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1. 10/7/2013
Outcomes from External and Internal
Environmental Analyses
Internal Environment Scanning
Examine competitors,
opportunities and threats
Company Situation Analysis:
The Key Questions
1. How well is firm’s present strategy working?
2. What are the firm’s resource strengths and
weaknesses vis-à-vis external opportunities and
threats?
Examine unique resources,
capabilities, and
competencies
How Well is the
Present Strategy Working?
• Best indicators of a well-conceived, wellexecuted strategy:
– The company is achieving its stated financial and
strategic objectives.
3. Are the firm’s prices and costs competitive with those
of key rivals, and does it have an appealing customer
value proposition?
– The company is an above-average industry
performer.
4. Is the firm competitively stronger or weaker than key
rivals?
5. What strategic issues does the firm face?
How Well is the
Present Strategy Working?
• Quantitative
–
–
–
–
–
–
–
Sales growth – faster / slower
Market share – growing / declining
Retaining old customers, acquiring new customers
Profits increasing / decreasing
Credit rating
Image and reputation
Shareholder value
• Qualitative
– Completeness, internal consistency, rationale and
relevance
Indicators of Strategic Success
•
•
•
•
•
•
Growth in firm’s sales and market share
Acquisition and retention of customers
Increasing profit margins, net profits and ROI
Growing financial strength and credit rating
Positively viewed by shareholders and customers
Leadership in factors relevant to marketindustry
success
• Continuing improvement in operating
performance
1

2. 10/7/2013
Make Meaningful Comparisons
SWOT
Potential Resource
Strengths
• Comparison with past performance
– Trend analysis – Where are you relative to the
past.
– Stages of Industry Evolution
• Emergence, Growth, Maturity and Decline
• Strengths or competencies needed at each stage are
different
– Benchmarking with the competitors
• Key competitors
• Best practices irrespective of industry
SWOT Analysis
Potential Resource
Weaknesses
• Powerful strategy
• Strong financial
condition
• Strong brand name
image/reputation
• No clear strategic
direction
• Obsolete facilities
• Weak balance sheet;
excess debt
• Serving additional
customer groups
• Expanding to new
geographic areas
• Expanding product line
• Widely recognized
market leader
• Proprietary technology
• Cost advantages
• Higher overall costs
than rivals
• Missing some key
skills/competencies
• Subpar profits
• Internal operating
problems . . .
• Vertical integration
• Acquisition of rivals
• Alliances or JVs to
expand coverage
• Strong advertising
• Product innovation
skills
• Good customer service
• Better product quality
• Alliances or JVs
Potential External
Opportunities
• Openings to exploit
new technologies
• Falling behind in R&D
• Too narrow product
line
• Weak marketing skills
Potential External
Threats
• Entry of potent new
competitors
• Loss of sales to
substitutes
• Slowing market growth
• Adverse shifts in
exchange rates & trade
policies
• Costly new regulations
• Vulnerability to
business cycle
• Growing leverage of
customers or suppliers
• Reduced buyer needs
for product
• Demographic changes
SWOT Analysis
• Draw conclusions from the SWOT listings
about the firm’s overall situation.
Identify
Draw
Conclusions
Translate into
Strategic
Action
• Translate these conclusions into strategic
actions by the firm that:
– Match its strategy to its internal strengths and to
market opportunities.
– Correct important weaknesses, and defend it
against external threats.
SWOT Analysis
How Strong is the Company’s
Competitive Position?
• How firm ranks relative to key rivals on each
industry KSF and relevant measure of
competitive strength
• Whether firm has a sustainable competitive
advantage or finds itself at disadvantage
relative to certain rivals
• Ability of firm to defend its position in light of
– Industry driving forces
– Competitive pressures
– Anticipated moves of rivals
2

3. 10/7/2013
Assessing a Company’s Competitive
Strength versus Key Rivals
1. List industry key success factors and other relevant
measures of competitive strength
2. Rate firm and key rivals on each factor using rating
scale of 1 to 10
3. Decide whether to use a weighted or unweighted
rating system (a weighted system is usually superior
because the chosen strength measures are unlikely to
be equally important)
4. Sum individual ratings to get an overall measure of
competitive strength for each rival
5. Determine whether firm enjoys a competitive
advantage or suffers from a competitive disadvantage
based on the overall strength ratings
Strategic Implications of Competitive
Strength Assessment
• The higher a firm’s overall weighted strength rating, the
stronger its overall competitiveness versus rivals.
• The rating score indicates the total net competitive
advantage for a firm relative to other firms.
• Firms with high competitive strength scores are targets
for benchmarking.
• The ratings show how a company compares against
rivals, factor by factor (or capability by capability).
MCKINSEY 7-S FRAMEWORK
• Strength scores can be useful in deciding what strategic
moves to make.
McKinsey 7-S Framework
• The 7-S framework of McKinsey is a Value
Based Management (VBM) model that
describes how one can holistically and
effectively organize a company. Together these
factors determine the way in which a
corporation operates.
Structure
Strategy
Systems
Shared values
Style
Skills
Staff
3

4. 10/7/2013
The McKinsey 7S model involves seven interdependent
factors which are categorized as either "hard" or "soft"
elements:
Hard Elements
Soft Elements
Strategy
Structure
Shared Values
Skills
Style
Staff
Systems
"Hard" elements are easier to define or identify and management can directly
influence them: These are strategy statements; organization charts and reporting lines;
and formal processes and IT systems.
Shared Values
•
•
•
•
The interconnecting center of McKinsey's model
What the organization stands for and what it believes in.
Central beliefs and attitudes.
Shared Values are guiding concepts - they are a set of values
and aspirations (often unwritten) that go beyond the
conventional formal statement of objectives
• Shared Values are the fundamental ideas around which a
business is built, they are its main values. Staff who can
identify and abide by these core values are very often the
ones who have successful career paths.
"Soft" elements, on the other hand, can be more difficult to describe, and are less
tangible and more influenced by culture. However, these soft elements are as
important as the hard elements if the organization is going to be successful.
Shared Values
• Shared Values link with ‘organisational culture’:
– The collection of traditional values, policies, beliefs and
attitudes that constitute a pervasive context for everything
that is done and thought and taught in organisations.
• They also link to what is termed ‘organisational
climate’:
– Prevailing atmosphere surrounding the organisation,
– Level of morale, and the strength of feeling or belonging,
care and goodwill among members.
– Perceptions of members towards the organisation.
Strategy
• Plans for the allocation of a firms scarce resources, over time,
to reach identified goals. Environment, competition,
customers.
• Strategy relates to those actions that an organisation plans, in
response to or anticipation of change in its external
environment:
– Its Clients and its Competitors
• Strategy is the way an organisation aims to improve its
position in relation to its competitors through
•
•
•
Structure
• The way the organization's units relate to each other:
centralized, functional divisions (top-down); decentralized
(the trend in larger organizations); matrix, network, etc.
• The pattern of relationships among positions in the
organisation and among members of the organisation.
• It makes possible the application of the process of
management and creates a framework of order and command
through which activities of the organisation can be planned,
organised, directed and controlled
low cost delivery or production
providing better value to clients
achieving sales and service dominance
Structure
• The challenge lies not so much in comprehending all the dimensions of
organisational structure but in developing:
– the ability to focus on those dimensions that are currently important to the
organisation’s evolution
– being ready to refocus as the crucial elements in the business environment
shift
• The central problem with structuring an organization is not the one on
which most organizational designers spend their time - ‘how to divide up
tasks !’
•
It is one of emphasis and co-ordination - ‘how to make the whole thing
work !’
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5. 10/7/2013
System
•
•
The procedures, processes and routines that characterize how important work
is to be done: financial systems; hiring, promotion and performance appraisal
systems; information systems.
Systems are the day-to-day procedures, formal and informal, that make the
organisation function and they include:
–
–
–
–
–
–
–
•
•
Ordering systems
Production procedures
Deliver procedures
Capital budgeting procedures
Training systems
Cost accounting procedures
Budgeting systems, etc.
Structure Vs Systems
• Structure enhances power
– And therefore authority
• Systems dilute power
– And therefore authority
If you want to understand how an organisation does or doesn’t get things done?
Look at its systems
If you want to change an organisation without disruptive restructuring
Try changing its systems
• Systems when they get old, crystallize into
structure
• Systems provide the dynamic connection
between two structures
• Therefore are also change resistant!
Staff
Style
• Numbers and types of personnel within the organization.
• At the hard end of the spectrum
• Cultural style of the organization and how key
managers behave in achieving the organization’s
goals.
• The ‘Style’ of an organisation is very much founded
in its Managerial Style
• Staff may listen to what managers say, but they
believe what managers do.
• You will not sell to the clients what you cannot sell to
the staff.
– Appraisal systems
– Pay scales
– Formal training programmes
• And at the soft end we talk about:
–
–
–
–
Morale
Attitude
Motivation
Behaviour
Skill
• Distinctive capabilities of personnel or of the
organization as a whole.
• Core Competences.
• We characterise companies not by their strategies or
structures but by what they can do best.
• Examples
–
–
–
–
McDonalds:
efficiency and consistency
Microsoft:
innovation
Du Pont:research and new products
Intel:
precision
RESOURCE BASED APPROACH
5

6. 10/7/2013
Components of Internal Analysis
Resources, Capabilities and Core
Competencies
• Resources
– The source of a firm’s
capabilities
– Cover a spectrum of
individual, social and
organizational
phenomena
– Alone, may not yield
a competitive
advantage
Resources
• Tangible resources
Tangible Resources
• Intangible resources
– Financial resources
– Human resources
– Physical resources
– innovation resources
– Technological resources
Financial Resources
– Reputation resources
– Organizational resources
Organizational Resources
Physical Resources
Technological Resources
Intangible Resources
Human Resources
•Knowledge
•Trust
•Managerial capabilities
•Organizational routines
•Culture
Intangible resources
are more likely than
tangible resources to
produce competitive
advantage
Innovation Resources
•Ideas
•Scientific capabilities
•Capacity to innovate
Reputational Resources
•Reputation with customers
•Brand name
•Perceptions of product quality, durability, and
reliability
•Reputation with suppliers
•Efficient, effective, supportive, and mutually
beneficial interactions and relationships
•The firm’s borrowing capacity
•Ability to generate internal funds
The firm’s formal reporting structure
and its formal planning, controlling,
and coordinating systems
•Sophistication and location of a
firm’s plant and equipment
•Access to raw materials
Stock of technology, such as patents,
trade-marks, copyrights
Resources, Capabilities and Core
Competencies
• Capabilities
– The firm’s ability to use its
resources effectively
– The firm’s capacity to deploy
resources that have been
purposely integrated to
achieve a desired end state
– Emerge over time through
complex interactions among
tangible and intangible
resources
– Based on developing, carrying
and exchanging information
and knowledge through the
firm’s human capital
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7. 10/7/2013
Capabilities
• The foundation of many capabilities lies in:
Examples of Firms’ Capabilities
• Capabilities are often developed in specific
functional areas or as part of a functional area
Resources, Capabilities and Core
Competencies
• Core Competencies
– Resources and capabilities
that serve as a source of a
firm’s competitive
advantage
– Distinguish a company
competitively and reflect its
personality
– Emerge over time through
an organizational process of
accumulating and learning
how to deploy different
resources and capabilities
Core Competencies
• A core competency should:
– Contribute significantly to the end product
benefits
– Be difficult for competitors to imitate
• Core competencies of a firm, in addition to its
analysis of its general, industry, and
competitor environments, should drive its
selection of strategies
Capabilities
Distribution
Effective use of Logistics Management Techniques
Human Resources
Motivating, empowering and retaining employees
Management Information Systems
Effective and efficient control of inventories
through point of purchase data collection methods
Marketing
Effective promotion of brand name products
Effective customer service
Management
Effective organizational structure
Manufacturing
Miniaturization of components and products
Design and product quality
Low-cost manufacturing
Research & development
– The unique skills and knowledge of a firm’s
employees
– The functional expertise of those employees
Functional Areas
Rapid transformation of technology into new
products and processes
Continuous innovation
Core Competencies
• Activities that a firm performs especially well
compared to competitors
• Activities through which the firm adds unique
value to its goods or services
• Collective learning or co-ordination skills
behind a firm’s product lines
Core Competencies
• A Competence
– Is an activity that a firm has learned to perform with
proficiency—a capability.
• A Core Competence
– Is a proficiently performed internal activity that is central
to a firm’s strategy and competitiveness.
• A Distinctive Competence
– Is a competitively valuable activity that a firm performs
better than its rivals.
7

8. 10/7/2013
Competitive Advantage
Sustainable Competitive Advantage
Valuable Capabilities
Rare Capabilities
Costly-to-Imitate
Capabilities
Nonsubstitutable
Capabilities
VRIO Framework
Sustainable Competitive Advantage
•
Value: Does it provide customer
value and competitive advantage?
•
Rareness: Do other competitors
posses it?
Imitability: Is it costly for others
to imitate?
Help a firm neutralize threats or exploit
opportunities
Offsetting the cost of acquiring resources
and capabilities
Are not possessed by many others
Historical: A unique and a valuable
organizational culture or brand name
Social complexity: Interpersonal
relationships, trust, and friendship
among managers, suppliers, and
customers
No strategic equivalent
•
Durability: depreciation rate of the firm’s resources, capabilities, or core
competencies
– Examples: Intel, cassette tapecdmp3mp4
Imitability: duplication rate by others
– Transparency: speed of other firms in understanding the relationship of
resources and capabilities supporting a successful firm’s strategy
– Transferability: competitors ability to get the resources and capabilities
necessary for the competitive challenge
– Replicability: competitors duplication ability, the use of resources and
capabilities to imitate the firm’s success
Explicit knowledge vs. Implicit knowledge Which one is easier to copy?
Organization: Is the firm
organized to exploit the resource?
A Resource-based Approach to
Strategy Analysis
Select a strategy which best exploits
the firm's resources and capabilities
relative to external opportunities.
Strategy
Appraise the rent-generating potential
of resources and capabilities in terms
of: i) their potential for sustainable
competitive advantage, and ii) the
appropriability of their returns
Competitive
Advantage
Identity the firm's capabilities: What
can the firm do more effectively than
its rivals? Identify the resources inputs
to each capability, and the complexity
of each capability.
Capabilities
Identify and classify the firm's
resources. Appraise strengths and
weaknesses relative to competitors.
Identify opportunities for better
utilization of resources.
Resources
Identify resource gaps which
need to be filled. Invest in
replenishing, augmenting and
upgrading the firm's resource
base
The Resource-Based View of a Winning
Strategy
• Develop resources and capabilities which are
rare, valuable, non-tradeable, that form the basis
of the core competencies of the firm
• Make those resulting advantages sustainable by
precluding imitation or substitution from
competitors
• Ensure efficient use of resources
• Make sure that the implementation process is
done in such a way that its associated costs do
not upset the resulting benefits.
8

9. 10/7/2013
Cautions and Reminders
• Never take for granted that core competencies
will continue to provide a source of
competitive advantage
• Core competencies may become “core
rigidities”
• Determining what the firm can do through
continuous and effective analyses of its
internal environment increases the likelihood
of long-term competitive success
Strategic Cost Analysis
• Focuses on a firm’s costs relative to its rivals
• Compares a firm’s costs activity by activity against
costs of key rivals
– Raw materials purchase to production to price paid by
ultimate customer
• Pinpoint which internal activities are a source of cost
advantage or disadvantage
• A company’s cost competitiveness depends on how
well it manages its value chain relative to how well
competitors manage their value chains
Are the Company’s
Prices and Costs Competitive?
• Assessing whether a firm’s costs are
competitive with those of rivals is a crucial
part of company analysis
• Key analytical tools
– Strategic cost analysis
– Value chain analysis
– Benchmarking
Strategic Advantage Profile (SAP)
• Five functional areas in most of the
organizations.
– Production or Operation
– Finance or Accounting
– Marketing or Distribution
– Human Resource & Corporate Planning
– Research & Development
• Identify their relative strength and weakness
Benchmarking
• Involves improving a firm’s internal activities based
on learning other companies’ “best practices.”
• Assesses whether the cost competitiveness and
effectiveness of a firm’s value chain activities are in
line with its competitors’ activities.
• Sources of Benchmarking Information
– Reports, trade groups, analysts and customers
– Visits to benchmark companies
– Data from consulting firms
VALUE CHAIN ANALYSIS
9

10. 10/7/2013
Value Chain Analysis
The Basic Value Chain
• Value chain
– The chain consists of a series of activities that create
and build value.
– They culminate in the total value delivered by an
organization.
– a systematic approach to examining the development
of competitive advantage.
– VCA disaggregates a business into sets of activities
• Primary Activities – Inbound logistics --- Operations ---Outbound logistics ---- marketing and Sales and service
• Support activities – General Administration, HRM, R&D,
Systems Development
Value Chain Analysis
• Primary activities involved with:
– A product’s physical creation
– A product’s sale and distribution to buyers
– The product’s service after the sale
• Support activities
– Provide the support necessary for the primary
activities to take place
The Value-Creating Potential of
Primary Activities
• Marketing and sales
– Activities completed to provide means through which customers can
purchase products and to induce them to do so (advertising,
promotion, distribution channels, etc.)
– all of the activities associated with attracting and keeping customers
for your products
• Service
– Activities designed to enhance or maintain a product’s value (repair,
training, adjustment, etc.)
Each activity should be examined relative to
competitors’ abilities and rated as superior,
equivalent or inferior
The Value-Creating Potential of
Primary Activities
• Inbound logistics
– Activities used to receive, store, and disseminate inputs to a product
(materials handling, warehousing, inventory control, etc.)
• Operations
– Activities necessary to convert the inputs provided by inbound
logistics into final product form (machining, packaging, assembly, etc.)
• Outbound logistics
– Activities involved with collecting, storing, and physically distributing
the product to customers (finished goods warehousing, order
processing, etc.)
Primary Activities and Factors for
Assessment
Inbound
Logistics
• Soundness of
material and
inventory control
systems
• Efficiency of raw
material
warehousing
activities
Operations
Outbound
Logistics
Marketing &
Sales
Customer Service
• Productivity of
equipment
compared to that of
key competitors
• Appropriate
automation of
production
processes
• Effectiveness of
production control
systems to improve
quality and reduce
costs
• Efficiency of plant
layout and workflow design
• Timeliness and
efficiency of
delivery of finished
goods and services
• Efficiency of
finished goods
warehousing
activities
• Effectiveness of
market research to
identify customer
segments & needs
• Innovation in sales
& promotion
• Evaluation of
alternate
distribution
channels
• Competence of
sales force
• Development of
image of quality
and a favorable
reputation
• Extent of brand
loyalty among
customers
• Extent of market
dominance within
the market segment
or overall market
• Means to solicit
customer input for
product
improvements
• Promptness of
attention to
customer
complaints
• Appropriateness of
warranty and
guarantee policies
• Quality of customer
education and
training
• Ability to provide
replacement parts
and repair service
10

11. 10/7/2013
The Value-Creating Potential of
Supporting Activities
The Value-Creating Potential of
Supporting Activities
• Firm’s infrastructure
• Procurement
– Activities completed to purchase the inputs needed to produce a
firm’s products (raw materials and supplies, machines, laboratory
equipment, etc.)
• Technological development
– Activities completed to improve a firm’s product and the processes
used to manufacture it (process equipment, basic research, product
design, etc)
• Human resource management
– Activities involved with recruiting, hiring, training, developing, and
compensating all personnel
– Activities that support the work of the entire value chain (general
management, planning, finance, accounting, legal, government
relations, etc.)
– Establishment of accounting practices, management information
systems, compliance with environmental regulations, tracking and
reporting for government programs,
– Effectively and consistently identify external opportunities and threats
– Identify resources and capabilities
– Support core competencies
Each activity should be examined relative to competitors’
abilities and rated as superior, equivalent or inferior
Secondary Activities and Factors for
Assessment
Firm Infrastructure
•
•
•
•
•
Capability to identify new
product market
opportunities and
potential environmental
threats
Quality of the strategic
planning system to
achieve corporate
objectives
Coordination and
integration of all value
chain activities
Ability to obtain
relatively low cost funds
for capital expenditures
and working capital
Timely & accurate
information on general
and competitive
environments
Human Resource
•
•
•
•
Effectiveness of
procedures for recruiting,
training, and promoting
all levels of employees
Appropriateness of
reward systems
Relations with trade
unions
Levels of employee
motivation and job
satisfaction
Technology
Development
•
•
•
•
•
Success of R&D activities
in leading to product and
process innovations
Quality of working
relationship between
R&D personnel and other
departments
Timeliness of technology
development activities in
meeting critical deadlines
Qualifications &
experience of laboratory
technicians and scientists
Ability of work
environment to encourage
creativity and innovation
Procurement
•
•
•
•
Development of alternate
sources for inputs to
minimize dependence on
a single supplier
Procurement of raw
materials on timely basis
at lowest possible cost
and at acceptable levels of
quality
Development for criteria
for lease-vs.-buy
decisions
Good, long-term
relationships with
suppliers
The Result of the Value Chain
Value Chain Analysis
• How to do a VCA
– Identify key activities
– Allocate costs to each activity
– Identify the activities that differentiate the firm
– Examine the Value Chain
• Different activities may be important – industry and
strategy
• Importance of activities can vary based on a company
position in a larger scheme of activities
Internal Value Chain for a Hospital
• Margins
– Capture the value from performing value-creating
activities as cheaply as possible
– The basic idea is that the consumer is willing to pay a
certain amount for the value you create. This is depicted as
the size of the overall pentagon.
– The size of the individual activity boxes represents the cost
of performing those particular activities.
– Thus, the smaller the size of the individual activity boxes
relative to the value the consumer is willing to pay, the
greater the MARGIN will be for the firm.
Financial Management, Payer Contracting, Billing
Governance, Stakeholder and Public Relations
Medical Research, Medical Student Training
Legal, Compliance, Patient Advocacy, Patient Satisfaction
SUPPLIERS
(Physicians,
MCOs)
Marketing and
Promotion
ER, Admitting, and
Patient Intake
Tests, Diagnosis,
Treatment, and
Referral
Discharge
Planning, Rehab/
LTC Referral
Referral and
Follow-Up
CUSTOMERS
(Patients, payers,
employers)
Facilities, Security, Maintenance, Housekeeping
Clinical, Financial, and Managemant Information Systems (EMR, CPOE)
Human Resource Management, Medical Staff Relations, Nurse Recruiting
Risk Management, Case Management, Quality Assurance
11

12. 10/7/2013
Value Chain System for an Entire
Industry
Supplier
Value Chains
Activities,
Costs, &
Margins of
Suppliers
A Company’s
Own
Value Chain
Internally
Performed
Activities,
Costs, &
Margins
Forward Channel
Value Chains
Activities,
Costs, &
Margins of
Forward
Channel
Allies &
Strategic
Partners
Buyer or
End User
Value
Chains
The Buyer’s Value Chain
• A firm’s differentiation stems from how its
value chain relates to its buyer’s chain.
• Differentiation derives fundamentally from
creating value for the buyer through a firm’s
impact on the buyer’s value chain.
• Value is created when a firm creates a
competitive advantage for its buyer.
• The buyer must perceive the value to pay a
premium price.
Linkages with Supplier Value Chain
• Linkages between suppliers’ value chains and
a firms chain provide opportunities for the
firm to enhance competitive advantage.
• Division of benefits between firm and its
suppliers is a function of supplier’s bargaining
power and reflecting in supplier’s margins.
• Both coordination with suppliers and hard
bargaining are important to competitive
advantage.
Outsourcing
• The purchase of a value-creating activity from
an external supplier
• A firm may outsource all or only part of one or
more primary and/or support activities.
12

13. 10/7/2013
Forces Driving Outsourcing
Strategic Rationales for Outsourcing
• Few organizations possess the resources and capabilities
required to achieve competitive superiority in all primary and
support activities
• Improve business focus
– Lets a company focus on broader business issues by having outside
experts handle various operational details
– By forming and emphasizing fewer capabilities a firm can concentrate
on those areas in which it can create value
• Provide access to best capabilities
– Specialized resources of service providers makes best capabilities
available to firms in a wide range of applications
– Specialty suppliers can perform outsourced activities more efficiently
Strategic Rationales for Outsourcing
Core vs Context
• Frees resources for other purposes
– Redirects efforts from non-core activities toward those that
serve customers more effectively
• Sharing risks
– Reduces investment requirements and makes firm more flexible,
dynamic and better able to adapt to changing opportunities
•
•
•
•
•
Reduce and control operating costs
Make capital funds available
Gain access to world class capabilities
Resources are not available internally
Function difficult to manage
Outsourcing Issues
Outsourcing Issues
• Outsource only to firms possessing a core
competence in terms of performing the
primary or supporting the outsourced activity
• Do not outsource activities in which the firm
itself can create and capture value
• Do not outsource primary and support
activities that are used to neutralize
environmental threats or to complete
necessary ongoing organizational tasks
• Do not outsource capabilities that are critical
to the firm’s success, even though the
capabilities are not actual sources of
competitive advantage
• Do not outsource activities that stimulate the
development of new capabilities and
competencies
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14. 10/7/2013
Outsourcing Risks
Outsourcing Costs
Outsourcing – Organizational Complexity
Other Internal Issues
• Organizational Structure: Specialization, control,
command, decision, communication flow
• Corporate culture: identity, commitment, stability, and
employee behavior
• Marketing: positioning, segmentation, product life
cycle, marketing mix, brand
• Financial: financial leverage, capital budgeting
• R&D: R&D intensity(% R&D spending), patent,
publication, new product, technology transfer,
technology discontinuity
• HR: teams, temporary workers, quality of life and
diversity
14