Lecture 04
Lecture 04The Internal AssessmentAssessing Strengths and
Weaknesses External and Internal
AnalysesGeneralEnvironmentGeneralEnvironmentGeneralEnvironmentSocioculturalGlobalTechnologicalPolitical/LegalDemographicEconomicIndustryEnvironmentCompetitorEnvironmentBy
studying the external environment, firms identify what they might
choose to doOpportunities and threats2By studying the internal
environment, firms identify what they can doUnique resources,
capabilities, and core competencies(sustainable competitive
advantage)External and Internal AnalysesThe Firm33Why Do an
Internal Analysis?Enables a firm to identify its strengths and
weaknesses.
Enables a firm to make good strategic decisions.
Information from internal environment provides basis for
developing strategic alternatives. 4Challenge of Internal
AnalysisHow do we effectively manage current core competencies
while simultaneously developing new ones?How do we assemble bundles
of resources, capabilities and core competencies to create value
for customers?How do we learn to change rapidly?5Key Internal
Forces
6Functional Business Areas:Vary by organizationDivisions have
differing strengths & weaknessesDistinctive Competencies:Firms
strengths that cannot be easily matched or imitated by
competitorsBuilding competitive advantage involves taking advantage
of distinctive competencies
Internal Audit
Ch 4 -7Parallels process of external auditKey to Organizational
Success
Information
from:ManagementMarketingFinance/accountingProduction/operationsResearch
& DevelopmentManagement information Systems
Involvement in performing an internal strategic-management audit
provides vehicle for understanding nature and effect of decisions
in other functional business areas of the firmCoordination &
understanding among managers from all functional areasFunctional
RelationshipsFinancial Ratio Analysis
Resource Based View (RBV)
8Approach to Competitive AdvantageInternal resources are more
important than external factorsThree All-Encompassing
CategoriesPhysical resources: plant, equipment, location, tech, raw
materials, machinesHuman resources : employees, training,
experience, intelligence, knowledge, skills,
abilitiesOrganizational resources : structure, planning process,
information system, patents, trademarks, copyrights, database,
Empirical IndicatorsRareHard to imitateNot easily
substitutable
Integrating Strategy & Culture
9Organizational CulturePattern of behavior developed by an
organization as it learns to cope with its problem of external
adaptation and internal integration . . . is considered valid and
taught to new members
Organizational Culture Can Inhibit Strategic ManagementMiss
external changes due to strongly held beliefsNatural tendency to
hold the course even during times of strategic change
CulturalProductsValuesLegendsBeliefsHeroesRitesSymbolsRitualsMythsIntegrating
Strategy & Culture1010
1111ManagementPlanningStage When Most ImportantFunctionStrategy
FormulationOrganizingStrategy ImplementationMotivatingStrategy
ImplementationStaffingControllingStrategy ImplementationStrategy
Evaluation1212 Ch 4-13PlanningForecasting
Establishing objectives
Devising strategies
Developing policies
Setting goalsManagement13 Ch 4-14OrganizingOrganizational
designJob specializationJob descriptionsJob specificationsSpan of
controlUnity of commandCoordinationJob designJob
analysisManagement14 Ch 4-15MotivatingLeadershipCommunicationWork
groupsJob enrichmentJob satisfactionNeeds fulfillmentOrganizational
changeMoraleManagement15 Ch 4-16StaffingWage & salary
admin.Employee
benefitsInterviewingHiringDischargingTrainingManagement
developmentAffirmative actionEEOLabor relationsManagement16 Ch
4-17ControllingQualityFinancialSalesInventoryExpenseAnalysis of
varianceRewardsSanctionsManagement17 Ch 4-18MarketingCustomer
Needs/Wants for
Products/ServicesDefiningAnticipatingCreatingFulfilling
18 Ch 4-19MarketingMarketing FunctionsCustomer analysisSelling
products/servicesProduct & service
planningPricingDistributionMarketing researchOpportunity analysis19
Ch 4-20Customer AnalysisCustomer surveys
Consumer information
Market positioning strategies
Customer profiles
Market segmentation strategiesMarketing20 Ch
4-21AdvertisingSalesPromotionPublicitySales force
managementCustomer relationsDealer relationsMarketingSelling
Products/Services
21 Ch 4-22Test marketingBrand positioningDevising
warranteesPackagingProduct features/optionsProduct
styleQualityMarketingPlanning Product/Service
22 Ch 4-23Forward integrationDiscountsCredit termsCondition of
saleMarkupsCostsUnit pricingMarketingPricing
23 Ch 4-24WarehousingChannelsCoverageRetail site locationsSales
territoriesInventory levelsTransportationMarketingDistribution
24 Ch 4-25Data collectionData inputData analysisSupport business
functionsMarketingMarketing Research
25 Ch 4-26Assessing costs
Assessing benefits
Assessing risks
Cost/benefit/risk analysisMarketingOpportunity Analysis
26Finance/AccountingFinance/Accounting Functions Does the firm
have sufficient working capital?Are capital budgeting procedures
effective?Are dividend payout policies reasonable?Are the firms
financial managers experienced & well trained?
Investment decision (Capital budgeting)Financing
decisionDividend
decision2727Production/OperationsProduction/Operations
FunctionsProcessCapacityInventoryWorkforceQuality2828Research &
DevelopmentResearch & Development FunctionsDevelopment of new
products before competitorsImproving product qualityImproving
manufacturing processes to reduce costs
2929Management Information SystemsInformation
SystemsCIO/CTOSecurityUser-friendlyE-commerce
3030(1) Value Chain AnalysisValue Chain AnalysisCustomers want
(demand) some type of value from the goods and services they
purchase or obtainCustomer value arises from(1) Uniqueness of
product or service(2) Low-priced product/service(3) Quick response
to specific or distinctive customer needsAllow assessment of cost
competitiveness of organization with those of its rivals31The Value
ChainThe value chain identifies the separate activities and
business processes performed to design, produce, market, deliver,
and support a product/service and how well they create customer
value.Consists of two types of activitiesPrimary activities :
create customer valueInbound logistics, Operations; Outboard
logistics; Sales & Marketing; & Customer Service Support
activities: Support primary activitiesProcurement; Technological
development; HRM; General Administration (Firm infrastructure)32The
Four Criteria of Sustainable Competitive AdvantageValuable
Capabilities Help a firm neutralize threats or exploit
opportunities
Rare Capabilities Are not possessed by many others
Costly-to-Imitate Capabilities Historical: A unique and a
valuable organizational culture or brand name Ambiguous cause: The
causes and uses of a competence are unclear Social complexity:
Interpersonalrelationships, trust, and friendshipamong managers,
suppliers, andcustomers
Nonsubstitutable CapabilitiesNo strategic equivalent33
