24-1 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.
Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill...
-
Upload
johnathan-lawson -
Category
Documents
-
view
215 -
download
0
Transcript of Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill...
![Page 1: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/1.jpg)
Assessing the InternalEnvironment of the Firm
Chapter Three
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
![Page 2: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/2.jpg)
Learning ObjectivesAfter reading this chapter, you should have a good
understanding of:LO1 The benefits and limitations of SWOT analysis in
conducting an internal analysis of the firm.LO2 The primary and support activities of a firm’s value
chain.LO3 How value-chain analysis can help managers create
value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
LO4 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
3-2
![Page 3: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/3.jpg)
Learning Objectives (cont.)LO 5 The four criteria that a firm’s resources must possess
to maintain a sustainable advantage and how value created can be appropriated by employees.
LO 6 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
LO 7 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
LO 8 How firms are using Internet technologies to add value and achieve unique advantages. (Appendix)
3-3
![Page 4: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/4.jpg)
The Limitations of SWOT Analysis
• Strengths may not lead to an advantage• SWOT’s focus on the external environment is too narrow
• SWOT gives a one-shot view of a moving target
• SWOT overemphasizes a single dimension of strategy
3-4
![Page 5: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/5.jpg)
Value-Chain Analysis
• Value-chain analysis a strategic analysis of an organization that
uses value creating activities.
• Value is the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue
3-5
![Page 6: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/6.jpg)
Value-Chain Analysis
• Primary activities contribute to the physical creation of the
product or service, its sale and transfer to the buyer, and its service after the sale.
inbound logistics, operations, outbound logistics, marketing and sales, and service
3-6
![Page 7: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/7.jpg)
QUESTION
In assessing its primary activities, an airline would examine: A. Employee training programsB. Baggage handlingC. Criteria for lease versus purchase decisionsD. The effectiveness of its lobbying activities
3-7
![Page 8: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/8.jpg)
Value-Chain Analysis
• Support activities activities of the value chain that either add
value by themselves or add value through important relationships with both primary activities and other support activities
procurement, technology development, human resource management, and general administration.
3-8
![Page 9: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/9.jpg)
The Value Chain
Exhibit 3.1
3-9
![Page 10: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/10.jpg)
Primary Activity: Inbound Logistics
• Associated with receiving, storing and distributing inputs to the product Location of distribution facilities Warehouse layout
and designs
3-10
![Page 11: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/11.jpg)
Primary Activity: Operations
• Associated with transforming inputs into the final product form Efficient plant operations Incorporation of appropriate process
technology Efficient plant layout and workflow design
3-11
![Page 12: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/12.jpg)
Primary Activity: Outbound Logistics
• Associated with collecting, storing, and distributing the product or service to buyers Effective shipping processes to provide quick
delivery and minimize damages Shipping of goods in large lot sizes to
minimize transportation costs.
3-12
![Page 13: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/13.jpg)
Primary Activity: Marketing and Sales
• Associated with purchases of products and services by end users and the inducements used to get them to make purchases Innovative approaches to promotion and
advertising Proper identification of customer segments
and needs
3-13
![Page 14: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/14.jpg)
Primary Activity: Service
• Associated with providing service to enhance or maintain the value of the product Quick response to customer needs and
emergencies Quality of service
personnel and ongoing training
3-14
![Page 15: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/15.jpg)
Support Activity: Procurement
• Function of purchasing inputs used in the firm’s value chain Procurement of raw material inputs Development of collaborative “win-win”
relationships with suppliers Analysis and selection of alternate sources of
inputs to minimize dependence on one supplier
3-15
![Page 16: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/16.jpg)
Support Activity: Human Resource Management
• Activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel Effective recruiting, development, and
retention mechanisms for employees Quality relations with trade unions Reward and incentive programs to motivate
all employees
3-16
![Page 17: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/17.jpg)
Support Activity: Technology Development
• Related to a wide range of activities and those embodied in processes and equipment and the product itself Effective R&D activities for process and
product initiatives Positive collaborative relationships between
R&D and other departments Excellent professional qualifications of
personnel
3-17
![Page 18: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/18.jpg)
Support Activity: General Administration
• Typically supports the entire value chain and not individual activities Effective planning systems Excellent relationships with diverse
stakeholder groups Effective information technology to integrate
value-creating activities
3-18
![Page 19: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/19.jpg)
Interrelationships among Value-Chain Activities within and across Organizations
Two levels
• Interrelationships among activities within the firm
• Relationships among activities within the firm and with other organization (e.g., customers and suppliers)
3-19
![Page 20: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/20.jpg)
Value Chains in Service Industries
3-20
![Page 21: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/21.jpg)
Resource-Based View of the Firm
• Resource-based view of the firm perspective that firms’ competitive
advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute.
3-21
![Page 22: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/22.jpg)
Resource-Based View of the Firm
• Two perspectives The internal analysis of phenomena within a
company An external analysis of the industry and its
competitive environment
3-22
![Page 23: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/23.jpg)
Types of Resources
• Tangible resources organizational assets that are relatively easy
to identify, including physical assets, financial resources, organizational resources, and technological resources.
3-23
![Page 24: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/24.jpg)
Types of Resources
• Intangible resources organizational assets that are difficult to identify and
account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.
3-24
![Page 25: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/25.jpg)
Types of Resources
• Organizational capabilities The competencies
and skills that a firm employs to transform inputs into outputs.
3-25
![Page 26: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/26.jpg)
QUESTION
Gillette combines several technologies to attain unparalleled success in the wet shaving industry. This is an example of their A. Tangible resourcesB. Intangible resourcesC. Organizational capabilitiesD. Strong primary activities
3-26
![Page 27: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/27.jpg)
Firm Resources and Sustainable Competitive Advantages
• First, the resource must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the firm’s environment.
• Second, it must be rare among the firm’s current and potential competitors.
3-27
![Page 28: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/28.jpg)
Firm Resources and Sustainable Competitive Advantages
• Third, the resource must be difficult for competitors to imitate.
• Fourth, the resource must have no strategically equivalent substitutes.
3-28
![Page 29: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/29.jpg)
Sources of Inimitability
• Physical uniqueness
• Path dependency
• Causal ambiguity
• Social complexity
3-29
![Page 30: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/30.jpg)
The Generation and Distribution of a Firm’s Profits
Four factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate
• Employee bargaining power
• Employee replacement cost
• Employee exit costs
• Manager bargaining power
3-30
![Page 31: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/31.jpg)
Evaluating Firm Performance
• Financial ratio analysis Balance sheet Income statement Historical
comparison Comparison with
industry norms Comparison with
key competitors
• Stakeholder perspective Employees Customers Owners
3-31
![Page 32: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/32.jpg)
Financial Ratio Analysis
• Five types of financial ratios Short-term solvency or liquidity Long-term solvency measures Asset management (or turnover) Profitability Market value
3-32
![Page 33: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/33.jpg)
Financial Ratio Analysis
• Historical comparisons
• Comparison with industry norms
• Comparison with key competitors
3-33
![Page 34: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/34.jpg)
Five Types of Financial Ratios
3-34
![Page 35: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/35.jpg)
The Balance Scorecard
• Provides a meaningful integration of many issues that come into evaluating a firm’s performance
• Four key perspectives How do customers see us? What must we excel at? Can we continue to improve and create
value? How do we look to shareholders?
3-35
![Page 36: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/36.jpg)
Customer Perspective
• Time
• Quality
• Performance and service
• Cost
3-36
![Page 37: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/37.jpg)
Internal Business Perspective
• Processes
• Decisions
• Actions
• Coordination
• Resources and capabilities
3-37
![Page 38: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/38.jpg)
Innovation and Learning Perspective
• Introduction of new products and services
• Greater value for customers
• Increased operating efficiencies
3-38
![Page 39: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/39.jpg)
Financial Perspective
• Profitability
• Growth
• Shareholder value
• Increased market share
• Reduced operating expenses
• Higher asset turnover
3-39
![Page 40: Assessing the Internal Environment of the Firm Chapter Three Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d8a5503460f94a70aab/html5/thumbnails/40.jpg)
Potential Limitations of the Balanced Scorecard
• Lack of a clear strategy• Limited or ineffective executive sponsorship• Too much emphasis on financial measures
rather than non-financial measures• Poor data on actual performance• Inappropriate links to scorecard measures to
compensation• Inconsistent or inappropriate terminology
3-40