1 3 assessing strengths and weaknesses: doing an internal analysis strategic management
TRANSCRIPT
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3 Assessing Strengths and Weaknesses:
Doing An Internal Analysis
Strategic Management
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Learning Outline
o What is an internal analysis?• Define internal analysis.• Describe the relationship between organizational resources,
organizational capabilities, core competencies, and distinctive capabilities.
• Explain what organizational strengths and weaknesses are.
o How to do an internal analysis• Describe the primary and support activities on the value chain.• Explain what an internal audit is and how it can be used for
internal analysis.• Describe the steps in a capabilities assessment profile.
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Learning Outline (contd.)
o Why do an internal analysis?• Explain the criteria that could be used to assess an
organization’s strengths and weaknesses.• Discuss why an internal analysis is important.
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What is an Internal Analysis?
Internal Analysis Identifies and evaluates resources,
capabilities, and core competencies Looks at the organization’s
o Current visiono Missiono Strategic objectiveso Strategies
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A Quick Review of Organizational Resources
Organizational Resources (assets)
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Financial resources
Physical assets
Human resources
Intangible resources
Structural-cultural resources
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The Strategic Role of Organizational Resources and Organizational Capabilities
OrganizationalResources
Financial assetsPhysical assetsHuman resourcesIntangible assetsStructural-cultural
assets
OrganizationalCapabilities
Organizational processes and routines
Accumulated knowledgeActual work activities
CoreCompetencies
Distinctive OrganizationalCapabilities
Competitive Advantage
Performance Results
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From Capabilities toDistinctive Capabilities & Core Competencies
OrganizationalCapabilities
Organizational Capabilities •Org. capabilities come first •Fundamental building block for
developing core competencies •Organizational processes and
routines to get the work done
CoreCompetencies
Core Competencies •Not a source of competitive advantage •Develop distinctive organizational capabilities • Improve and enhance organizational capabilities •Fundamental skills and capabilities •Exploitable by organization •Major value-creating skills and capabilities
Distinctive OrganizationalCapabilities
DistinctiveOrganizational Capabilities •Special and unique capabilities •Distinguish from competitors •Sustainable competitive advantage •Outperform competition
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Characteristics of Distinctive Organizational Capabilities
DistinctiveOrganizational
Capabilities
•Contributes toSuperior CustomerValue
•Can Be Usedin a Varietyof Ways
• Is Difficultfor Competitorsto Imitate
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From Capabilities toDistinctive Capabilities & Core Competencies
OrganizationalCapabilities
Organizational Capabilities •Org. capabilities come first •Fundamental building block for
developing core competencies •Organizational processes and
routines to get the work done
CoreCompetencies
Core Competencies •Not a source of competitive advantage •Develop distinctive organizational capabilities • Improve and enhance organizational capabilities •Fundamental skills and capabilities •Exploitable by organization •Major value-creating skills and capabilities
Distinctive OrganizationalCapabilities
DistinctiveOrganizational Capabilities •Special and unique capabilities •Distinguish from competitors •Sustainable competitive advantage •Outperform competition
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The Role of Strengths and Weaknesses
Strengths: Resources that an organization possesses and capabilities that an organization has developed. Both can be exploited and developed into a sustainable competitive advantage
Weaknesses: Resources and capabilities that are lacking or deficient. Prevent an organization from developing a sustainable competitive advantage
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Value Chain Analysis
The premise behind value chain analysis is that customers demand value from goods and services they obtain
Customer value Product is unique and different Product is low priced Quick response to specific or distinctive customer needs
A value chain is a systematic way of examining organization’s functional activities
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Primary and Support Activities in the Value Chain
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Technological Development
Human Resource Management
Firm Infrastructure
Primary Activities
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Out
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Mar
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Inbo
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Value Chain AnalysisAssessing the PRIMARY Activities in the Value Chain
Inbound LogisticsInbound Logistics•••
Materials control systemInventory control systemRaw material handling and warehousing
OperationsOperations••••
Equipment comparison to competitorsPlant layoutProduction control systemLevel of automation in production processes
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Value Chain AnalysisAssessing the PRIMARY Activities in the Value Chain (continued)
Outbound LogisticsOutbound Logistics••
Timeliness and efficiency of finished products deliveryWarehousing of finished products
Marketing and SalesMarketing and Sales••••••••
Marketing researchSales promotions and advertisingAlternative distribution channelsCompetency and motivation of sales forceOrganization’s image of qualityOrganization’s reputationBrand loyalty of customersDomination of various market segments
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Value Chain AnalysisAssessing the PRIMARY Activities in the Value Chain (continued)
Customer ServiceCustomer Service•••••
Customer input for product improvementsHandling of customer complaintsWarranty and guarantee policiesEmployee training in customer education & service issuesReplacement parts and services
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Value Chain AnalysisAssessing the SUPPORT Activities in the Value Chain
ProcurementProcurement•••••
Alternate sources for obtaining needed resourcesTimeliness of resources procurementProcurement of large capital expenditure resourcesLease-versus-purchase decisionsLong-term relationships with reliable suppliers
Technological DevelopmentTechnological Development••••••
R&D activities in product and process innovationsRelationship between R&D and other departmentsMeeting deadlines in technological development activitiesQuality of labs and other research facilitiesQualifications of lab technicians and scientistsCreativity and innovation in organizational culture
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Value Chain AnalysisAssessing the SUPPORT Activities in the Value Chain (continued)
Human Resource ManagementHuman Resource Management•••••••
Recruiting, selecting, orienting, and training employeesEmployee promotion policiesReward systems to motivate and challenge employeesAbsenteeism and turnoverUnion-organization relationsEmployee participation in professional organizationsEmployee motivation, job commitment, and satisfaction
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Value Chain AnalysisAssessing the SUPPORT Activities in the Value Chain (continued)
Firm InfrastructureFirm Infrastructure•••••••
Identification of external opportunities and threatsAccomplishing goals with strategic planning systemCoordination and integration of value chain activitiesLow-cost capital expenditures & working capital fundsIS support for strategic and operational decisionsRelationships with stakeholdersPublic image as a responsible corporate citizen
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Using an Internal Audit
An internal audit thoroughly assessesan organization's various internal functional areas
Six Primary Functional Areas
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Productions-Operations
Marketing
Research and Development
Financial and Accounting
Management (including HRM)
Information Systems
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Capabilities Assessment Profile
Complex Analysis of Capabilities Not as easily identifiable as organizational functions Hard for competitors to imitate
Two-phased Capability Assessment Phase I: Identify distinctive capabilities Phase II: Develop and leverage these distinctive
capabilities
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Identifying Distinctive Organizational Capabilities
Step 1
Step 2
Step 3
Step 4
Step 5
Prepare current product-market profile.
Identify sources of competitiveadvantage and disadvantage inthe main product-market segments.
Describe all the organizationalcapabilities and competencies.
Sort the core capabilities andcompetencies according tostrategic importance.
Identify and agree onthe key capabilitiesand competencies.
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Criteria to Judge Organizational Strengths and Weaknesses
Are organizational resources and capabilitiesstrengths or weaknesses?
Past Performance Trends
Specific Goals or Targets
Comparison Against Competitors
Personal Opinions of StrategicDecision Makers or Consultants
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Why Do an Internal Analysis?
1. It is the only way to identify an organization’s strengths and weaknesses
2. It’s needed for making good strategic decisions
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Chapter Three
Developing and exploiting distinctive competencies
Three approaches to internal analysis Know the What, How and Why