Internal analysis

- How to analyse businesses from the inside in a systematic way

- Internal characteristics which are internal to that entity only

Layers of a business environment

 Organisation
- Internal analysis focused on company itself
- If the problem exists inside the org, internal analysis should be focused there
 Competitors and markets
- Layers of competitors/collaborators
- Organisations competing with others
- E.g. competitors of USYD = UNSW, UTS
 Industry(sector)
- Organisations that produce the same products or services
- E.g. industry with USYD business school can be defined within Australia (Go8 uni’s)
or globally
 Macro-environment
- Highest-level layer
- Every business has a relationship with either the industry or macro environment
- E.g. COVID-19 is disrupting every industry, market and organisation

Importance of understanding layers

- Organisation needs to understand industry and associated competitive environment
- Need to understand competitors
- Pays to understand your competitors and what is happening in the market
- Consider macro-environmental factors e.g. government and institutions (e.g.
regulatory bodies, legal system etc.)
- Analyse business problems through multiple layers  develop comprehensive
understanding

EXAMPLE
Grocery retail manager facing new regulations whereby you need to provide extra benefits
to you casual employees
Inside Layer:
- How regulations effect both casual staff, permanent and temporary employees
- If pay rates increase, less budget for new employees

Outside Layer:
- Competitors of Aldi and Woolworths, or even global competitors e.g. Walmart
- Australian grocery retail chains are not threatened by eCommerce platform
- Most look at Coles and Woollies

Business Implications
- During COVID-19, toilet paper became high selling product  significant disruption
in supply chain where people were buying more but consumption remained the
same
- Demand increased temporarily  supply chain had to adjust
Price: Money spent by consumer to buy a product or avail a service

Cost: Amount of money incurred by firms to provide a product/service

Supplies Opportunity Cost (SOC): For every product, there is a cost, which is greater than
the price of raw materials only. For the supplier, the total cost of materials = SOC> The firm
must pay more than the SOC to the supplier.

Value Creation: Difference between WTP (willingness to pay) and SOC (supplies opportunity
cost)
- Goal of the supplier is to lower the SOC (by adopting a more efficient process or
procuring raw materials from a cheaper source) while increasing the cost
- Goal of the firm is to lower the cost while taking the price as close to WTP as possible
- Consumers prefer to create a bigger gap between price and WTP to get greater value
o WTP is dependent on consumer’s behaviour

Porter’s Generic Value Chain

- Helps companies find their core competence in order to reach maximum value
1. Primary activities
- Inbound logistics, operations, outbound logistics, marketing/sales, service
2. Secondary (or support) activities
- Firm infrastructure, Human resource management, technology development,
procurement

- How business develop, produce and sell their products

- How to turn inputs into outputs so that they have a greater value than the original
cost of creating those outputs

Value Created and Captured – Cost of Creating that Value = Margin

Outsourcing: Eliminating parts of the production system which don’t add value to the
product
Case Study: Starbucks
- Clear segmentation of various industries
- Inbound logistics are easy to define

 Support activities
- Firm infrastructure
- Human resources management
- Technology development
- Procurement

 Primary activities
- Inbound logistics
o Starbucks doesn’t grow its own coffee  left to another company
o To ensure quality, Starbucks has a contract with its supplier
o If sample supply doesn’t meet criteria, deal is off
- Operations
o Starbucks doesn’t process its own coffee
- Outbound logistics
o Left to another company
- Marketing and Sales
o Main business focus in on right hand side of value chain; marketing and sales
and service
o Core competence
o Marketed as the ‘third place’ for consumers
- Service
o Baristas write name on your cup
o Part of service that they remember who you are

Resource Based View Framework – VRIN

VRIN = Valuable, Rare, not easy to Imitate, Non-substitutable

- “The resource-based view (RBV) of the firm, holds that certain assets with certain
characteristics will lead to sustainable competitive advantage. All the traits are
required to be present to result in sustainable competitive advantage.”
- Every organisation has resources that bring competitive advantages
- Resources = assets, capabilities, organisational processes, firm attributes,
information, knowledge etc
- To have competitive advantage, can check the presence of VRIN characteristics
- Purpose of VRIN = pinpoint a specific resource or capability which gives an advantage
SWOT Framework
- Strengths, Weaknesses, Opportunities, Threats

CASE STUDY – Southwest Airlines:

Strengths:
- Only runs one type of aircraft, operational costs reduced
- Everything is standardised  faster turnaround
Weaknesses:
- Less reliable
- Less profitability  no special business class

Case Study – Zomato

- Zomato Instant will be launched  10-minute delivery

- States that 30+ mins is too long
- Now available for a standardised, select menu
- Criticised for creating undue pressure on delivery agents
- No penalties for late deliveries, won’t inform delivery drivers of this, no incentive for
on-time deliveries

1. Identify at least five key resources and capabilities Zomato has then conduct a VRIN
analysis on each (using a table for each capability/resource will help you to do this).

 Capabilities/resources
- Loyalty program  Zomato gold
- Grocery delivery service
- Use of technology through online advertising

 Valuable
- Short delivery times with 10-minute deliveries in populated areas
- Wide distribution network of a great range of restaurants
- Provides a one-stop solution for discovering, ordering and delivering food
- Provides info such as restaurant ratings, reviews, menus and photos  allow
customers to make informed decisions
- Valuable to restaurants as it helps them reach new customers and gain access into
the online space
 Rare
- No  competitors of Swiggy, Amazon etc. cause there to be an over-saturated
market in food delivery
- Gives customers more purchasing power in their ability to choose where to order
 Inimitable
- Other companies are able to imitate its delivery capabilities and strategies
- Might be hard to imitate some restaurants they have access to
- Zomato is one of India’s biggest food delivery platforms and has a large database of
restaurant information
- Makes it difficult for new competitors to enter the market
 Non-substitutable
- Can substitute for one of its many competitors

2. Does Zomato have any sustainable competitive advantages?

 10-minute delivery
- Not sustainable
- No incentive to have 10-minute delivery
- As demand increases, 10-minutes will not be sustainable, and this can no longer
occur
 Loyalty program
- Sustainable
- Causes brand loyalty, creates a solid network/base of customers
- Encourages customers to be long time users of Zomato
 Use of social media and technology
- Sustainable as technology will only become a bigger phenomenon
- Online presence will grow and thus their reach to customers will increase as well
 Grocery delivery services
- Somewhat sustainable
- Business will most likely drop after COVID once people can do their own grocery
shopping again
- However, for their busier clients, it is a good way to attract other people who do not
have takeaway food often
- Tapping into a new market

3. What do you recommend they should do to create/maintain or strengthen their

competitive advantages?
 Online presence
- Increase online advertising, hire social media marketers
- Allow them to compete on a more level playing field with Amazon
- Use internet and cloud computing to their advantage to maintain hold on India’s
food delivery market
 Create more loyalty rewards
 Create stronger bonds with local restaurants
- With Zomato’s long standing business growth in India, they need to continue to
uphold their relationships with restaurants, preventing them working with Amazon
- Therefore, can maintain market share
- Avoid any more ‘logout’ movements
- Need to make restaurants exclusive to Zomato to keep Amazon out of the market
 - Zomato has a strong brand recognition in India and needs to maintaint that to draw
in customers

- Zomato’s sole focus on food allows them the opportunity to capture the food
delivery market (page 1)
- Food delivery market characterized by low entry costs, shifting customer loyalties
and preferences, frequent introduction of new offerings
- To retain market share, Zomato needed to offer discounts or free delivery to attract
and retain customers (page 1)
- Needed to maintain relationship with restaurants  can’t lose trust like logout
movement (page 3)
- Needed to be fast and innovative, speed to scale up
- Needed to offer discounts to customers whilst pacifying partner restaurants by
offering some rebate in the commission
- With increased number of competitors, customers bargaining power increased 
had more choice

 Amazon
- Offered free food delivery to prime members
- Cheaper delivery
- Waived off packaging fee
- Charging only 10% of order value as commission from restaurants whilst
Zomato/Swiggy took 20-25%
- Amazon had competence in cloud computing and other cutting-edge technologies

Consider as well the following:

What other key factors are occurring in the case impacting the business that we would need
to consider when examining the value of the company from a holistic perspective?