Strategic Management Chapter 4 Ppt

Chapter 4 Internal Scanning: Organizational Analysis

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Internal strategic factors: Critical strengths and weaknesses that are likely to determine if the firm will be able to take advantage of opportunities while avoiding threats.

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Resource-Based Approach Resource: An asset, competency, process, skill, or knowledge controlled by the corporation.

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Evaluating Key Resources VRIO Framework 

Value: Does it provide competitive advantage?

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Rareness: Do other competitors possess it?

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Imitability: Is it costly for others to imitate?

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Organization: Is the firm organized to exploit the resource? 4

Resource-Based Approach 5-Step approach to strategy analysis: 

Identify & classify firm’s resources 

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Strengths & weaknesses

Combine firm’s strengths into capabilities  

Core competencies Distinctive competencies

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Resource-Based Approach 5-Step approach to strategy analysis: 

Profit potential of resources 

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Select strategy 

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Sustainable competitive advantage

Exploits firm’s resources relative to external opportunities

Identify resource gaps 

Invest in upgrading weaknesses 6

Sustainability of an Advantage Durability: Rate at which a firm’s underlying resources and capabilities (core competencies) depreciate or become obsolete. Imitability: Rate at which a firm’s underlying resources and capabilities (core competencies) can be duplicated by others.

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Core Competencies Imitability of core competencies determined by: 

Transparency: how easy it is to understand the competencies of others

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Transferability: how easy it is to bring the competency to your organization

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Replicability : overall how easy it is to copy 8

Core Competencies Explicit Knowledge: 

Knowledge that can be easily articulated and communicated.

Tacit Knowledge: 

Knowledge that is not easily communicated because it is deeply rooted in employee experience or in a corporation’s culture .

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Resource Sustainability

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Corporate Value Chain

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Corporate Value Chain Analysis 

Examine each product line’s value chain 

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Examine the “linkages” within each product line’s value chain 

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Core competencies & core deficiencies

Connections between the way one value activity is performed and the cost of performance of another activity

Examine the synergies among the value chains of different product lines or business units 

Economies of scope

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Basic Organizational Structures: Simple and Functional I. Simple Structure Owner-Manager

Workers II. Functional Structure Top Management

Manufacturing

Sales

Finance

Personnel

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Basic Structures of Corporations: Divisional III. Divisional Structure* Top Management

Product Division A

Manufacturing

Product Division B

Finance

Sales

Manufacturing

Personnel

Finance

Sales

Personnel

*Conglomerate structure is a variant of the division structure.

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Corporate Culture

Defined: Collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another.

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Corporate Culture Distinct Attributes 1. Cultural intensity 

Degree to which members of a unit accept the norms, values, or other culture content associated with the unit.  Strong vs. Weak

2. Cultural integration 

Extent to which units throughout an organization share a common culture.

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Corporate Culture Important Functions    

Sense of identity for employees Generate employee commitment Stability of organization Guide for appropriate behavior

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Strategic Marketing Issues Market Position: 

“Who are our customers?”

Market Segmentation: 

Niches, new product development

Marketing Mix: 

Combination of key variables under the corporation’s control used to affect demand and gain competitive advantage. 18

Marketing Mix Variables Product

Place

Promotion

Price

Quality Features Options Style Brand name Packaging Sizes Services Warranties Returns

Channels Coverage Locations Inventory Transport

Advertising Personal selling Sales promotion Publicity

List price Discounts Allowances Payment periods Credit terms

Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 89. Copyright © 1980. Reprinted by permission of Prentice-Hall, Inc.

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Sales

The Product Life Cycle

Introduction

Growth*

Maturity Time

Decline

*The right end of the Growth stage is often called Competitive Turbulence because of price and distribution competition that shakes out the weaker competitors. For further information, see C. R. Wasson, Dynamic Competitive Strategy and Product Life Cycles, 3rd ed. (Austin, Tex.: Austin Press, 1978).

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Strategic Financial Issues Financial Leverage: 

Ratio of total debt to total assets.

Capital Budgeting: 

Analyzing and ranking possible investments in fixed assets.

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Strategic R&D Issues R&D Intensity: 

Spending on R&D as a percentage of sales revenue.

Technological Competence: 

Development and use of innovative technology.

Technology Transfer: 

Process of taking new technology from the lab to the marketplace. 22

Technological Discontinuity

Product Performance

What the S-Curves Reveal

Mature Technology New Technology

Research Effort/Expenditure In the corporate planning process, it is generally assumed that incremental progress in technology will occur. But past developments in a given technology cannot be extrapolated into the future, because every technology has its limits. The key to competitiveness is to determine when to shift resources to a technology with more potential.

Source: P. Pascarella, “Are You Investing in the Wrong Technology?” Industry Week (July 25, 1983), p. 38. Copyright © 1983 Penton/IPC. All rights reserved. Reprinted by permission.

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Strategic Operations Issues Intermittent systems: 

Manufacturing systems where items are normally processed sequentially but the work and sequence of the process vary.

Continuous systems: 

Laid out as lines where products are continuously assembled or processed.

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Strategic HRM Issues Teams Autonomous (self-managing)  Cross-functional  Concurrent engineering 

Unionization 13.9% of labor force overall  12% of private labor force 

Temporary Workers 

Increase flexibility; avoid layoffs 25

Strategic HRM Issues Quality of Work life Participative problem solving  Restructuring work  Innovative reward systems  Improvements in work environment 

Human Diversity 

Different races, cultures and backgrounds in the workplace. 26

Strategic Information Systems Issues    

Automate back-office processes Automate individual tasks Enhance key business functions Develop competitive advantages

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Strategic Information Systems Issues 

Intranet: 

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Information network within an organization that also has access to the external worldwide Internet.

Extranet: 

Information network within an organization available to key suppliers and customers. 28

Internal Factor Analysis Summary (IFAS)

Internal Factors Strengths

Rating

Weight 1

Weighted Score

2

3

Comments 4

5

Weaknesses

Total Weighted Score

1.00

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Internal Factor Analysis Summary (IFAS): Maytag as Example

Internal Factors Strengths • • • • •

1 Quality Maytag culture Experienced top management Vertical integration Employee relations Hoover’s international orientation

Weaknesses • Process-oriented R&D • Distribution channels • Financial position • Global positioning

Weight

Weighted Score

Rating 2

3

4

5

.15 .05 .10 .05 .15

5 4 4 3 3

.75 .20 .40 .15 .45

Quality key to success Know appliances Dedicated factories Good, but deteriorating Hoover name in cleaners

.05 .05

2 2

.10 .10

.15 .20

2 2

.30 .40

.05

4

.20

Slow on new products Superstores replacing small dealers High debt load Hoover weak outside the United Kingdom and Australia Investing now

• Manufacturing facilities

Total Weighted Score

Comments

1.00

3.05 30

Impact of the Internet 

Virtual Teams: 

Groups of geographically and/or organizationally dispersed coworkers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task.

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Impact of the Internet Virtual Teams • • • • •

Flatter organizational structures Turbulent environments Employee autonomy Higher knowledge requirements Globalization of trade 32