prof. dr. majed el-farrachapter 4 wheelen/hunger 1 internal scanning: organizational analysis

Prof. Dr. Majed El-Farra Chapter 4Wheelen/Hunger 1

Internal Scanning:Organizational Analysis

التخطيط مجموعات تحديداالستراتيجي

االستراتيجي • للتخطيط مؤسسة تسمية يتمكل في العمل فرق اعضاء اسماء تحديد مع

مجموعة.من • حقيقية مؤسسة تكون ان يجب

. الطلبة مؤسسات


Homework

• CASE 11: McAfee 2005: Anti-virus and Anti-spyware

• questions:

1.Conduct SWOT analysis.

• Prepare EFA and IFA



A Comprehensive Strategic Management Model

Develop Mission statement

Establish long term objectives

Generate, Evaluate, and select strategies

Establish policies and annual objectives

Allocate resources

Measure and evaluate performance

Perform external audit

Perform internal audit

Feedback

Formulation Implementation Evaluation

Prof. Dr. Majed El-Farra 6-5

Situational Analysis

SWOT --

–Internal•Strengths/Weaknesses

–External•Opportunities/Threats

Chapter 4Wheelen/Hunger

Prof. Dr. Majed El-Farra 6-6

TOWS Matrix

Chapter 4Wheelen/Hunger


Resource-Based Approach

Internal strategic factors: Scanning and analyzing the external environment

for O and T is not enough to provide an organization a competitive advantage. Analysts must also look within the corporation it self to identify 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.



Resource:

An asset, competency, process, skill, or knowledge controlled by the corporation.


Evaluating Key Resources VRIO Framework

• How to identify the key resources?

Base on four criteria:

1. Value: Does it provide competitive advantage?

2. Rareness: Do other competitors possess it?

3. Imitability: Is it costly for others to imitate?

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

• If the answer is use to all it is considered distinctive competence.

Core and distinctive competencies

• Capabilities: organization ability to utilize its resources. Its business process and routine.

• Competency: cross-functional integration and coordination of capabilities. E.g., new product development.

• Core-competency: collection of competencies that crosses divisional boundaries. E.g., new product development is a core-competency if it goes beyond one division.

• Distinctive competencies: when core- competencies are superior to those of the competitions.



Keys of Strategic Outsourcing Success

1- Understand the bus core competencies.

‘What it gives competitive Differentiation’

Core comp. Is the integration of technologies, constituent skills and collective learning which makes healthy bus.

2- Mapping out the work of bus.

3- Requires trust between parties

4- Understand the type of work of bus.


Competitive advantage analysis

• Analyzing competences and core competences:

The analysis here determines how resources are deployed

Competitive advantage is built on the uniqueness of resources or on the core competences.

Outsourcing Definition

• One can define Outsourcing Services as a process of purchasing non essential resources (non-core activity) from others through long term contracts instead of being made within the company .

• To remain competitive, many companies outsource as a way to reduce costs, increase efficiencies, and refocus critical resources.

• TO focus on operating it in the most optimal way to achieve transformational cost savings (30% - 60%) and transformational revenue growth

• The term of outsourcing has been created from the words outside –resource-using



Strategic Outsourcing for Competitive Advantage

• Used mainly for downsizing and cost reductions at corporations.

• Usually corps outsourcing non-essential work, why?

To free valuable resources and focus on its areas of competitive advantage.

To do this org. must know its core competences.


Why some nations are more competitive than others?

• M. Porter in his diamond, suggests that there are inherited reasons why some nations are more competitive, and there organizations are as well, than others.

• Porter believes that national home base of an organization influence the global success of organization.


Porter’s Determinants of National Advantage

There are four forces:

1- The conditions of the nation, availability of skills, infrastructure.

2- Home country’s demand for products.

3- The presence or absence of supporting industries.

4- The firm’s strategy, structure, rivalry, establishment process..


Four Nation’s Distinct Strategies

• S-O, or maxi-maxi

• S-T, or maxi-mini

• W-O, or mini-maxi

• W-T, or mini-mini



5-Step approach to strategy analysis:

• 1- Identify & classify firm’s resources• What are the Strengths & weaknesses

• 2- Combine firm’s strengths into capabilities• Core competencies• Distinctive competencies



5-Step approach to strategy analysis:

• 3- Appraise the Profit potential of resources\capabilities.

- Identify the competitive advantages.

- Sustainable competitive advantage

• 4- Select strategy• Exploits firm’s resources relative to external

opportunities

• 5- Identify resource gaps• Invest in upgrading weaknesses

Determining the Sustainability of an Advantage

• Two characteristics determine the sustainability of a firms’ distinctive competency: durability and limitability.



Determining the Sustainability of an Advantage

Durability:

Rate at which a firm’s underlying\basic resources and capabilities (core competencies) depreciate or become obsolete. E.g., new technology can make the company core competency irrelevant.


Sustainability of an Advantage

Imitability:

Rate at which a firm’s underlying resources and capabilities (core competencies) can be duplicated by others?. Competitors will do what they can to learn and imitate that set of skills and capabilities.


Core Competencies

Imitability of core competencies determined by:

1. Transparency/clearly understood. Gillette’s razor design is very difficult to copy; complicated manufacturing equipment.

2. Transferability. Ability of competitors to gather necessary resources and capabilities to support a competitive challenge.

3. Replicability/ do it exactly by the competitors :imitate other firms’ success.


Core Competencies

Is it easy to imitate another company’s core competency? Depends if it comes from:

Explicit Knowledge:– Knowledge that can be easily articulated and

communicated.

Tacit/unexpressed Knowledge:– Knowledge that is not easily communicated

because it is deeply rooted in employee experience or in a corporation’s culture .


Resource Sustainability

Business models

• How firms earn revenue and make profit. This is based on business model used which is usually composed of 5 elements:

1. Who it serves

2. What it provides

3. How it makes money

4. How it differentiates and sustains competitive advantage.

5. How it provides its products.



Competitive advantage analysis

• Steps of analyzing competences: 1- Value chain analysis: describes the

activities within and around the organization, and relates them to an analysis of the competitive strength of the organization.

2- the bases of core competences.

Value-Chain Analysis

• A value chain is a linked set of value -creating that being with basic raw materials coming from suppliers, move on to a series of value-added activities involved in producing and marketing a product or services, and end with distributors getting the final goods into the hands of the ultimate consumer.


Corporate Value Chain Analysis

• Each corporation has its own internal value chain of activates. Porter proposes that a manufacturing firms primary activities usually being with inbound logistics (raw materials handling and warehousing), go through an operations process in which a product is manufactured, and continue on to outbound logistics (warehousing and distribution), to marketing and sales, finally to service (installation, repair, and sale of parts)


Corporate Value Chain Analysis

• Several support activities, such as

• (purchasing), technology development(R&D), human resources management, and firm infrastructure (accounting, finance, strategic planning), ensure that the primary value-chain activities operate effectively and efficiently , each of a company’s product lines has its own distinctive value chain. Because most corporations make several different products or services. An internal analysis of the firm involves analyzing a series of different value chain.



Corporate Value Chain


Corporate Value Chain Analysis steps:

• The systematic examination of individual value chain activities can lead to a better understanding of corporation’s strengths and weaknesses. According to Porter, “Differences among competitor value chains are a key source of different value chain”

• Corporate value-chain analysis involves the following three steps:

• Examine each product line’s value chain in terms of the various activities involved in producing that product or service. Which activities can be considered strengths (core competencies) or weakness (core deficiencies)? Do any of the strengths provide competitive advantage, and can they thus be labeled distinctive competencies?


• Examine the “linkages” within each product line’s value chain. Linkages are the connections between the way one value activity (for example, marketing) is performed and the cost of performance of another activity (for example, quality control). In seeking ways for corporation to gain competitive advantage in the market place, the same function can be performed in different ways with different results. For example, quality inspection of 100% of output by the workers themselves instead of the usual 10% by quality control inspectors might increase production costs, but that increase could be more than offset by the savings obtained from reducing the number of repair people needed to fix defective products and increasing the amount of salespeople’s time devoted to selling instead of exchanging already-sold but defective products.



• Examine the synergies among the value chains of different product lines or business units. Each value element, such as advertising and manufacturing, has an inherent economy of scale in which activities are conducted at their lowest possible cost per unit of output. If a particular product is not being produced at a high enough level to reach economies scale in distribution, another product could be used to share the same distribution channel. This is an example of economies of scope, which result when the value chains of two separate products or services share activities, such as the same marketing channels or manufacturing facilities. For example, the cost of joint production of multiple products can be lower than the cost of separate production.



Value Chain

•. التنافسية الميزة كتابة في بورتر مايكل قدمهاالشركة • تؤديها التي األنشطة سلسة تحليل على تقوم

التنافسية الميزة مصادر تحديد يمكن خاللها ومنللشركة.

أكبر • مع المقارنة على التحليل فكرة وتقومالمنافسين

•: مجموعتين إلى األنشطة بوتر قسماألولية- 1 األنشطةالمساعدة- 2 األنشطة


Value Chain

األولية- 1 :األنشطة - - والتصنيع التشغيل العمليات الداخلية االمدادات

- التسويق المنتجات من المخرجاتالخدمة- والمبيعات

المساعدة- 2 :األنشطة - إدارة محاسبة مثل للشركة األساسية البنية

- التكنولوجي التطور البشرية المواردالمدخالت- شراء عملية والبحوث

How can value chain analysis help identify a company's strengths and weaknesses?

• The systematic examination of individual value activities can lead to a better understanding of a corporation's strengths and weaknesses. Its advantage over other methods of analyzing a firm's internal environment is its ability to visualize a company in terms of strings of product value chains.



Competitive advantages

• When competitive advantage is materialized?

When a firm earns persistently higher rate of profit over its rivals.

• Determinants of profit level

1- Value of company products in customers’ eyes.

2- Company production cost.


Competitive advantage

• It can be created in certain industrial field, through the adoption of low-cost-differentiation strategy. . M. Porter


Bases of establishing competitive advantages

Efficiency: output/inputالكفاءة- 1

. الكفاءة مكونات أهم هي الموظف إنتاجية إن2 : في Qualityالجودة- المنتج قيمة من تزيد التي

. المستهلكين اعينبادارة : Innovationالتجديد- 3 يتعلق جديد شىء أي

. ومنتجاتها الشركةالقدرة- : 4 يتطلب وهذا العميل لحاجات االستجابة

. متميز بشكل واشباعها العميل حاجات معرفة على


What is the success strategy

• The strategy which enables organizations developing new advantages, or maintaining the existing advantages.


Market segmentation analysis

• It aims to identify similarities and differences between groups of customers or users .

Not all customers are the same.• Some criteria for market segmentation:1. Characteristics of customers (e.g., income,

gender),2. Purchase situation (e.g., behavior, its size,

importance), 3. Users needs and preferences for product

characteristics (e.g., quality, price, brand).


Assessing Effectiveness

Value addedCustomer requirements

•Product traits•Service expectations

•Price sensitivity

Degree ofMatching

Value-added features•Product features

•Service performance•communication


What is efficiency and effectiveness?• Management (cont.)• elements of definition• Efficiency - getting the most output from the least amount of

inputs• “doing things right”• concerned with means• Effectiveness - completing activities so that organizational goals

are attained• “doing the right things” • concerned with ends

1-1-4444


Boston Consulting Group Matrix

• It portrays differences among divisions in terms of relative market share position and industry growth rate.

• The matrix allows multidivisional corp. to manage its portfolio of business effectively.


Boston Consulting Group Matrex بوستن مصفوفه

النجمةkٍStar

Question mark

?النقدية Cash البقرة

Cow

النقدي Cash الفخTrap

Relative market share السوقية الحصةlowhigh

high

low

IndustrialGrowth

Rateنمو معدل

الصناعة %

0

20+

20-

11 0.5 0.0

9 - 47

Benchmarking• . Benchmarking is the search for the best practices

among competitors or non-competitors that lead to their superior performance.

• The benchmarking process typically follows four steps. • a. A benchmarking planning team is formed. The team’s

initial task is to identify what is to be benchmarked, identify comparative organizations, and determine data collection methods.

• b. The team collects internal and external data.• c. The data is analyzed to identify performance gaps and

to determine the cause of the difference.• d. An action plan is prepared and implemented.

Steps In BenchmarkingForm a benchmarking

planning team

Prepare andimplementaction plan

Gather internal andexternal data

Analyze data to identify performance

gaps

BestPractices

© Prentice Hall, 9-9-4848

9 - 49

Suggestions for improving benchmarking

1. Link benchmarking efforts with strategic objectives.

2. Have the right size team -6-8 persons.

3. Involve those people who will be directly affected by the benchmarking.

4. Focus on specific targeted issues rather than broad.

5. Set realistic timetable.


Goals & Objectives Defined

• Goals: The desired general ends towards which efforts are directed e.g., expand firm size.

• Objectives: are specific quantified, e.g., increase sales by 10% each year.

• “We may derive a number of objectives from a goal”


Long-Term Objectives

• Objectives: Specific results an organization seeks to achieve in pursuing its basic mission.

• Long-term objective: More than 3 years.

Objectives should be: challenging, measurable, consistent, reasonable and clear. Ex. Our objective is to achieve 20% return on equity.


Annual Objectives• Short-term that the organization must achieve

to reach long-term objectives.

Objectives Characteristics:

Measurable, quantitative, challenging, realistic, consistent and prioritized.

Annual objectives are important for strategy implementation, whereas, long-term objectives are important for strategy formulating.


Objectives

• We must avoid generalities e.g.:

maximize profits

reduce costs

become more efficient

increase sales

Review

• How to use the "resource-based" approach in environmental analysis? Is it a tool for internal or external evaluation? How can we benefit from resource-based approach in enhancing the competitive advantages of business? Draw an example in your answer?


prof. dr. majed el-farrachapter 4 wheelen/hunger 1 internal scanning: organizational analysis

Documents