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Strategic AnalysisStrategic Analysis

33Chapter

MANDEEP KAUR

HARSHIL SHAH

MONISH SHAH

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Chapter RoadmapChapter Roadmap

Analysing Company’s Resources & Competitive Position

Core Competencies & Distinctive Competitiveness

Organisational Capability ProfileStrategic Advantage Profile

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Strategic ManagementStrategic Management Strategic Management is the art and science of formulating,

implementing and evaluating cross-functional decisions that enable an organization to achieve it’s objectives.

Elements of Strategic Management: Strategic Analysis Strategic Choice Strategic Implementation

Strategic Analysis is the investigation of the objective factors being considered in the process of strategic choice.

Strategic Strategic Strategic Analysis Choice Implementation Evaluation Process

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PYRAMID OF STRATEGYPYRAMID OF STRATEGY

Policies, Procedures, Rules, Regulations, etc

BUDGET

PROJECTS

PROGRAMMES

PLANS

STRATEGY

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Approaches to Assess How Well the Present Strategy Is WorkingApproaches to Assess How Well the Present Strategy Is Working

Qualitative assessment –What is the strategy?

Completeness

Internal consistency

Rationale

Relevance

Quantitative assessment – What are the results? Is company achieving its

financial and strategic objectives?

Is company an above-average industry performer?

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Key Indicators of How Wellthe Strategy Is Working

Key Indicators of How Wellthe Strategy Is Working

Trend in sales and market share Acquiring and/or retaining customers Trend in profit margins Trend in net profits, ROI Overall financial strength and credit ranking Efforts at continuous improvement activities Trend in stock price and stockholder value Image and reputation with customers Leadership role(s) – Technology, quality, e-commerce,

innovation, etc.

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S W O T represents the first letter in S trengths W eaknesses O pportunities T hreats

For a company’s strategy to be well-conceived, it must be Matched to its resource strengths and weaknesses Aimed at capturing its best market opportunities and

erecting defenses against external threats to its well-being

Analysing Company’s Resources & Competitive Position

Analysing Company’s Resources & Competitive Position

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Identifying Resource Strengthsand Competitive Capabilities

Identifying Resource Strengthsand Competitive Capabilities

A strength is something a firm does well or an attribute that enhances its competitiveness Valuable competencies or know-how Valuable physical assets Valuable human assets Valuable organizational assets Valuable intangible assets Important competitive capabilities An attribute that places a company in a position of market

advantage Alliances or cooperative ventures with partners

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Identifying Resource Weaknesses

and Competitive Deficiencies

Identifying Resource Weaknesses

and Competitive Deficiencies A weakness is something a firm lacks, does poorly, or a

condition placing it at a disadvantage Resource weaknesses relate to

Inferior or unproven skills, expertise, or intellectual capital

Lack of important physical, organizational, or intangible assets

Missing capabilities in key areas

Resource weaknesses and deficienciesare competitive liabilities!

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Identifying a Company’sMarket Opportunities

Identifying a Company’sMarket Opportunities

Opportunities most relevant to a company are those offering:

Good match with its financial and organizational resource capabilities

Best prospects for profitable & long-term growth

Potential for competitive advantage

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Identifying External ThreatsIdentifying External Threats

Emergence of cheaper/better technologies Introduction of better products by rivals Entry of lower-cost foreign competitors Onerous regulations Rise in interest rates Potential of a hostile takeover Unfavorable demographic shifts Adverse shifts in foreign exchange rates Political upheaval in a country

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Role of SWOT Analysis inCrafting a Better StrategyRole of SWOT Analysis inCrafting a Better Strategy

The most important part of S W O T analysis is not developing the 4 lists of strengths, weaknesses, opportunities, and threats, but rather

Using the 4 lists to draw conclusionsabout a company’s overall situation and

Acting on the conclusions to

Better match a company’s strategy to itsresource strengths and market opportunities,

Correct the important weaknesses, and

Defend against external threats

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Competencies vs. Core Competencies vs. Distinctive Competencies

Competencies vs. Core Competencies vs. Distinctive Competencies

A competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity

A core competence is a well-performedinternal activity central (not peripheral or incidental)to a company’s competitiveness and profitability

A distinctive competence is a competitively valuable activity a company performs better than its rivals

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Core Competencies -- AValuable Company Resource

Core Competencies -- AValuable Company Resource

A competence becomes a core competence when the well-performed activity is central to a company’s competitiveness and profitability

Often, a core competence results from collaboration among different parts of a company

Typically, core competencies reside in a company’s people, not in assets on a balance sheet

A core competence gives a company a potentially valuable competitive capability and represents a definite competitive asset

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Examples: Core CompetenciesExamples: Core Competencies

Know-how in creating operating systems for cost efficient supply chain management

Speeding new/next-generation products to market

Better after-sale service capability

Skills in manufacturing a high quality product

System to fill customer orders accurately and swiftly

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Distinctive Competence -- ACompetitively Superior Resource

Distinctive Competence -- ACompetitively Superior Resource

It’s a specific ability possessed by a particular organization exclusively, or in a relatively large measure

A distinctive competence is a competitively significant activity that a company performs better than its competitors

A distinctive competence Represents a competitively valuable capability rivals do

not have Presents attractive potential for being a cornerstone of

strategy Can provide a competitive edge in the marketplace —

because it represents a competitively superior resource strength

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Examples: Distinctive Competencies

Examples: Distinctive Competencies

Sharp Corporation Expertise in flat-panel display technology

Toyota and Honda Low-cost, high-quality manufacturing capability and short

design-to-market cycles Intel

Ability to design and manufacture ever more powerful microprocessors for PCs

Wal-Mart Low-cost distribution and use of state-of-the-art retail

technology

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To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a “resource” must pass 3 tests:

1. Should provide access to potential market….

2. Should contribute to the customer benefits of the end product….

3. Should be difficult for the rivals to imitate….

Determining the CompetitiveValue of a Company ResourceDetermining the Competitive

Value of a Company Resource

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Organisational Capability Profile

Organisational Capability Profile

Organisational capability means the potential of the company to use its strengths & to overcome its weaknesses with a view to avail the opportunities provided & face the threats posed by its external enviornment.

Organisational Capability Profile includes 3 factors: General Management Factors Functional Management Factors Operational Management Factors

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General Management Factors

General Management Factors

It is concerned with the accomplishment of organisational objectives by utilising physical, financial & human resources.

A Manager performs 5 basic functions: Planning Organising Directing Staffing Controlling

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PlanningPlanning

Effective Planning

Suitable Organisational

structure

Right People in Right Places

Effective Methods of Motivation

Effective Leadership

Optimum Levels of Control

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OrganisingOrganising

Means to an end. It is essential to carry out pre-determined course of action Organising includes:

Giving a structure to a task Authority – Responsibility Relationship. Co-ordination Control

Pressure to complete the desired objectives. Organising is a medium to complete tasks as per priority

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DirectingDirecting

It involves efforts directed towards achieving organisational goals

The basic function of management is: Motivating Commanding Leading Activating

It deals with inducing the willingness & cooperation of employees towards attaining the objectives

It also enables a sense of coordination of activities

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StaffingStaffing

Centered around human resource management. It includes:

Job Design & Analysis HR Planning Recruitment & Selection Training & Development Performance Appraisal & Compensation Union Mgmt & Grievance Handling Maintaining records

It is one of the most complicated task to handle.

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ControllingControlling

It includes all activities that are undertaken to ensure the actual performance confirm to the planned performance

The controlling activities include:

Take corrective action

Compare actual performance to planned standards

Measure actual performance

Establish performance standards

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Functional Management Factors

Functional Management Factors

Functional competence refers to the strengths of the organisation in the functional areas of management viz; Marketing Finance Production & Operation Human Resource Research & Development

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Marketing ManagementMarketing ManagementCustomer Analysis

Buying

Selling

Product & Service

Planning

Price PlanningDistribution

Marketing Research

Opportunity Analysis

Social Responsibilit

y

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Contd…Contd… Marketing System Audit

Marketing Intelligence system Market & Sales Forecast Marketing Cost

Marketing Productivity Audit Profitability Cost Reduction

Marketing Function Audit Product – line & offerings Distribution Pricing

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Financial ManagementFinancial Management

Financing

Decision

Dividend

Decision

Investment

Decision

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Contd…Contd…

Financial Checklist Liquidity Activity(Turnover) Profitability Growth

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Production & Operation Management

Production & Operation Management

Managing the resources required to produce the products or render services provided by the organisation.

It reflects: Product Design Product Cost Production Efficiencies Production Process Inventory Work Force Product Quality

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Human Resource ManagementHuman Resource Management

It is said that, the difference between two organisations in term of competencies is due to the difference in the capabilities of their Human Resources.

Human Resource Department

Employment HR Development Compensation Human

RelationsIndustrial Relations

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Research & DevelopmentResearch & Development

It is concerned with: creation of knowledge; design of goods & services; & the operation of production process

Survival & Development

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Value Chain Analysis Value Chain Analysis

It separates the activities of the firm into a sequential chain.

Michael Porter’s representation of the value chain distinguishes between: Primary Activities (those involved with the transformation

of inputs and interface with the customer) Support Activities (those involved with other activities

which support the primary function of the organisation)

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Support Activities

Primary Activities

PR

OF

IT M

AR

GIN

FIRM’S INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUNDLOGISTIC

OPERATION

OUTBOUNDLOGISTIC

MARKETING

SERVICE

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Strategic Advantage ProfileStrategic Advantage Profile

Strategic Advantage

Organisational Capability

Competencies

Synergistic Effects

Strengths & Weaknesses

Organisational Resources + Organisational Behaviour

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Strategic AdvantageStrategic Advantage

It is the outcome of organizational capabilities The rewards are in terms of financial parameters (eg. Profit,

shareholder value) or in terms on non-financial parameters (eg. Market share, goodwill)

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