Also known as corporate appraisal, appraisal of internal factors, audit of organizational competence or appraising organizational competencies & resources, is the systematic evaluation of the organizations strengths & weakness.It is the process through which strategists & managers analyze the various factors of their organization to evaluate their relative strengths & weaknesses so as to meet the opportunities & threats of environment.

It is considered as beginning of the strategic management.Enables mangers to overcome their weakness.It enables organization to improve its weaknesses.Organization can try alternatives methods.

STRATEGIC ADVANTAGEORGANIZATIONAL CAPABILITYCOMPETENCIESSYNERGISTIC EFFECTSSTRENGTHS & WEAKNESSESORGANIZATIONAL RESOURCESORGANIZATIONAL BEHAVIOUR

A firm is bundle of resources-tangible & intangible-includes all assets, capabilities, organizational processes, information, knowledge etc.3 types of resources: Physical, human & organizational

Manifestation of various forces & influences operating in internal environment of an organization that create the ability for , or place constraints on, the usage of resources.Forces that affect organizational behavior are-quality of leadership, management philosophy, shared values & culture, quality of work environment ,organizational climate, organizational politics, use of power etc.

Strength is the inherent capability which an organization can use to gain strategic advantage.Weakness is inherent limitation or constraint which creates a strategic disadvantage for an organization.

Synergy is an idea that the whole is greater or lesser than the sum of its parts.

Competencies are special qualities possessed by an organization that make them withstand the pressures of competition in the marketplace. Net result of strategic advantage & disadvantage that exists for an organization determine its ability to compete with its rivals.Specific ability is distinctive competence.

The inherent capacity or potential of an organization to use its strengths & overcome its weaknesses in order to exploit the opportunities & face the threats in its external environment.

Outcome of competitive advantage.Competitive advantage is strategic advantage where there is more than one or more identified rivals against whom rewards or penalties can be measured.

Value Chain ApproachFunctional approach

FIRM INFRASTRUCTUREHUMAN RESOURCE MANAGEMENTTECHNOLOGY DEVELOPMENTPROCUREMENTINBOUND LOGISTICSOPERATIONOUTBOUND LOGISTICSMKTG& SALESSERVICE

Inbound LogisticsOperationsOutbound logisticsMarketing & salesServices

Firm InfrastructureHuman resource managementTechnology developmentprocurement

Provides clarity about weaknesses & strengths.Difficult to implementConcept of value is hazyTraditional cost analysis method cant be adoptedRequires data collected from various sources

Functional approach of organizational analysis takes into account various functional areas & evaluates these for identifying strengths & weaknesses.Functional areas to be evaluated:Production/OperationsMarketingFinanceHuman ResourceGeneral Management

Allocation & use of resourcesRationalization of resourcesLocational PatternProduction capacity & its useCost StructureCost-Volume-Profit RelationshipOperation proceduresRaw material availabilityInventory control systemsResearch & developmentPatent rights

Competitive CompetenceProduct MixProduct Life cycleMarketing ResearchChannels of distributionSales ForcePricingPromotional efforts

Capital costCapital StructureFinancial planningTax benefitsPattern of shareholdingRelationship with shareholders & financiersAccounting procedures

Quality of personnelPersonal turnover & absenteeismIndustrial relations

LeadershipTop management constitution & philosophyOrganizational image &prestigeOrganizational climateManagement practicesOrganizational structureOrganizational external relationship

Internal analysisVRIO FrameworkValue Chain analysisQuantitative analysisQualitative AnalysisComparative AnalysisHistorical AnalysisIndustry NormsBenchmarking

Comprehensive AnalysisKey factor ratingBusiness Intelligence systemBalanced Scorecard

Valuable ,Rare ,Inimitable ,organizedIt helps to determine the strategic significance of an organizations capabilities

VALUABLE?RARE?COSTLY TO IMITATE?ORGANIZED FOR USAGE?STRENGTHS OR WEAKNESS?No--NoWeaknessYesNo-YesStrengthYesYesNoYesStrength & Distinctive CompetenceYesYesYesYesStrength & sustainable distinctive competence

Financial analysis-Ratio analysis, activity based accountingNon Financial Analysis- Employee turnover, goodwill, rate of absenteeism

Strengths & weaknesses cannot be expressed in quantitative terms.It is best used to express corporate culture, ability to absorb, assimilate knowledge etcIt requires survey approachAlso considered as soft

Historical AnalysisIndustry NormsBenchmarking

Compare performance, strength & weakness with past Measure of how well an organization has performed Should be develop to know in depth the reasons for bad performance.

Comparing oneself with those firm having same strategiesIt provides a good idea to firms regarding the areas in which they excel or need improvementsHelps in locating strengths & weaknesses

A benchmark is the reference point for taking measures against.Purpose is to find best performers in that areaWhat is to be compared ;Three types: Performance, process & Strategic benchmarkingAgainst whom to be compared; four types:Internal,Competitive,functional, generic

Key factor ratingBusiness Intelligence systemBalanced score card

Organizational Capability profile

Factors appraisedDegree of strength/weaknessWeakness Normal Strength -5 0 +5Production/operation factorsMarketing factorsFinancial factorsPersonnel & management factors