"Sainsburys Corporate Strategy"
S W O T Analysis Internal Analysis of: – Strengths and Weaknesses – Resources and Capabilities – Competitive Competencies The Aim of Strategy is .... to find a position in the industry where the company can best defend itself against competitive forces or can influence them in its favour. Porter 1980 Fit between Firm Strategy and its Environment Creates a New Re-shape Environment Environment by where there is Choice of a New Fit between Competitive Strategy Strategy and the Success Environment Requires The Degree of Fit of the Strategy with the Existing Environment Internal Analysis • The SW part of the SWOT analysis that often forms the first part of any strategic assessment of a company. This analysis feeds into the development of strategic options that a company is considering • The internal analysis is related to how the firm develops and leverages its competitive advantage. Internal Analysis When we conduct an Internal Analysis we are trying to assess: • The competitive strengths of the firm • The competitive weaknesses of the firm • Its resources • Its capabilities Internal Analysis • The firm must build on its strengths and use them to leverage any competitive advantage it has • Minimise or neutralise any weaknesses and ensure that the firm does not rely on these elements to build its strategy around Strategy built around SW • Identify - Key Success Factors (KSFs) ie what factors are necessary to create success in an industry • Identify - Resources & Capabilities (R&C) the firm can call upon • Analyse & Evaluate - the gap between the KSFs and the R&C Key Success Factors Key Success YES - High Factors Performance Technology & MATCH ? Market Context Resources & NO - Poor Capabilities Performance of the Firm Typically we • Define the Strengths and Weaknesses • Assign the priorities to close the gap • Develop a strategy to enhance the strengths and reduce the weaknesses This assumes that we can identify such KSFs and make sense of what is happening. Frequently we can’t, and when we can it is probably too late as the game has moved on. Analysing Resources Providing the Data Base Identify the attributes Measure its effectiveness Measure its efficiency Drawing Comparisons Assessing the Balance Historical analysis Company portfolio Industry norms Internal skills Normative criteria Key success factors Costs... etc Identification of Capabilities Distinctive competencies Resource assessment Evaluation of gap between success factors & SW profile Typical SW Items • Financial Aspects • Marketing Aspects • Production Aspects • Personnel Aspects • Cost Base SW Profile • Identify Strengths and Weaknesses • Rank them in importance in leveraging Competitive Advantage • Score them against desired criteria • Total and assess Quest for Competitiveness in the 1990s Restructuring/ Process Re-inventing Downsizing Re-engineering the Business Re-evaluating Continual the Portfolio Improvement Smaller Better Different Hamel & Prahalad 1994 T O W S Matrix Internal Factors Strengths Weaknesses Opportunities Leverage Constraint External OS OW Factors Vulnerability Problematic Threats TS TW Source: adapted from- Weihrich, H (1982) SWOT Profile and Possible Strategies O Aggressive Strategy Reconfiguration Strategy S W Diversification Turnaround Strategy Strategy T Resources & Skills Resources and skills can erode over time • Need to continually invest • Need to continue to be innovative • Need to continue to renew the skills base Examples of firms that “took their eye off the ball “ Resources as the basis for corporate profitability • Conventional approaches to competitive advantage focus upon the “generic” sources (cost, differentiation) • Resource-based view concentrates upon the resources and capabilities that underlie these advantages. RBV approach to strategy analysis - (R M Grant) Strategy Competitive Identify Gaps Advantage Invest and Augment Resource Base Capabilities Resources We see this later in this presentation The Role of Resources and Capabilities in Strategy Formulation Two Important Points: • Individual resources; items of capital equipment, the skills of individual employees, patents, brand names, etc. • How the resources work together to create capabilities and competitive advantage Link between R&C and Strategy Shape Resources & Capabilities Strategies (Competencies) Build Elements in Distinctive Competencies Superior Efficiency Superior Quality Distinctive Competencies Superior Innovation Superior Customer Responsiveness Competitive Advantage Simplified Superior Quality Competitive Advantage Superior Superior Customer Efficiency Low-cost Differentiation Responsiveness Superior Innovation Day & Wenley‟s Model of Comp Adv Superior Resources Positional Advantage Performance Outcomes •Differentiation Superior Skills •Low-cost •Satisfactory •Niche •Premium Invest to maintain comp adv Day & Wensley 1988 Durability of Comp Advantage Durability of a Firm’s Competitive Advantage Barriers to Capability Industry Imitation of Competitors Dynamism Lets expand on this a little more Sustainability of Com Adv depends on: • Durability • Transparency • Replicability • Transferability Resources & Skills of a Firm • Are central when considering strategy • They are primary constructs around which the firm can – establish its identity – frame its strategy • Fundamental to leveraging advantage • Primary sources of the firm’s profitability. Resources as the Basis of Superior Profitability Patents Barriers to Brands Entry Retaliatory capacity Industry Attractiveness Monopoly Market share Vertical Firm size Bargaining Power Financial Rate of Profit Resources in Excess of the Process Tech Competitive Level Cost Size of plants Advantage Access to low- cost inputs Competitive Brands Advantage Differentiation Product technology Advantage Marketing, distribution, service capabilities Source: R M Grant(1991) Issues surrounding Resources &Capabilities Resources and Capabilities can be often be: • Transferable • Replicable • Transparent If so, then sustaining comp adv is difficult, but firms can use these factors to their own advantage in their own strategies Examples ... Examples Industries where Resources & Skills are easily transferable or imitated: • Retailing • Financial services • Fashion • Toys Firms have brief windows of opportunity to exploit their strengths before imitators erode it away. However Firm can exploit these issues in developing their own strategies when they expand or diversify their interests: • Geographic expansion • Product expansion • Mergers • Alliances BUT • Can success in the home market lead to success in the foreign market ? – Marks & Spencer Plc – Sainsburys – Bass – Dixons – Laura Ashley etc.. • The evidence is mixed for these firms WHY is this difficult ? Barriers. • Barriers to Transferability • Barriers to Replicability • Barriers to Durability • Transparency But can we actually „see‟ into other firms ? • Success factors are ‘difficult to identify never mind observe • Firms are entrepreneurial and change is a way of life • The game moves on • Identify the success factors now and act, may be too late, firm need ‘foresight’ Entrepreneurial view of Strategy …. Austrian School And Finally A Model to show how Resources & Capabilities are Linked to Strategy Formulation COMPETITIVE INDUSTRY STRATEGY KEY ADVANTAGE SUCCESS FACTORS ORGANIZATIONAL CAPABILITIES RESOURCES Tangible Intangible Human