Internal analysis

Welcome to Global
Strategy and
Sustainability
Topic: Internal analysis –
Distinctive Competencies, Profitability
and Competitive Advantage

Today’s Agenda
Quick Recap of Previous Week’s Topic (External analysis)
The sources of competitive advantage
• Activity 1: Group – CASE STUDY: Coca Cola resources and capabilities
The concept of the value chain
BREAK
How competitive advantage is built and maintained
• Activity 2 Individual: How Zara took over the industry using fast fashion
Global supply chain management, competitive advantage and technology
• Activity 3: Group – CASE STUDY – Electric Vehicles supply chain
• Review of Apply Activity
• Recap, Q&A, Discussion
• Next steps

Previous Week Recap –
External analysis
Critically evaluate and review the competitive
environment by application of the five forces model
Explore the concept of strategic groups for industry
analysis
Analyse and discuss how industries evolve with
reference to the industry lifecycle
Demonstrate how trends in the macro-environment can
shape the nature of competition

Today’s Learning Outcomes
Assess the sources of competitive advantage that a global
firm might possess
Analyse and explore how competitive advantage is built and
maintained
Critically evaluate the concept of the value chain and be able
to apply it in assessment terms for global enterprise
Evaluate approaches to global supply chain management and
how technology can enable competitive advantage

The sources of
competitive advantage

What is the goal of internal analysis?
Identify the SW
(Strengths and
Weakness) of the
SWOT framework

Competitive advantage and business model
The focus
of our
session
Source: De Wit (2020) )
The source of sustained
competitive advantage
depends on the
business model
that the firm has
developed in relation to
its business environment

The Resource-based view
Source: Porter, 2008
The firm’s unique collection of
resources and capabilities is the
primary influence on the selection and
use of strategies to exploit
opportunities in the external
environment
Raw material
Plants
People skills
Financial assets
Know-how
Technology
Brand

Resource-based view (RBV): “stretching” strategy
The RBV argues that business can leverage their
competences to pursue business opportunities outside
their core business.
This Photo by Unknown
Author is licensed under
CC
BY-NC-ND

Link between resources and capabilities
Resources are
what a firm has
Capability is
what it can do
How do we assess if a resource or capability is
core in the development of a sustained
competitive advantage?
Relation between resources and capabilities (Johnson et al. 2017)
VRIO model
This Photo by Unknown Author is licensed under CC BY-SA
VRIO provides four criteria by which resources and capabilities can be
assessed in terms of their ability to lay the basis for competitive advantages

VRIO model: Starbucks
Source: www.managementmania.com/en/vrio-analysis – accessed 02-04-2021
Group Activity: Case Study
Coca Cola resources and capabilities
This Photo by Unknown Author is licensed under CC BY-SA-NC
This Photo
by Unknown Author is licensed under CC BY-SA
The concept of value chain
Value creation: the key question
How does a company create value?
Understanding how value is created allows a
company to find ways to create more value,
minimising the cost of creating that value
Porter’s Value Chain is used to model a firm’s organisational
activities that generate value to customers. The linkage of
these activities ultimately create the firm’s capabilities

Porter’s Value Chain: mapping the firm’s activities
Supporting activities:
activities which help to
improve the effectiveness or
efficiency of the primary
activities
Primary activities:
Activities directly concerned
with the creation and delivery
of a product or service.
https://www.smartsheet.com/value-chain-model
Value Chain analysis (VCA): benefits
Low Cost Advantage:
• Helps to stablish the cost drivers of each process
• Implement cost improvement strategies based on those drivers
• at the same time without lowering customer value
Differentiation:
• Helps to focus on the customer’s perceived value of the products and services,
• Identify innovative ways to perform value-creating activities and
• Evaluate differentiation strategies for enhancing customer value
VCA ultimately helps to identify Core Competencies
and Activities.
Strengthening these helps to improve
the firm’s overall performance and competitive
advantage

Amazon Value Chain
Source: https://www.researchgate.net/figure/Amazoncom-Value-Chain-Analysis-In-technology-stream-has-important-role-to-drive-and_fig3_326132044
Break Time – 15 minutes
How competitive advantage
(CA) is built and maintained

CA building: Resource and capability gap analysis
Gap analysis provides a systematic approach to identify and evaluate
organisational resources and capabilities.

Superfluous
strengths
Key
strengths
Key
weakness
Zone of
irrelevance

Relative strength
Strategic importance
• Step 1: Identify the Key Resources and
Capabilities
• Step 2: Appraising Resources and Capabilities
(first their importance, second, our strengths and
weaknesses as compared with competitors)
• Step 3: Bringing together importance and relative
Strength (matrix)
• Step 4: Developing Strategy Implications

Resource and capability gap analysis: VW case
RESOURCES
R1. Finance
R2. Technology
R3. Plant and equipment
R4. Location
R5. Distribution (dealership network)
R6. Brands
CAPABILITIES
C1. Product development
C2. Purchasing
C3. Engineering
C4. Manufacturing
C5. Financial management
C6. R&D
C7. Marketing and sales
C8. Government relations
C9. Strategic management
Source: Grant (2007) Hypothetical analysis This Photo by Unknown Author is licensed under CC BY-NC
Porter’s value chain and competitive advantage
This Photo by Unknown Author is licensed under CC BY
This Photo by Unknown Author is licensed under CC BY-SA
Position the firm as
cost leader and/or
differentiation
Primary activities:
By reducing their cost
or increasing their value
Strengthen the
key resources
and capabilities
Develop/strength
competitive advantages
Value chain Generic strategies
Strengthen competitive advantage through value chain
Identify the set of value-added
activities
(Primary activities)
Assess the relative importance of
activity costs internally
Assess the relative importance of
activity value to customers
Assess the relative importance of
activities externally against
competitors
Identify opportunities for cost reduction
on those critical activities
Identify opportunities for
value
improvement
on those critical activities
Review
Support activities to find
opportunities for cost reduction

Protecting and sustaining competitive advantage

Barrier to
imitation
Example Company
Avoid the disclosure of
key company information
Hide key information
Persuade rivals that
imitation will be
unprofitable
Price war
Multiple brands
Difficulties to link
superior performance to
the resources and
capabilities
Complex
Business
model
High transaction cost to
transfer capability
Patents and IPR

For a competitive advantage to be sustained over time requires the existence
of barriers to imitation

How sustainable is a sustained competitive advantage
At one point, all had
competitive advantages.
These companies are no
longer with us!
tough competition
The
question is:
How long
Netflix can
continue?

How sustainable is a sustained competitive advantage
The lesson is:
Competitive advantage does not last for as
long as it used to.
Companies need to create competitive
advantages today, then not be complacent
and start looking for the next ones….
… and the next ones after that.

Individual activity: Case Study
How Zara took over the industry using fast fashion
This Photo by Unknown Author is licensed under CC BY-SA
Global supply chain
management and
competitive advantage

Supply chain definition
Source: https://corporatefinanceinstitute.com/resources/knowledge/strategy/supply-chain/
The material and informational
interchanges in the logistical process
stretching from acquisition of raw materials
to delivery of finished products to the end
user. All vendors, service providers and
customers are links in the supply chain.
Council of Supply Chain Management Professionals
The Value system
This Photo by Unknown Author is licensed under CC BY
Suppliers
value
chains
Organisation
value chain
Distributors
value
chains
Buyer
value
chains
Value, and therefore competitive advantages, can occur in
any part of the supply chain
Efficient management of the supply chain leads to cost savings while synergies between the
components of the supply chain leads to greater profitability for the firms.

Competing through value chain
Reliability, responsiveness, agility, cost and assets provide the basis for companies
to compete in today fast-moving business environment
Right products delivered
Products available
at the right location Right delivery time
Right after sale support
Differentiation
Decrease purchasing cost Decrease
production cost
Decrease total
supply chain cost
Cost leader
5 Supply Chain Technologies that deliver
Competitive Advantage
The internet of things (IoT)
Blockchain
AI,
machine learning,
and analytics
Robots and
automation
3D printing

Risks associated to the value chain
The major risks to the
supply chain do not come
from inside (financial and
operational risks), but
from the external risks
affecting the firms across
the world
Source: https://www.rethinkglobal.info/supply-chain-risk/
Top 10 risks listed in the World
Economic Forum Global risks 2020
report’s top 10
– by likelihood or
impact – affect supply chains!

Group Activity: CASE STUDY –
Electric Vehicles supply chain
This Photo by Unknown Author is licensed under CC BY-SA
Conclusion of external and internal analysis
Review of Apply
Activity

Apply Activity Instructions
Discussion Forum (100 words)
Apply the learning from the prepare section by engaging with these questions and answering and
discussing them within the discussion forum.
Answer the following questions in the discussion forum and comment on the answers of your peers
(comment on at least one answer):
• Conduct some research into a global firm and briefly explain what competitive advantage that this firm
has and why (max 50 words)
• Explain how technology can enable competitive advantage for a firm (max 50 words)

Assessment Instructions
For this assessment, in the role of a Management Consultant, you are required to undertake an overall strategy
review of Tesla and provide a business report and a PowerPoint presentation to the CEO on further growth
opportunities using the techniques and concepts you have covered in the module. Background reading has
been provided for the case study which you can access via links on the HUB and via the core textbook also.
The business report comprises 4 tasks (this task is part of both formative and summative assessments):
For this week you can do the next part of Task 1 i.e., the Internal Environment.
Task 1 (LO1): – The External and Internal Environment (15 Marks)
• Identify and critically analyse the external and internal environment for Tesla using relevant models.
• Discuss in more detail what you consider to be the 3 most critical factors emerging from your analysis.
• Determine Tesla’s current sources of competitive advantage and critically evaluate how they maintain and
build on this competitive advantage.
o Support your arguments with academic literature and references to other similar real companies.
Recap, Q&A,
Discussion

Key Takeaways
You should be now able to :
• Assess the sources of competitive advantage that a
global firm might possess
• Analyse and explore how competitive advantage is
built and maintained
• Critically evaluate the concept of the value chain and
be able to apply it in assessment terms for global
enterprise
• Evaluate approaches to global supply chain
management and how technology can enable
competitive advantage

Next Steps
• Review this topic
• Go through the Preparation and Apply part of this week (if
not done yet)
• Go through the Consolidation part of this week
• Go through the Preparation and Apply part of next week
Prepare Task 1 of your Assessment
• See you next week same time!