Competitive Strategies 1
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Strategic Management
4
Assessing Strengths and Weaknesses: Doing An Internal Analysis 1
Learning Outline o
What is an internal analysis? • •
•
o
Define internal analysis. Describe the relationship between organizational resources, organizational capabilities, core competencies, and distinctive capabilities. Explain what organizational strengths and weaknesses are.
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. 2
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.
3
What is an Internal Analysis?
Internal Analysis Identifies and evaluates resources, capabilities, and core competencies Looks at the organization’s o o o o
Current vision Mission Strategic objectives Strategies 4
A Quick Review of Organizational Resources
Organizational Resources (assets) • Financial resources • Physical assets • Human resources • Intangible resources • Structural-cultural resources
5
The Strategic Role of Organizational Resources and Organizational Capabilities Performance Results
Competitive Advantage Distinctive Organizational Capabilities Organizational Resources Financial assets Physical assets Human resources Intangible assets Structural-
Organizational Capabilities Organizational processes and routines Accumulated knowledge Actual work activities
Core Competencies
6
From Capabilities to Distinctive Capabilities & Core Competencies Distinctive Organizational Capabilities Distinctive Organizational • Special and unique capabilities • Distinguish from competitors • Sustainable competitive advantage • Outperform competition
Organizational Capabilities • Org. capabilities come first • Fundamental building block for developing core competencies • Organizational processes and routines to get the work done
Capabilities
Organizational Capabilities
Core Competencies
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 7
Characteristics of Distinctive Organizational Capabilities • Contributes to Superior Customer Value
• Can Be Used in a Variety of Ways
Distinctive Organizational Capabilities
• Is Difficult for Competitors to Imitate
8
From Capabilities to Distinctive Capabilities & Core Competencies Distinctive Organizational Capabilities • Special and unique capabilities • Distinguish from competitors • Sustainable competitive advantage • Outperform competition
Organizational Capabilities • Org. capabilities come first • Fundamental building block for developing core competencies • Organizational processes and routines to get the work done
Distinctive Organizational Capabilities Organizational Capabilities
Core Competencies
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 9
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
10
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
11
Primary and Support Activities in the Value Chain
IN G AR M
Marketing and Sales Service
{
Outbound Logistics
Procurement Operations
Inbound Logistics
Support Activities
IN
Technological Development
G AR
Human Resource Management
M
{
Firm Infrastructure
Primary Activities
12
Value Chain Analysis Assessing the PRIMARY Activities in the Value Chain
( from Table 4-1)
Inbound Logistics • Materials control system • Inventory control system • Raw material handling and warehousing
Operations • • • •
Equipment comparison to competitors Plant layout Production control system Level of automation in production processes
13
Value Chain Analysis Assessing the PRIMARY Activities in the Value Chain (continued) ( from Table 4-1)
Outbound Logistics • Timeliness and efficiency of finished products delivery • Warehousing of finished products
Marketing and Sales • • • • • • • •
Marketing research Sales promotions and advertising Alternative distribution channels Competency and motivation of sales force Organization’s image of quality Organization’s reputation Brand loyalty of customers Domination of various market segments 14
Value Chain Analysis Assessing the PRIMARY Activities in the Value Chain (continued) ( from Table 4-1)
Customer Service • • • • •
Customer input for product improvements Handling of customer complaints Warranty and guarantee policies Employee training in customer education & service issues Replacement parts and services
15
Value Chain Analysis Assessing the SUPPORT Activities in the Value Chain
( from Table 4-2)
Procurement • • • • •
Alternate sources for obtaining needed resources Timeliness of resources procurement Procurement of large capital expenditure resources Lease-versus-purchase decisions Long-term relationships with reliable suppliers
Technological Development • • • • • •
R&D activities in product and process innovations Relationship between R&D and other departments Meeting deadlines in technological development activities Quality of labs and other research facilities Qualifications of lab technicians and scientists Creativity and innovation in organizational culture 16
Value Chain Analysis Assessing the SUPPORT Activities in the Value Chain (continued) ( from Table 4-2)
Human Resource Management • • • • • • •
Recruiting, selecting, orienting, and training employees Employee promotion policies Reward systems to motivate and challenge employees Absenteeism and turnover Union-organization relations Employee participation in professional organizations Employee motivation, job commitment, and satisfaction
17
Value Chain Analysis Assessing the SUPPORT Activities in the Value Chain (continued) ( from Table 4-2)
Firm Infrastructure • • • • • • •
Identification of external opportunities and threats Accomplishing goals with strategic planning system Coordination and integration of value chain activities Low-cost capital expenditures & working capital funds IS support for strategic and operational decisions Relationships with stakeholders Public image as a responsible corporate citizen
18
Using an Internal Audit
An internal audit thoroughly assesses an organization's various internal functional areas Six Primary Functional Areas • Productions-Operations • Marketing • Research and Development • Financial and Accounting • Management (including HRM) • Information Systems
19
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 20
Identifying Distinctive Organizational Capabilities Prepare current product-market profile.
Step 1
Identify sources of competitive advantage and disadvantage in the main product-market segments.
Step 2
Describe all the organizational capabilities and competencies.
Step 3
Step 4
Step 5
Sort the core capabilities and competencies according to strategic importance. Identify and agree on the key capabilities and competencies. 21
Criteria to Judge Organizational Strengths and Weaknesses Past Performance Trends
Comparison Against Competito
Are organizational resources and capabilities strengths or weaknesses?
Specific Goals or Targets
Personal Opinions of Strategic Decision Makers or Consultants 22
Why Do an Internal Analysis? 1.
It is the only way to identify an organization’s strengths and weaknesses
3.
It’s needed for making good strategic decisions
23
Chapter Four
Developing and exploiting distinctive competencies Three approaches to internal analysis Know the What, How and Why
24
4
Assessing Strengths and Weaknesses: Doing An Internal Analysis 1
Learning Outline o
What is an internal analysis? • •
•
o
Define internal analysis. Describe the relationship between organizational resources, organizational capabilities, core competencies, and distinctive capabilities. Explain what organizational strengths and weaknesses are.
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. 2
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.
3
What is an Internal Analysis?
Internal Analysis Identifies and evaluates resources, capabilities, and core competencies Looks at the organization’s o o o o
Current vision Mission Strategic objectives Strategies 4
A Quick Review of Organizational Resources
Organizational Resources (assets) • Financial resources • Physical assets • Human resources • Intangible resources • Structural-cultural resources
5
The Strategic Role of Organizational Resources and Organizational Capabilities Performance Results
Competitive Advantage Distinctive Organizational Capabilities Organizational Resources Financial assets Physical assets Human resources Intangible assets Structural-
Organizational Capabilities Organizational processes and routines Accumulated knowledge Actual work activities
Core Competencies
6
From Capabilities to Distinctive Capabilities & Core Competencies Distinctive Organizational Capabilities Distinctive Organizational • Special and unique capabilities • Distinguish from competitors • Sustainable competitive advantage • Outperform competition
Organizational Capabilities • Org. capabilities come first • Fundamental building block for developing core competencies • Organizational processes and routines to get the work done
Capabilities
Organizational Capabilities
Core Competencies
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 7
Characteristics of Distinctive Organizational Capabilities • Contributes to Superior Customer Value
• Can Be Used in a Variety of Ways
Distinctive Organizational Capabilities
• Is Difficult for Competitors to Imitate
8
From Capabilities to Distinctive Capabilities & Core Competencies Distinctive Organizational Capabilities • Special and unique capabilities • Distinguish from competitors • Sustainable competitive advantage • Outperform competition
Organizational Capabilities • Org. capabilities come first • Fundamental building block for developing core competencies • Organizational processes and routines to get the work done
Distinctive Organizational Capabilities Organizational Capabilities
Core Competencies
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 9
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
10
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
11
Primary and Support Activities in the Value Chain
IN G AR M
Marketing and Sales Service
{
Outbound Logistics
Procurement Operations
Inbound Logistics
Support Activities
IN
Technological Development
G AR
Human Resource Management
M
{
Firm Infrastructure
Primary Activities
12
Value Chain Analysis Assessing the PRIMARY Activities in the Value Chain
( from Table 4-1)
Inbound Logistics • Materials control system • Inventory control system • Raw material handling and warehousing
Operations • • • •
Equipment comparison to competitors Plant layout Production control system Level of automation in production processes
13
Value Chain Analysis Assessing the PRIMARY Activities in the Value Chain (continued) ( from Table 4-1)
Outbound Logistics • Timeliness and efficiency of finished products delivery • Warehousing of finished products
Marketing and Sales • • • • • • • •
Marketing research Sales promotions and advertising Alternative distribution channels Competency and motivation of sales force Organization’s image of quality Organization’s reputation Brand loyalty of customers Domination of various market segments 14
Value Chain Analysis Assessing the PRIMARY Activities in the Value Chain (continued) ( from Table 4-1)
Customer Service • • • • •
Customer input for product improvements Handling of customer complaints Warranty and guarantee policies Employee training in customer education & service issues Replacement parts and services
15
Value Chain Analysis Assessing the SUPPORT Activities in the Value Chain
( from Table 4-2)
Procurement • • • • •
Alternate sources for obtaining needed resources Timeliness of resources procurement Procurement of large capital expenditure resources Lease-versus-purchase decisions Long-term relationships with reliable suppliers
Technological Development • • • • • •
R&D activities in product and process innovations Relationship between R&D and other departments Meeting deadlines in technological development activities Quality of labs and other research facilities Qualifications of lab technicians and scientists Creativity and innovation in organizational culture 16
Value Chain Analysis Assessing the SUPPORT Activities in the Value Chain (continued) ( from Table 4-2)
Human Resource Management • • • • • • •
Recruiting, selecting, orienting, and training employees Employee promotion policies Reward systems to motivate and challenge employees Absenteeism and turnover Union-organization relations Employee participation in professional organizations Employee motivation, job commitment, and satisfaction
17
Value Chain Analysis Assessing the SUPPORT Activities in the Value Chain (continued) ( from Table 4-2)
Firm Infrastructure • • • • • • •
Identification of external opportunities and threats Accomplishing goals with strategic planning system Coordination and integration of value chain activities Low-cost capital expenditures & working capital funds IS support for strategic and operational decisions Relationships with stakeholders Public image as a responsible corporate citizen
18
Using an Internal Audit
An internal audit thoroughly assesses an organization's various internal functional areas Six Primary Functional Areas • Productions-Operations • Marketing • Research and Development • Financial and Accounting • Management (including HRM) • Information Systems
19
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 20
Identifying Distinctive Organizational Capabilities Prepare current product-market profile.
Step 1
Identify sources of competitive advantage and disadvantage in the main product-market segments.
Step 2
Describe all the organizational capabilities and competencies.
Step 3
Step 4
Step 5
Sort the core capabilities and competencies according to strategic importance. Identify and agree on the key capabilities and competencies. 21
Criteria to Judge Organizational Strengths and Weaknesses Past Performance Trends
Comparison Against Competito
Are organizational resources and capabilities strengths or weaknesses?
Specific Goals or Targets
Personal Opinions of Strategic Decision Makers or Consultants 22
Why Do an Internal Analysis? 1.
It is the only way to identify an organization’s strengths and weaknesses
3.
It’s needed for making good strategic decisions
23
Chapter Four
Developing and exploiting distinctive competencies Three approaches to internal analysis Know the What, How and Why
24
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