11

Chapter 4Chapter 4Internal Scanning: Internal Scanning:

Organizational AnalysisOrganizational Analysis

22

Internal strategic factors:Internal strategic factors:

Critical strengths and weaknesses that Critical strengths and weaknesses that are likely to determine if the firm will be are likely to determine if the firm will be able to take advantage of opportunities able to take advantage of opportunities while avoiding threats.while avoiding threats.

33

Resource-Based ApproachResource-Based Approach

Resource:Resource:

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

44

Evaluating Key ResourcesEvaluating Key Resources VRIO FrameworkVRIO Framework

Value: Value: Does it provide competitive Does it provide competitive advantageadvantage??

Rareness: Rareness: Do other competitors possess it?Do other competitors possess it?

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

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

55

Resource-Based ApproachResource-Based Approach

5-Step approach to strategy analysis:5-Step approach to strategy analysis:

Identify & classify firm’s resourcesIdentify & classify firm’s resources Strengths & weaknessesStrengths & weaknesses

Combine firm’s strengths into capabilitiesCombine firm’s strengths into capabilities Core competenciesCore competencies Distinctive competenciesDistinctive competencies

66

Resource-Based ApproachResource-Based Approach

5-Step approach to strategy analysis:

Profit potential of resources Sustainable competitive advantage

Select strategy Exploits firm’s resources relative to external

opportunities

Identify resource gaps Invest in upgrading weaknesses

77

Sustainability of an Sustainability of an AdvantageAdvantage

Durability:Durability:

Rate at which a firm’s underlying resources and Rate at which a firm’s underlying resources and capabilities (core competencies) depreciate or become capabilities (core competencies) depreciate or become obsoleteobsolete..

Imitability:Imitability:

Rate at which a firm’s underlying resources and Rate at which a firm’s underlying resources and capabilities (core competencies) can be duplicated by capabilities (core competencies) can be duplicated by others.others.

88

Core CompetenciesCore Competencies

Imitability of core competencies determined by:Imitability of core competencies determined by:

Transparency: how easy it is to understand the Transparency: how easy it is to understand the competencies of otherscompetencies of others

Transferability: how easy it is to bring the Transferability: how easy it is to bring the competency to your organizationcompetency to your organization

ReplicabilityReplicability : overall how easy it is to copy: overall how easy it is to copy

99

Core CompetenciesCore Competencies

Explicit Knowledge: Knowledge that can be easily articulated and

communicated.

Tacit Knowledge: Knowledge that is not easily communicated because

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

1010

Resource SustainabilityResource Sustainability

1111

Corporate Value ChainCorporate Value Chain

1212

Corporate Value Chain Corporate Value Chain AnalysisAnalysis

Examine each product line’s value chain Core competencies & core deficiencies

Examine the “linkages” within each product line’s value chain

Connections between the way one value activity is performed and the cost of performance of another activity

Examine the synergies among the value chains of different product lines or business units

Economies of scope

1313

Basic Organizational Structures: Simple and Functional

I. Simple Structure

II. Functional Structure

Owner-Manager

Workers

Top Management

Manufacturing Sales Finance Personnel

1414

Basic Structures of Corporations: Divisional

III. Divisional Structure*

Manufacturing Finance Manufacturing Finance

Top Management

Product Division A Product Division B

*Conglomerate structure is a variant of the division structure.

Sales Personnel Sales Personnel

1515

Corporate CultureCorporate Culture

Defined:Collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another.

1616

Corporate CultureCorporate Culture

Distinct Attributes

1. Cultural intensity Degree to which members of a unit accept the norms,

values, or other culture content associated with the unit. Strong vs. Weak

2. Cultural integration Extent to which units throughout an organization share a

common culture.

1717

Corporate CultureCorporate Culture

Important FunctionsImportant Functions

Sense of identity for employeesSense of identity for employees Generate employee commitmentGenerate employee commitment Stability of organizationStability of organization Guide for appropriate behaviorGuide for appropriate behavior

1818

Strategic Marketing IssuesStrategic Marketing Issues

Market Position:Market Position: ““Who are our customers?”Who are our customers?”

Market Segmentation:Market Segmentation: Niches, new product developmentNiches, new product development

Marketing Mix:Marketing Mix: Combination of key variables under the Combination of key variables under the

corporation’s control used to affect demand and corporation’s control used to affect demand and gain competitive advantage.gain competitive advantage.

1919

Marketing Mix Variables

Product Place Promotion Price

Quality Channels Advertising List price

Features Coverage Personal selling Discounts

Options Locations Sales promotion Allowances

Style Inventory Publicity Payment periods

Brand name Transport Credit terms

Packaging

Sizes

Services

Warranties

Returns

Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 89. Copyright © 1980. Reprinted by permission of Prentice-Hall, Inc.

2020

The Product Life Cycle

Introduction Growth* Maturity Decline

Time

Sal

es

*The right end of the Growth stage is often called Competitive Turbulence because of price and distribution competition that shakes out the weaker competitors. For further information, see C. R. Wasson, Dynamic Competitive Strategy and Product Life Cycles, 3rd ed. (Austin, Tex.: Austin Press, 1978).

2121

Strategic Financial IssuesStrategic Financial Issues

Financial Leverage:Financial Leverage: Ratio of total debt to total assets.Ratio of total debt to total assets.

Capital Budgeting:Capital Budgeting: Analyzing and ranking possible investments Analyzing and ranking possible investments

in fixed assets.in fixed assets.

2222

Strategic R&D IssuesStrategic R&D Issues

R&D Intensity:R&D Intensity: Spending on R&D as a percentage of sales Spending on R&D as a percentage of sales

revenue.revenue.

Technological Competence:Technological Competence: Development and use of innovative technology.Development and use of innovative technology.

Technology Transfer:Technology Transfer: Process of taking new technology from the lab Process of taking new technology from the lab

to the marketplace.to the marketplace.

2323

Technological Discontinuity

What the S-Curves Reveal

Research Effort/Expenditure

In the corporate planning process, it is generally assumed that incremental progress in technology will occur. But past developments in a given technology cannot be extrapolated into the future, because every technology has its limits. The key to competitiveness is to determine when to shift re-sources to a technology with more potential.

Mature Technology

New Technology

Source: P. Pascarella, “Are You Investing in the Wrong Technology?” Industry Week (July 25, 1983), p. 38. Copyright © 1983 Penton/IPC. All rights reserved. Reprinted by permission.

Pro

du

ct P

erfo

rman

ce

2424

Strategic Operations IssuesStrategic Operations Issues

Intermittent systems: Manufacturing systems where items are

normally processed sequentially but the work and sequence of the process vary.

Continuous systems: Laid out as lines where products are

continuously assembled or processed.

2525

Strategic HRM IssuesStrategic HRM Issues

TeamsTeams Autonomous (self-managing)Autonomous (self-managing) Cross-functionalCross-functional Concurrent engineeringConcurrent engineering

UnionizationUnionization 13.9% of labor force overall13.9% of labor force overall 12% of private labor force12% of private labor force

Temporary WorkersTemporary Workers Increase flexibility; avoid layoffsIncrease flexibility; avoid layoffs

2626

Strategic HRM IssuesStrategic HRM Issues

Quality of Work lifeQuality of Work life Participative problem solvingParticipative problem solving Restructuring workRestructuring work Innovative reward systemsInnovative reward systems Improvements in work environmentImprovements in work environment

Human DiversityHuman Diversity Different races, cultures and Different races, cultures and

backgrounds in the workplace.backgrounds in the workplace.

2727

Strategic Information Systems Strategic Information Systems IssuesIssues

Automate back-office processesAutomate back-office processes Automate individual tasksAutomate individual tasks Enhance key business functionsEnhance key business functions Develop competitive advantagesDevelop competitive advantages

2828

Strategic Information Systems Strategic Information Systems IssuesIssues

Intranet:Intranet: Information network within an Information network within an

organization that also has access to the organization that also has access to the external worldwide Internet.external worldwide Internet.

Extranet:Extranet: Information network within an Information network within an

organization available to key suppliers organization available to key suppliers and customers.and customers.

2929

Internal Factor Analysis Summary (IFAS)

Internal Factors Weight RatingWeighted Score Comments

1 2 3 4 5

1.00

Strengths

Weaknesses

Total Weighted Score

3030

Internal Factor Analysis Summary (IFAS):Maytag as Example

Internal Factors Weight Rating

Weighted Score Comments

1 2 3 4 5

1.00

Strengths• Quality Maytag culture

• Experienced top management

• Vertical integration

• Employee relations

• Hoover’s international orientation

Weaknesses• Process-oriented R&D

• Distribution channels

• Financial position

• Global positioning

• Manufacturing facilities

Total Weighted Score

Quality key to success

Know appliances

Dedicated factories

Good, but deteriorating

Hoover name in cleaners

Slow on new products

Superstores replacing small dealers

High debt load

Hoover weak outside the United Kingdom and Australia

Investing now

3.05

.15

.05

.10

.05

.15

.05

.05

.15

.20

.05

5

4

4

3

3

2

2

2

2

4

.75

.20

.40

.15

.45

.10

.10

.30

.40

.20

3131

Impact of the InternetImpact of the Internet

Virtual Teams:Virtual Teams: Groups of geographically and/or Groups of geographically and/or

organizationally dispersed coworkers that organizationally dispersed coworkers that are assembled using a combination of are assembled using a combination of telecommunications and information telecommunications and information technologies to accomplish an technologies to accomplish an organizational task.organizational task.

3232

Impact of the InternetImpact of the Internet

Virtual TeamsVirtual Teams• Flatter organizational structuresFlatter organizational structures• Turbulent environmentsTurbulent environments• Employee autonomy Employee autonomy • Higher knowledge requirementsHigher knowledge requirements• Globalization of tradeGlobalization of trade