4 Internal Context & Past Performance Analysis

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INTERNAL CONTEXT LOOKS AT THE INTERNAL FACTORS THAT INFLUENCE A FIRMS SUCCESS

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Transcript of 4 Internal Context & Past Performance Analysis

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INTERNAL CONTEXT

LOOKS AT THE INTERNAL FACTORS THAT INFLUENCE A

FIRMS SUCCESS

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INTERNAL CONTEXT

MissionObjectives

Results

Review

Strategy

StakeholdersManagement team – Culture/Style

Resources/Audit

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THE MISSION – 5 key elements

1. WHAT IS THE NATURE OF THE FIRM i.e. what business are we in or should we be in 2. FROM CUSTOMER PERSPECTIVE3. MUST REFLECT FIRMS VALUES & BELIEFS 4. INCLUDE SUSTAINABLE COMPETITIVE ADVANTAGE PRINCIPLE e.g. we aim to be the leader in our field5. MAIN REASONS FOR CHOICE OF APPROACH e.g. Volvo stress the team approach – “We must treat each other with trust and respect”

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OBJECTIVES

COME FROM THE MISSION THEY ARE SPECIFIC WHAT IS TO BE DONE WHEN IT IS TO BE DONE BY QUANTIFIABLE THEY FOCUS MANAGEMENT ALLOW OUTCOMES TO BE MEASURED

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OBJECTIVES

1. FINANCIAL e.g. earnings per share, ROR, margins

2. STRATEGIC (time scale/firm size dependant)

e.g. diversification, merger, new markets, internationalisation, larger market share, higher product quality, lower unit cost, wider product line

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OBJECTIVES

POTENTIAL CONFLICT BETWEEN OBJECTIVES

SURVIVE v GROW DISTRIBUTE v INVEST LONG TERM v SHORT TERM FINANCIAL v ETHICAL STAKEHOLDER v STAKEHOLDER

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THE MANAGEMENT TEAM

CRUCIAL IN ENSURING BUSINESS SUCCESS

FACILITATING CHANGE FOCUSSING THE BUSINESS ON

OBJECTIVES KEEPING THE BUSINESS COMPETITIVE MOTIVATING RESOURCES MUST BE COHESIVE & CREATE SYNERGY

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MANAGEMENT TEAM

SIZE & MEMBERSHIP DEPENDS ON:1. TYPE OF BUSINESS2. SIZE OF BUSINESS3. PRODUCTS/SERVICES OFFERED4. LIFE CYCLE STAGE OF BUSINESS5. ORGANISATIONAL STRUCTURE OF THE

BUSINESS

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THE RELEVANCE OF CULTURE & STYLE

KEY IMPACT ON MANAGEMENT TEAM MT MAJOR IMPACT ON CULTURE & STYLE

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THE RELEVANCE OF CULTURE & STYLE

KEY IMPACT ON MANAGEMENT TEAM MT MAJOR IMPACT ON CULTURE & STYLE

CULTURE• Set of beliefs, values and learned ways of managing• Comes from firms past, present, people, technology, physical resources, objectives and values• Power, Role, Task, Personal

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THE RELEVANCE OF CULTURE & STYLE

KEY IMPACT ON MANAGEMENT TEAM MT MAJOR IMPACT ON CULTURE & STYLE

CULTURE STYLE

• Set of beliefs, values and learned ways of managing• Comes from firms past, present, people, technology, physical resources, objectives and values• Power, Role, Task, Personal

• Process of influencing people• So they will strive to achieve firms mission – enthusiastically, willingly•Trait, Style, Contingency

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THE RELEVANCE OF STRUCTURE – its purpose

TO ALLOCATE WORK & ADMINISTRATION TO SPECIFIC FUNCTIONS

TO DISTRIBUTE POWER TO CONTROL THE

OPERATION OF THE BUSINESS

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STRUCTURE UNITARY- traditional, functional MULTI DIVISIONAL – SBU’s FLAT MATRIX HOLDING COMPANY e.g. Virgin INTEGRATED INTERNATIONAL BUSINESS e.g. McDonald's TRANSNATIONAL ASSOCIATION e.g. Ford

*THE KEY COMPONENT ? - People

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PEOPLE - WHY KEY? CAN BE MOTIVATED - financial and non

financial SKILL IS A SCARCE RESOURCE EXPENSIVE TO REPLACE – own wood/

buy trees MAJOR OVERHEAD GENERATE ADDED VALUE CAN MAKE/BREAK THE ORG CAN BE USED TO ENGINEER CHANGE

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STRUCTURE & STRATEGY WHAT IS STRATEGY - HOW ORG’s AIMS AND

OBJECTIVES ARE TO BE ACHIEVED - S/T, M/T, L/T

WHAT COMES FIRST – STRUCTURE OR STRATEGY?

TRADITIONALLY - STRUCTURE EVOLVES & STRATEGY FOLLOWS

HOW - STRUCTURE EVOLVES AS ORG GROWS AND PROCEEDS THROUGH ITS LIFE CYCLE

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STRUCTURE & STRATEGY

e.g. as org grows from sole trader to private co and plc the structure becomes larger and more bureaucratic - hence “structure evolves”

STRATEGY THEN TENDS TO FOLLOW ARGUABLY - THEY TEND TO PROCEED IN

UNISON! ? BETTER THAT STRATEGY COMES FIRST

FOLLOWED BY STRUCTURE e.g. Sony uses this practice.

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STRUCTURE & STRATEGY OR ARE THEY MORE CLOSELY

INTERRELATED i.e. structure needs to be considered while strategy is being developed

IN THIS MODEL THEN THEY MAY BE CLOSELY INTERDEPENDANT

MODERN, FLEXIBLE, PRO ACTIVE & DYNAMIC ORG’s TEND TO FOLLOW THIS FORM i.e. the structure influences the strategy and vice versa. ORG’s THAT “SUCCESSFULLY FLOW”

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RELEVANCE OF RESOURCE AUDIT - RESOURCES

LAND RAW MATERIALS LABOUR CAPITAL ENTREPRENEUR INFORMATION & KNOWLEDGE

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THE RELEVANCE OF THE RESOURCE AUDIT

RESOURCES – the means by which the business generates value

VALUE IS THEN DISTRIBUTED TO STAKEHOLDERS:

SHAREHOLDERS – higher divi’s, appreciating share value

WORKERS – improved working conditions and higher pay

CONSUMERS – lower prices, higher quality, improved service

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THE RELEVANCE OF THE RESOURCE AUDIT

OTHER STAKEHOLDERS – suppliers, local community, national community, global community

REMEMBER - RESOURCES CAN ALSO PROVIDE SUSTAINABLE COMPETITIVE ADVANTAGE (SCA) e.g. via highly skilled staff

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RESOURCE AUDIT – WHY?

TO IDENTIFY THOSE RESOURCES THAT DELIVER SCA

& VALUE ADDED & THOSE THAT DON’T UNDERUTILISED RESOURCES AND

THOSE THAT ARE NOT NEEDED RESOURCE GAPS SKILLS GAPS OPPORTUNITIES FOR RATIONALISATION

& UNIT COST CUTTING

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ANALYSIS OF PAST PERFORMANCE

THE MEASURES USED TO ASSESS BUSINESS

PERFORMANCE & THE NEED FOR ANALYSIS

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PAST PERFORMANCE

CAN REFER TO PERFORMANCE FROM KEY STAKEHOLDER PERSPECTIVE

i.e. shareholders, financiers, consumers, workers

WIDER PERFORMANCE i.e. local community/economy,

national and international community/economy

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PERFORMANCE – key stakeholders

FINANCIAL MEASURES PROFIT & SALES LIQUIDITY RATIOS GEARING PROFITABILITY INVESTOR RATIOS TRADING ACTIVITY UNIT COST VALUE ADDED SHARE VALUE

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PERFORMANCE – key stakeholders

NON FINANCIAL MEASURES

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PERFORMANCE – key stakeholders

NON FINANCIAL MEASURES

•MARKET SHARE•PRODUCT PORTFOLIO•QUALITY•SERVICE•PRODUCTIVITY•R & D ACTIVITY

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PERFORMANCE – key stakeholders

NON FINANCIAL MEASURES

•MARKET SHARE•PRODUCT PORTFOLIO•QUALITY•CUSTOMER SERVICE•PRODUCTIVITY•R & D ACTIVITY

•EMPLOYEE BENEFITS•GROWTH•MERGERS/TAKEOVERS•BENCHMARKING•OUTSOURCING•RATIONALISATION

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THE NEED FOR ANALYSIS

ASK QUESTIONS & PROVIDE ANSWERS HAVE PERFORMANCE MEASURES

CHANGED HOW MUCH WHY HAVE THEY CHANGED HOW HAS THE BUSINESS BEEN AFFECTED WHO HAS BENEFITTED WHO HAS SUFFERED USE STATISTICS, GRAPHS & DIAGRAMS TO

ASSIST ANALYSIS

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WIDER PERFORMANCE POLLUTION

CONGESTION IMPACT ON

ENVIRONMENT CHOICE, PRICE &

QUALITY CONCENTRATION OF

POWER EFFICIENCY

ETHICAL BEHAVIOUR

TAX EMPLOYMENT SOCIAL

RESPONSIBILTY ECONOMIC

IMPACT