1 internal analysis. 2 strategic managers must evaluate the internal environment of the...
TRANSCRIPT
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Internal Analysis
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Internal Analysis
• Strategic Managers must evaluate the Internal Environment of the organization.
• What is the process?– Identify and classify variables within an
organization as strengths or weaknesses.
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• STRENGTH = factor that is better than:– past performance– key competitors– industry as a whole
• WEAKNESS = factor that is worse than:– past performance– key competitors– industry as a whole
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Approaches for scanning and analyzing Internal Variables
• Functional Analysis
• Value Chain Analysis
• Core Competencies Analysis
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Functional Analysis
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Management
1. General Management
2. Human Resource Management
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General Management Factors
• Structure of the organization• Organizational Culture• Record in Achieving Objectives• Top management skills, capabilities, &
interests.• Reputation of the Organization and Top
Management• Social Responsibility record
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Human Resource Management
• Number of employees
• Unionization
• Employee skills and morale
• Quality of Work/Life Issues– Recent downsizings
• Recognition/promotion/reward systems
• Training programs; educational reimbursement
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Operations (Manufacturing or Service Firms)
• Quality Initiatives– Quality certifications– Policies and procedures for quality
• Six sigma quality = 3.4 manufacturing defects per million items
• Location of facilities
• Outsourcing
• Flexible manufacturing
• Raw material costs and availability
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Operations - Continued(Manufacturing or Service)• Economies of scale
– decreasing fixed costs/ unit when producing more
• Economies of scope– common parts of different products manufactured
together.
• Re-engineering
• Percentage of cost of goods sold to sales
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Information Systems
• Chief Information Officer
• Network Capabilities
• Hardware and software upgrades
• Y2K compliance & costs
• Internet page – quality; features
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Research and Development
• Expenditures– Over time– In relation to competitors/industry– Percentage of sales
• Product to market time
• Own labs/facilities or lease?
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Finance
• Currency risk management– Global impact
• Financing decisions
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Financial Ratios
Type ofratio
1995 1996 1997 IndustryAvg
Trend
LiquidityCurrentQuickLeverageDebt-to-totalassetsDebt-to-equity
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Value Chain Analysis
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Firm Infrastructuregeneral management,accounting financeHuman Resource Management recruiting, training, development
Technology DevelopmentR&D, product and process improvement
Procurementpurchasing raw materials; machines, supplies
SupportActivities
InboundLogisticsraw matlhandlingware-housing
Operationsmachiningassemblingtestingpackaging
OutboundLogisticsware-housingdistri-bution
Marketingand Salesadvertisingpromotionpricingchannelrelations
Serviceinstal-lation,repair,replace-ment
PRIMARY ACTIVITIES
Pro
fit
Mar
gin
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Core Competencies
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Core Competencies of the Corporation
• Real sources of advantage - not based on businesses.– management’s ability to consolidate
corporatewide technologies and production into competencies.
• Core competencies are collective learning in the organization, especially:– how to coordinate diverse production skills by
integrating multiple streams of technologies.
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Three tests to identify core competencies
• Provide potential access to a wide variety of markets.
• Make a significant contribution to the perceived customer benefits of the end product.
• Are difficult to imitate.
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examples
• Engines• Powertrains
• Optics• Imaging• Microprocessor
controls
• Cars; motorcycles; lawn mowers; generators
• Copiers; laser printers; cameras; image scanners; medical imaging
Core Competencies Products/businesses
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More kinds of core competencies:
• Systems Integration
• Virtual reality
• Bioengineering
• Delighting the customer
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Purpose of Internal Analysis
• Identify and evaluate what’s going on inside the firm.
• The goal is to assess what are strengths and what are weaknesses.
• Critical in making decisions about the future of the organization.