Internal Analysis

•SWOT analysis

•Value Chain Analysis

SWOT analysis

• Strengths (internal)

• Weaknesses (internal)

• Opportunities (external)

• Threats (external)

INTERNAL ANALYSIS

“Everything as it exists in nature has one perfect purpose. One should look for that one attribute that makes it unique from all other things” Aristotle

• All organizations have strengths and weaknesses in the functional areas of business.

• No enterprise is equally strong or weak in all areas.

• Internal strengths/weaknesses, coupled with external opportunities/threats and a clear statement of mission, provide the basis for establishing objectives and strategies.

• A firm’s strengths that cannot be easily matched or imitated by competitors are called distinctive competencies.

• Strategies are designed in part to improve on a firm’s weaknesses, turning them into strengths, and maybe even into distinctive competencies.

• Building competitive advantages involves taking advantage of distinctive competencies.

• Distinctive competence (how the organisation is better than or different from its competitors).

• The process of performing an internal audit closely parallels the process of performing an external audit.

• Representative managers and employees from throughout the firm need to be involved in determining a firm’s strengths and weaknesses.

• Performing an internal audit requires gathering, assimilating, and evaluating information about the firm’s operations.

• Compared to the external audit, the process of performing an internal audit provides more opportunity for participants to understand how their jobs, departments, and divisions fit into the whole organization.

• Resources are only valuable if they have one or more of the following characteristics:

• Rare

• Hard to imitate

• Not easily substitutable

• Competences are the roots which give an organization its competitive strengths and which provide the nutrients for future business development through intermediate core products and/or services.

• Core competences could be found in technology, skills that a firm has developed over time, processes or business practices (ISO, Malcolm Baldrigde Awards, TQM), link with market needs

Core competences are typically characterized as:

• Unique to the firm• Sustainable because they are

hard to imitate or to substitute• Once the strategic core

competences have been found, they must be nurtured at board level by strategic investments in people, technology, processes and infrastructure.

End products and services

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Core competences The unseen roots of competition

The Visible Corporation

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• VALUE CHAIN ANALYSIS

• Porter describes the business of a firm as a value chain, in which total revenues minus total costs of all activities undertaken to develop and market a product or service yields value.

• Value Chain Analysis refers to the process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing products to marketing those products.

• All firms should use value-chain analysis to develop and nurture a core competence and develop this competence into a distinctive competence.

Human Resource Development

Company Head Office Activity

Technology Development

Procurement

Inbound Logistics Operations Outbound

logistics

Sales &Marketing

Service

Margin

PRIMARY ACTIVITIES

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• Porter suggested that all businesses have a continuous flow of activity in their business.

• The primary activities are as follows

Inbound Logistics

Operations

Outboundlogistics

Sales &Marketing

Service

Obtain raw materialsGet raw materials into factory

Make the product

Store the productTransport to Warehouse

Sell the product

Maintain and refresh the product for the customer

• The primary or the basic activities are activities that exist in their own right.

• They are activities that can be outsourced to other organisations.

• Primary activities, in essence are businesses in their own right. Expl. Unilever-Frytol bottling.

WE ARE THE CONSULTANTS!EXPERTS FROMINBOUND TO OUTBOUND LOGISTICS

• Within an organisation there are three areas that need to be managed. These are:

• People • Information &

Technology Development

• Money • These activities are

inherent within the primary activities of the firm.

• A core competence is a value-chain activity that a firm performs especially well.

• When a core competence evolves into a major competitive advantage, it is called a distinctive competence.

• Firms use benchmarking to determine whether its value chain activities are competitive compared to rivals.

• This entails measuring the costs of value chain activities across an industry to determine “best practices” among competing firms for the purpose of duplicating or improving upon those best practices.

• From the Value chain, the firm can determine its distinctive competence over its competitors and also know its strengths and weaknesses.

• Therefore you can capitalise on your strengths and gain competitive advantage.

• If it is a weakness-improve upon it. Since it is a competitive disadvantage you can outsource it.

• Before strategy implementation, one needs to know and study the organisation’s resources as a whole in terms of

• Organisational Culture

• Management style

• Marketing

• Finance

• Research and Development

• Operations and Production

• Management Information systems

• Internal Factors versus External Factors

• The RBV approach to competitive advantage contends that internal resources are more important than external factors for a firm in achieving and sustaining competitive advantage.

• Internal resources come from three categories.

• a. Physical resources: plant, equipment, location, technology, raw materials, machines, etc.

• b. Human resources: employees, training, experience, intelligence, knowledge, skills, abilities, etc.

• c. Organizational resources: firm structure, planning processes, information systems, patents, trademarks, copyrights, databases, etc.

• The Basic Premise is that

• The mix, type, amount, and nature of a firm’s internal resources should be considered first and foremost in devising strategies that can lead to sustainable competitive advantage.

• Firms should pursue strategies that are not currently being implemented by any competing firm.

SAMPLE SWOT ANALYSIS FRAMEWORK

StrengthsStrengths WeaknessesWeaknessesInternalFactorsInternalFactors OpportunitiesOpportunities

ExternalFactorsExternalFactors

ThreatsThreats

Management

Marketing

Manufacturing

R&D

Finance

Offerings

Economic

Competition

Consumer

Technology

Legal/Regulatory

Industry/MarketStructure

Which strengths represent distinctive competencies? Do they compare favorably with what are believed

to be market or industry success requirements?

Does a pattern emerge from the SWOT analysis?

Which weaknesses disqualify the organization from pursuing certain opportunities?

Questions to ask after a SWOT analysis:

The purpose of the analysis is to establish

1. the effectiveness of the business performance in the environment in which it operates and

2. the business’s position in the market. This includes establishing the internal strengths and weaknesses of the business and external opportunities and threats offered by market conditions, competition and customer behavior.

• The internal audit identifies the strengths and weaknesses of business activities.

• The components of the internal audit include evaluating the effectiveness of the business’s structure, culture, financial performance, people (and management), business operations (processes and technology used), strategic purpose and planning and its market environment.

Assignment

• Fen Side Golf Course is an internationally known Scottish golf facility. It is not just an eighteen hole world-class golf course, it has a five star hotel with 250 luxury rooms, and private leisure centre, indoor tennis courts, as well as a series of top class restaurants.

• Below are a series of nine activities that add value to the Fen Side experience. Print out the value chain above and place the appropriate letter (below) onto the value chain.

• .

• A. All staff are trained to the highest industry standards.

• B. The hotel management team focus on goals set out in their strategic plan.

• C. All golf course fairways are trimmed and watered daily.

• D. Fresh fruit and vegetables are delivered and prepared every day.

• E. The hotel has an advanced room reservation system.

• F. Fen Side is promoted through magazines targeted at the wealthy and influential.

• G. The whole experience is based upon high quality, professional service at every stage.

• H. Limousines are available to take guests to airports as they finish their stay.

• I. Fen Side has a series of contracts with suppliers of meat and fish