WEEK 4: THE INTERNAL ENVIRONMENT
SWOT à Strengths, Weaknesses, Opportunities, Threats
• E.g. Flight Center Australia
o Strengths: Market dominance à physical stores, online presence, advertising
§ Volatility within market
§ Offer the lowest airfare guaranteed BUT not necessarily the most important thing
to customers à e.g. customer loyalty
• Can negatively impact profits
§ Incentives offered by airlines to make flights cheaper/more attractive
o Opportunities: Market dominance = physical presence through many stores = can roll out any
o Threats: growth of online businesses to book flights
o Blinds us to complexity
o Fairly one dimensional
o Never critically questions the objectives
o People who do SWOT analyses rarely use them
VALUE CHAIN – Porter 1985
• A conceptual framework that helps us to understand the processes by
which organisations take inputs, add value, and produce outputs
o Map out orgs process + identify opportunities to increase value
• Two core parts:
o Primary Activities: inbound logistics, operations, outbound
logistics, marketing/sales, service
o Support Activities: firm infrastructure, Human Resource Management, technology development,
o Can deceive us into seeing an org as linear system à input > value add > output
o Lends itself most easily to manufacturing of goods
o Hard to translate to smaller, more agile orgs
o Doesn’t distinguish b/w generic and distinct goods
RESOURCE BASED VIEW – Wernerfelt (1984)
• Certain assets with certain characteristics will lead to sustainable competitive advantage
o All traits must be present to result in a sustainable competitive advantage
o Resources AND capabilities
o One gets paid only for strengths…not for weaknesses. First:
§ What are our specific strengths?
§ Are they the right strengths?
§ Are the strengths that fit the opportunities tomorrow, or are they the
strengths that fitted those yesterday?
§ Are we deploying our strengths where opportunities no longer are, or
perhaps, never were?
§ And finally, what additional strengths do we have to acquire?”
• VRIO: fits within a Resource Based View
o Framework to help us conceptualise an orgs resources and competitive
o VRIO Analysis:
§ Valuable: allow firm to exploit opportunities / neutralise threats in
external environment, customers cannot substitute
§ Rare: possessed by few (if any) current or potential competitors
§ Imitable: other firms cannot obtain them / must obtain them at a high cost
§ Organisationally relevant: firm must be organised appropriately to obtain the full benefits
o Often leads to production of summary table
o E.g. Flight Centre Australia
§ Lowest airfare guaranteed à V, R, I, O = Sustained Comp Adv.
§ Network of retail stores à V, R, I, O = Sustained Comp Adv.
§ BUT stock price has been falling since 2014…
• External environment changing
§ Fails to tell us if there is demand in the business environment
§ Fails to acknowledge that these resources do not exist in isolation à networks, catalysts
§ Fails to address creation and development of resources à assumes resources already there
• Limitations of Analysis: Human error, not omnipotent, hubris, bad day, forget, miss something etc.