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Chapter 3. Assessing the Internal Environment of the Firm

Overview:This chapter provides a different position than the previous chapter as it discusses the importance of looking internally to manage specific activities and processes to attain competitive advantages within the marketplace. Specifically, the primary and support activities of a firm’s value chain are explained. Overall, value chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers. The chapter also discusses the resource-based view, including both tangible and intangible resources. The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers is evaluated. Finally, the usefulness and inherent limitations of a financial ratio analysis and balanced scorecard are discussed.

Chapter 3. Assessing the Internal Environment of the Firm 

Learning Objectives

1. The primary and support activities of a firm’s value chain.
2. How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
3. The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities. 
4. The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
5. The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
6. The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.

   QUESTION

   Also, provide a graduate-level response to each of the following questions:

   1. In Learning from Mistakes at the beginning of the chapter, we saw how KFC became too focused on cutting cost in their supply chain, and how it hampered their ability to serve customers effectively. Imagine you were advising KFC on how they need to emphasize the customer orientation of every link in their value chain. To support this, lay out the key links in KFC’s value chain and evaluate how each step is critical to creating customer value.