str5

Internal Scanning:

Organizational Analysis

Chapter 5

A Resource-Based Approach to Organizational Analysis

Organizational analysis concerned with identifying and developing an

organizations resources and competencies

Copyright 2015 Pearson Education, Inc. 5-4

Core and Distinctive Competencies

Resources an organizations assets and are thus the basic building

blocks of the organization tangible, intangible (They include tangible assets (such as

its plant, equipment, finances and location), human assets (the number of employees, their skills and motivation), and intangible assets (such as its technology [patents and copyrights], culture and reputation)).

Capabilities refer to a corporations ability to exploit its resources consist of business processes and routines that manage

the interaction among resources to turn inputs into outputs


Core and Distinctive Competencies

Core competency a collection of competencies that cross divisional

boundaries, is wide-spread throughout the corporation and is something the corporation does exceedingly well

Distinctive competency core competencies that are superior to those of

the competition


VRIO Framework of Analysis

1. Value: Does it provide customer value and competitive advantage?

2. Rareness: Do no other competitors possess it?

3. Imitability: Is it costly for others to imitate? 4. Organization: Is the firm organized to exploit

the resource?


Using Resources to Gain Competitive Advantage

1. Identify and classify resources in terms of strengths and weaknesses

2. Combine the firms strengths into specific capabilities and core competencies

3. Appraise profit potentialAre there any distinctive competencies?

4. Select the strategy that best exploits the firms capabilities and competencies relative to external opportunities

5. Identify resource gaps and invest in upgrading weaknesses


Access to a Distinctive Competency

Asset endowment Acquired from someone else Shared with another business Built and accumulated within the company



It may be an asset endowment, such as a key patent, coming from the founding of the company. For example, Xerox grew on the basis of its original copying patent.

It may be acquired from someone else. For example, Whirlpool bought a worldwide distribution system when it purchased Philipss appliance division.

It may be shared with another business unit or alliance partner. For example, Apple Computer worked with a design firm to create the special appeal of its personal computers and iPods.

It may be carefully built and accumulated over time within the company. For example, Honda carefully extended its expertise in small motor manufacturing from motorcycles to autos and lawnmowers.



Clusters geographic concentrations of interconnected

companies and industries

Access to: Employees

Suppliers

Specialized information

Complementary products


Determining the Sustainability of an Advantage

Durability the rate at which a firms underlying resources,

capabilities or core competencies depreciate or become obsolete

Imitability the rate at which a firms underlying resources,

capabilities or core competencies can be duplicated by others



Transparency the speed at which other firms under the relationship

of resources and capabilities support a successful strategy

Transferability the ability of competitors to gather the resources and

capabilities necessary to support a competitive challenge

Replicability the ability of competitors to use duplicated resources

and capabilities to imitate the other firms success



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 the companys culture


Business Models

Business model a companys method for making money in the

current business environment

includes the key structural and operational characteristics of a firmhow it earns revenue and makes a profit


Business Models

A business model is usually composed of five elements:

Who it serves What it provides How it makes money How it differentiates and sustains competitive

advantage

How it provides its product/service


Business Models

Some of the many possible business models are:

Customer solutions model Profit pyramid model Multi-component system/installed model Advertising model Switchboard model


Business Models

Customer solutions model: IBM uses this model to make money not by selling IBM products, but by selling its expertise to improve its customers operations. This is a consulting model.

Profit pyramid model: General Motors offers a full line of automobiles in order to close out any niches where a competitor might find a position. The key is to get customers to buy in at the low-priced, low-margin entry point (Saturns basic sedans) and move them up to high-priced, high-margin products (SUVs and pickup trucks) where the company makes its money.

Multi-component system/installed base model: Gillette invented this classic model to sell razors at break-even pricing in order to make money on higher-margin razor blades. HP does the same with printers and printer cartridges. The product is thus a system, not just one product, with one component providing most of the profits.


Business Models

Advertising model: Similar to the multi-component system/installed base model, this model offers its basic product free in order to make money on advertising. Originating in the newspaper industry, this model is used heavily in commercial radio and television. Internet-based firms, such as Google, offer free services to users in order to expose them to the advertising that pays the bills. This model is analogous to Mary Poppins spoonful of sugar (content) helps the medicine (advertising) go down.

Switchboard model: In this model a firm acts as an intermediary to connect multiple sellers to multiple buyers. Financial planners juggle a wide range of products for sale to multiple customers with different needs. This model has been successfully used by eBay and Amazon.com.


Business Models

Some other possible business models are:

Efficiency model Blockbuster model Profit multiplier model Entrepreneurial model De Facto industry standard model


Business Models


Time model: Product R&D and speed are the keys to success in the time model. Being the first to market with a new innovation allows a pioneer like Sony to earn high margins. Once others enter the market with process R&D and lower margins, its time to move on.

Efficiency model: In this model a company waits until a product becomes standardized and then enters the market with a low-priced, low-margin product that appeals to the mass market. This model is used by Wal-Mart, Dell, and Southwest Airlines.

Blockbuster model: In some industries, such as pharmaceuticals and motion picture studios, profitability is driven by a few key products. The focus is on high investment in a few products with high potential payoffsespecially if they can be protected by patents.


Business Models


Profit multiplier model: The idea of this model is to develop a concept that may or may not make money on its own but, through synergy, can spin off many profitable products. Walt Disney invented this concept by using cartoon characters to develop high-margin theme parks, merchandise, and licensing opportunities.

Entrepreneurial model:In this model, a company offers specialized products/services to market niches that are too small to be worthwhile to large competitors but have the potential to grow quickly. Small, local brew pubs have been very successful in a mature industry dominated by Anheuser-Busch. This model has often been used by small high-tech firms that develop innovative prototypes in order to sell off the companies (without ever selling a product) to Microsoft or DuPont.

De Facto industry standard model:In this model, a company offers products free or at a very low price in order to saturate the market and become the industry standard. Once users are locked in, the company offers higher-margin products using this standard. For example, Microsoft packaged Internet Explorer free with its Windows software in order to take market share from Netscapes Web browser.


Value-Chain Analysis

Value chain a linked set of value-creating activities that begin

with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service and ending with distributors getting the final goods into the hands of the ultimate consumer


Figure 5-1

Industry Value Chain Analysis

Value chain segments include: Upstream Downstream The value chains of most industries can be split into two

segments, upstream and downstream segments. In the petroleum industry, for example, upstream refers to oil exploration, drilling, and moving of the crude oil to the refinery, and downstream refers to refining the oil plus transporting and marketing gasoline and refined oil to distributors and gas station retailers

Center of gravity the part of the chain that is most important to the company

and the point where its core competencies lie


Corporate Value Chain Analysis

Primary activities

Inbound logistics Operations Outbound logistics

Support activities

Procurement Technology

development

Human resource management

Firm infrastructure


A Corporations Value Chain


Corporate Value Chain Analysis

1. Examine each product lines value chain in terms of the various activities involved in producing the product or service

2. Examine the linkages within each product lines value chain

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


Basic Organizational Structures

Simple Functional Divisional

Strategic Business

Units Conglomerate


Basic Organizational Structures


Strategic business units (SBUs)are a modification of the divisional structure. Strategic business units are divisions or groups of divisions composed of independent product market segments that are given primary responsibility and authority for the management of their own functional areas. An SBU may be of any size or level, but it must have (1) a unique mission, (2) identifiable competitors, (3) an external market focus, and (4) control of its business functions.

The idea is to decentralize on the basis of strategic elements rather than on the basis of size, product characteristics, or span of control and to create horizontal linkages among units previously kept separate. For example, rather than organize products on the basis of packaging technology like frozen foods, canned foods, and bagged foods, General Foods organized its products into SBUs on the basis of consumer oriented menu segments: breakfast food, beverage, main meal, dessert, and pet foods.


Conglomerate structure is appropriate for a large corporation with many product lines in several unrelated industries. A variant of the divisional structure, the conglomerate structure (sometimes called a holding company) is typically an assemblage of legally independent firms (subsidiaries) operating under one corporate umbrella but controlled through the subsidiaries boards of directors. The unrelated nature of the subsidiaries prevents any attempt at gaining synergy among them.


Corporate Culture: The Company Way

Corporate culture the collection of beliefs, expectations and values

learned and shared by a corporations members and transmitted from one generation of employees to another.

R&D at HP,

customer service at Nordstrom,

innovation at Google,

or product quality at BMW


Functions of Corporate Culture

1. Conveys a sense of identity for employees 2. Generates employee commitment 3. Adds to the stability of the organization as a

social system

4. Serves as a frame of reference for employees to understand organizational activities and as a guide for behavior


Corporate Culture: The Company Way

Cultural intensity the degree of which members of a unit accept the

norms, values and other cultural content associated with the unit

shows the cultures depth

Cultural integration the extent of which units throughout the

organization share a common culture

cultures breadth


Strategic Marketing Issues

Market position refers to the selection of specific areas for

marketing concentration and can be expressed in terms of market, product and geographic locations

Marketing mix the particular combination of key variables under

a corporations control that can be used to affect demand and to gain competitive advantage


Marketing Mix Variables


Product Life Cycle

Product life cycle a graph showing time

plotted against the sales of a product as it moves from introduction through growth and maturity to decline


Brand and Corporate Reputation

Brand a name given to a companys product which

identifies that item in the mind of the consumer

Corporate brand a type of brand in which the companys name

serves as the brand


Brand and Corporate Reputation

Corporate reputation a widely held perception of a company by the

general public

Consists of two attributes:

Stakeholders perceptions of quality Corporations prominence in the minds of

stakeholders


Strategic Financial Issues

Financial leverage ratio of total debt to total assets

describes how debt is used to increase earnings available to common shareholders

Capital budgeting the analyzing and ranking of possible investments

in fixed assets in terms of additional outlays and receipts that will result from each investment

Hurdle point


Strategic Research and Development Issues

R&D intensity spending on R&D as a percentage of sales

revenue

principal means of gaining market share in global competition

Technology transfer the process of taking new technology from the

laboratory to the marketplace


R&D Mix

Basic R&D focuses on theoretical problems

Product R&D concentrates on marketing and is concerned with

product or product packaging improvements

Engineering R&D concerned with engineering, concentrating on quality

control and the development of design specifications and improved production equipment


Impact of Technological Discontinuity on Strategy

Technology discontinuity

when a new technology cannot be used to enhance current technology, but substitutes for the technology to yield better performance


Christensen explains in The Innovators Dilemma why this transition occurs when a disruptive technology enters an industry.

In a study of computer disk drive manufacturers, he explains that established market leaders are typically reluctant to move in a timely manner to a new technology. This reluctance to switch technologies (even when the firm is aware of the new technology and may have even invented it!) is because the resource allocation process in most companies gives priority to those projects (typically based on the old technology) with the greatest likelihood of generating a good return on investmentthose projects appealing to the firms current customers (whose products are also based on the characteristics of the old technology).

Copyright 2015 Pearson Education, Inc. 44

Strategic Operations Issues

Intermittent systems item is normally processed sequentially, but the

work and sequence of the process vary

Continuous systems work is laid out in lines on which products can be

continuously assembled or processed

Operating leverage impact of a specific change in sales volume on net

operation income


Experience Curve

Experience curve unit production costs decline by some fixed

percentage each time the total accumulated volume of production units doubles


Increasing Use of Teams

Autonomous (self-managed) a group of people work together without a supervisor

to plan, coordinate and evaluate their work

Cross-functional work teams various disciplines are involved in a project from the

beginning

Concurrent engineering specialists work side-by-side and compare notes

constantly to design cost-effective products with features customers want


Increasing Use of Teams

Virtual teams groups of geographically and/or organizationally

dispersed co-workers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task


Trends Driving Virtual Teams

1. Flatter organizational structures with increasing cross-functional coordination need

2. Turbulent environments requiring more interorganizational cooperation

3. Increasing employee autonomy and participation in decision making

4. Higher knowledge requirements derived from a greater emphasis on service

5. Increasing globalization of trade and corporate activity


Quality of Work Life and Human Diversity

Quality of work life includes improvements in:

Introducing participative problem solving Restructuring work Introducing innovative reward systems Improving the work environment


Quality of Work Life and Human Diversity

Human diversity the mix in the workplace of people from different

races, cultures and backgrounds

provides a competitive advantage


Strategic Information Systems/Technology Issues

Information systems/technology contributions to performance:

Automation of back office processes Automation of individual tasks Enhancement of key business functions Development of a competitive advantage



Web 2.0 the use of wikis, blogs, RSS (Really Simple

Syndication), social networks (e.g., LinkedIn and Facebook), podcasts and mash-ups through company Web sites to forge tighter links with customers and suppliers and to engage employees more successfully



Supply chain management the forming of networks for sourcing raw

materials, manufacturing products or creating services, storing and distributing the goods and delivering them to customers and consumers


Internal Factor Analysis Summary


Date post:	18-Dec-2015
Category:	Documents
Upload:	hina-ayub
View:	6 times
Download:	3 times

str5

Documents