Internal Analysis (1)

8/3/2019 Internal Analysis (1)

1/37

Internal Environment

Internal Environmental analysis is the

process of reviewing organizational

resources, scanning organizationalactivities and linking them with the

organization and identifying the strengths

and capabilities.


2/37

Significance of Internal Analysis

Helps to know where the firm stands in terms ofstrengths and weaknesses.

Helps to select the opportunities to be tapped in

line with its capacity.Helps in matching of its objectives to its

capacity.

Helps in assessing the capacity-gap and takes

steps to overcome it.Helps in selecting the specific lines in which the

firm can grow, using its potential.


3/37

Dynamics of Internal Environment

Organizational Resources

Organizational Behavior

Strengths and WeaknessesSynergy Effects

Competencies

Organizational Capabilities

Strategic Advantage


4/37

Organizational Resources

A firm is a bundle of resources tangible or

intangible includes all physical, human and

organizational resources, includes all assets,

capabilities, processes, information, knowledge,equipment, intelligence and so on.

The resources can lead to strategic advantage if

they are VALUABLE,RARE, COSTLY TO

IMITATE, NON-SUBSTITUTABLE.


5/37

Organizational Behavior

It is the influence of various forces and

influences operating in the environment

that create the ability or place constraintsin the usage of resources.

Important forces in OB are quality of

leadership, mgt. philosophy, values and

culture, work environment, quality of work

environment, org. politics etc.


6/37

Strengths and Weaknesses

Strengths Inherent capability that the

organization can use to gain strategic

advantage e.g. low cost of capital, efficientuse of funds etc.

Weaknesses Inherent limitation that can

create a strategic disadvantage for an

organization obsolete plant andmachinery, lack of skilled manpower etc.


7/37

Synergy

Synergy is the idea that the whole is

greater than the sum of its parts.

Also expressed as the two-plus-two-is-equal-to-five effect.

It gives an idea that resources and

behavior do not exist in isolation but

combine in number of ways.


8/37

Example ofSynergy

In marketing, synergistic effects may occur

when the product, pricing, promotion and

distribution support each other, resulting in

high level of marketing synergy ultimately

leading to operational synergies.


9/37

Competencies

The special qualities possessed by an org.that make them withstand pressures ofcompetition in the marketplace.

When an organization uses itscompetencies exceedingly well, over a

period of time, it turns them into corecompetencies.


10/37

Examples of Competencies

Good Technology

Surplus Cash Inflow

Skilled Sales Force Research and Development


11/37

Distinctive Competence

When a specific quality is possessed by

org. exclusively or relatively in a large

measure, it is called a distinctive

competence.

It is any advantage a company has over its

competitors because it can do something

which they cannot or it can do somethingbetter than they can.


12/37

Examples ofDistinctive

Competence Superior product quality on a particular

attribute, e.g. a two-wheeler which is more

fuel efficient than its competitor products.

Creation of marketing niche by supplying

highly specialized products to a particular

market segment.


13/37

Tests to Identify Core

CompetenciesAccording to C.K. Prahalad and Gary Hamel,

three tests are there:

It should be able to provide potential access to a

wide variety of markets.

It should make significant contribution to the

perceived customer benefits of the end products.

It should be difficult for competitors to imitate.


14/37

Organizational Capability

Organizational capability is the inherent capacity orpotential of an organization to use its strengths andovercome its weaknesses in order to exploitopportunities and face threats in its external

environment.

It is a measurable attribute, so it can be compared.

It can be regarded as the sum total of resources andbehavior, strengths and weaknesses, synergisticeffects and competencies of any org.


15/37

Reasons for the study of

Organizational CapabilitiesTo know what capacity exists within the

organization to exploit opportunities or

face threats.

To know what potentials should be

developed in the org. so that better

prospects could be availed in future.


16/37

Strategic Advantage

They are the result of organizational

activities leading to rewards in terms of

financial parameters (high profits) or non-

financial parameters (Market share,

reputation).

These are measurable in absolute terms.


17/37

Organizational Capability Factors

These are the strategic strengths and

weaknesses existing in different functional

areas within an organization which are of

crucial importance to strategy formulation

and implementation.


18/37

Organizational Capability Factors

Financial Capability

Marketing Capability

Operations CapabilityPersonnel Capability

Information Management Capability

General Management Capability


19/37


These factors relate to availability, usage, andmanagement of funds and all other relatedaspects.

Factors related to sources of funds capitalstructure, working capital, borrowings reserves &surplus etc.

Factors related to usage of funds capital inv.

Fixed assets, current assets etc. Factors related to management of funds

MCS, budgeting, financial analysis etc.


20/37

Typical Strengths supporting


Access to financial resources

High level of credit worthiness

Efficient capital budgeting system Low cost of capital

Tax benefits due to various govt. policies

Relations with financial institutions


21/37

Marketing Capability

Relate to the pricing, promotion and distribution ofproducts or services and all other related factors.

Product related factors variety, quality, position,packaging etc.

Price related factors Pricing obj., policies, strategiesetc.

Place related factors Distribution, transportation and

logistics channels etc. Promotion related factors Tools, sales promotion, adv.,

public relations etc.

Integrative factors Marketing mix, MIS etc.


22/37

Strengths that support Marketing

Capability

Wide variety of products

Good customer service

Effective sales promotionLow prices as compared in the market

Effective distribution system

Favorable company and product imageHigh profile advertising


23/37

Operations Capability

Relates to the production of goods or services, the useof material resources and all other aspects.

Factors related to production system capacity, location,layout, degree of automation, product design etc.

Factors related to operations and control systems Prod. planning, cost and quality control, inventorycontrols, maintenance systems etc.

Factors related to R&DSystem patent rights, productdevelopment, level of technology used, technologicalcollaborations etc.


24/37

Strengths that Support Operations

capability

High level of capacity utilization

Favorable plant location

Existence of good inventory controlsystems

Available of qualified R&D personnel

Technical collaboration with reputed firmsabroad

Reliable sources of supply


25/37

Personnel Capability

Relate to the existence and use of humanresources, their skills and all other relatedaspects.

Personnel System Relating to manpowerplanning, selection, development, compensationetc.

Org. and Employees Characteristics qualityof mgt., staff and workers, working conditions,

etc. Industrial Relations safety, welfare and

security, collective bargaining, employeesatisfaction and morale etc.


26/37

Typical Strengths that support

Personnel Capability

Efficient and effective personnel systems

Excellent training opportunities and

facilitiesCongenial work environment

High level of loyalty

Low absenteeismSatisfied and motivated workforce


27/37

Information Management Capability

Relate to the design and mgt. of the flow

of information from outside as well as from

within the org. to facilitate decision-making

and all other related aspects.


28/37

Factors affecting Information

CapabilityAcquisition and retention of Information Sources,

security, quantity, quality and capacity of retention.

Processing and analysis DBMS, computer systems,software capability etc.

Retrieval and usage Appropriate information formats,capacity to use information.

Transmission and dissemination -Speed, coverage,acceptability of information.

Integrative and Supportive factors IT infrastructure, upgradation facilities, professionals support etc.


29/37

Typical Strengths that Support IM

Capability

Extent of use of computerized information

system

Positive attitude of information sharing

Existence of foolproof security systems

High-tech equipment available and

operate able Easy access to information sources

Support of top mgt. and It professionals


30/37

General Management Capability

Relates to the integration, coordination

and direction of functional capabilities

towards common goals and all other

related aspects.


31/37

Factors related to GM Capability

General Managers Their orientation, values,competence, personal goals, track record,experience etc.

GM System Strategic mgt. system, intent,formulation, implementation, evaluation, MIS,corporate planning system etc.

External Relationships with govt. financial

institutions, public relations, social responsibilityOrg. Climate culture, use of power, mgt. of

change, nature of org. structure and control etc.


32/37

Typical Strengths that Support GM

Capability

Effective system of Corporate Planning

Good control and reward system

Development-oriented org. culture Effective system of org. change

Favorable corporate image

Commonly being perceived as a good org.to work for.


33/37

Competitive Advantage

For an organization, it means discovering

the needs of the customers and then

satisfying and even exceeding their

expectations for the purpose of achieving

the goals of the organization.


34/37

Preparation of OC Profile

Factors

Capability Factor Rating

Weakness (-5) Neutral (0) Strength (5)

Financial

Capability

Marketing

Capability

Operations

Capability

PersonnelCapability

IM Capability

Factors

GM Capability

Factors


35/37

What is Strategic Advantage

Profile (SAP)? SAP is the technique of analyzing the

internal factors of the organization by

preparing a critical picture of different

capacity factors.

It is a relative strength of the company

over its competitors.


36/37

Strategic Advantage Profile (SAP)

Functional Area Core Factors (+) or (-)

Production &

Operations

Good Prod. Facilities (+)

Old plant &machinery (-)

PersonnelFactors

Young & MotivatedForce

(+)

Poor union relations (-)

Finance and

Accounting

Tax holiday (+)

Costly finance (-)

Marketing

Operations

Effective comm. Mix (+)

Costly employees (-)

Rich experience in mkt. (+)


37/37

SAP

R & D and

Engineering

No design protection (-)

Well-developed

laboratory(+)

Highly qualified

research staff(+)

Organization

System

High-tech MIS (+)

Effective delegation

and decentralization(+)

No Mgt. by exception (-)

Date post:	06-Apr-2018
Category:	Documents
Upload:	mandeepparmar
View:	221 times
Download:	0 times

Internal Analysis (1)

Documents