Strategic Management

Jeff Dyer

Third Edition

Chapter 3

Internal Analysis: Strengths, Weaknesses, and Competitive Advantage


Professor’s Goals for this Lecture

There are many types of problems that can be solved for a company by doing a cost analysis. A cost analysis can be used to solve problems as diverse as marketing (e.g., how much to spend to acquire additional customers) or HR (how much labor costs go down per unit with increases in volume). The principle tools to be learned in this chapter are designed to help the student examine the relationship between a company’s size (measured in volumes produced or market share) and cost per unit. This is primarily reinforced by teaching students how to create a scale/experience curve (both done in the same way with “cost per unit” on the “Y” axis but the scale curve uses volume for a given year on the “X” axis whereas the experience curve uses cumulative volume on the “X” axis. The students will have the opportunity to examine the relationship between scale/experience in the following assignments:

– the homework assignment involving calculating an experience curve in semiconductors

– Fry’s Credit Card Mini-case (in lecture); considers the relationship between total number of subscribers (X axis) and cost per subscriber (Y axis)

– the Southwest Case (after lecture); considers the relationship between total passengers flown (or market share) and performance (profitability) in the industry



Technical innovations

Flowers and Trees—the first cartoon to use 3 color Technicolor technology, 1932


Snow white—the first full length feature in 1937


Fantasia—1940, the first film in stereophonic sound

Copyright ©2020 John Wiley & Sons, Inc.



The following are more technical innovations that Disney pioneered. Students will be familiar with Snow White and Fantasia (both from their own childhood viewing and the opening vignette), and so these slides can provide a quick quiz and test of student retention.



Huge innovation, huge risk


The Happiest Place on Earth

Copyright ©2020 John Wiley & Sons, Inc.



1957—Disneyland opens. Disneyland is not only a great technical innovation (lots of new technology from the imagineers in developing really cool rides and attractions).


Disneyland was also a huge business innovation, and a huge risk. First, to finance Disneyland, Walt began producing weekly TV programs, when it was not at all clear that TV would become a major medium of communication.


Second, in the 1950s theme parks were all local, and many were shabby and poorly run. Remember, the U.S. Interstate system is in the early days of its construction, having been funded only a year earlier, and jet air travel only began in 1954. It was not at all clear that a theme park could become a national draw and attraction.


It was a huge success, from the day that it opened. Walt made one huge mistake in setting up Disneyland, however, in that he only bought 160 Acres of land for the park. They avoided that mistake with their next purchase, buying more that 27,000 acres.



The Value Chain

Value Chain- A visual description of the steps required to turn raw materials into finished products and/or services. The value chain also describes key functions of

the firm linked to each stage and functions that span the productive activities of the firm.

Copyright ©2020 John Wiley & Sons, Inc.



The Resource-Based View

Resources- All assets, capabilities, organizational processes, firm attributes, information, knowledge, and so on, contro

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