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Internal analysis strategic management

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Internal Analysis as a part of scanning in Strategic Management Process

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Internal analysis strategic management

  1. 1. “Analysis of Company’s Resources and Competitive Position” Internal Analysis Prof. Vijay K S, MBA Programme`-BIET, Davangere
  2. 2. Internal Analysis Is present strategy working? strengths, weaknesses, opportunities, & threats firm’s prices costs competitive competitive position strategic issues How Company Create Value Superior efficiency, innovation, quality responsiveness towards customers Source of competitive advantage profitability Value Chain Analysis SWOT Benchmarking Prof. Vijay K S, MBA Programme`-BIET, Davangere
  3. 3. Internal Analysis Key questions to be asked 1. How well is firm’s present strategy working? 2. What are firm’s strengths, weaknesses, opportunities, & threats? 3. Are firm’s prices & costs competitive? 4. How strong is firm’s competitive position? 5. What strategic issues does firm face? Prof. Vijay K S, MBA Programme`-BIET, Davangere
  4. 4. Internal Analysis Internal Analysis is a three step process Manager should understand 1. Process by which companies create value for customers 2. Importance of Superior efficiency, innovation, quality and responsiveness towards customers 3. Source of competitive advantage – that drives the profitability – Strengths and Weakness Prof. Vijay K S, MBA Programme`-BIET, Davangere
  5. 5. Capabilities Resources Competency Core Competency Distinctive Competencies Internal Analysis Important Keys Prof. Vijay K S, MBA Programme`-BIET, Davangere
  6. 6. Internal Analysis Important Keys – Resources Resources are the organization’s assets and are thus the basic building blocks of the organization - Tangible assets - Human assets - Intangible assets Prof. Vijay K S, MBA Programme`-BIET, Davangere
  7. 7. Internal Analysis Important Keys – Capabilities Capabilities refers to a corporation’s ability to exploit its resources Examples - Marketing capabilities - Manufacturing capabilities - HR Capabilities Dynamic capabilities Prof. Vijay K S, MBA Programme`-BIET, Davangere
  8. 8. Internal Analysis Important Keys – Competencies Competencies is a cross functional integration and coordination of capabilities Examples - Competency in developing a new product VRIO framework of Analysis to evaluate firms competencies Value : Does it provide customer value and Competitive advantage Rareness : Do no other competitors possess it? Imitability : Is it costly for others to imitate? Organization : Is the firm organized to exploit the resource? Prof. Vijay K S, MBA Programme`-BIET, Davangere
  9. 9. Internal Analysis Important Keys – Core Competencies A core competency is a collection of competencies that crosses divisional boundaries, is wide spread within the corporation, and is something that the corporation can do exceedingly well. Examples - FedEx – Application of IT to its operations Prof. Vijay K S, MBA Programme`-BIET, Davangere
  10. 10. Internal Analysis Important Keys – Distinctive Competencies When the core competencies are superior to those of the competition , they are called as distinctive competencies Examples - GE’s Management Development Prof. Vijay K S, MBA Programme`-BIET, Davangere
  11. 11. Internal Analysis Strategy, Resources, Capabilities and Competencies Resources Distinctive Competencies Capabilities Strategies Competitive Advantage Superior Profitability Build Shape Build Prof. Vijay K S, MBA Programme`-BIET, Davangere
  12. 12. Internal Analysis - Value Chain Analysis Product Raw Materials Primary Manufacturing Fabrication Distribution Retailer • A company’s value chain consists of the linked set of value- creating activities the company performs internally. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  13. 13. Internal Analysis - Value Chain Analysis Industry Value Chain Upstream Segment Downstream Segment Value chain analysis is a useful method for organizational appraisal as it helps in providing clarity about the areas where the strengths and weaknesses of the organisation reside. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  14. 14. Internal Analysis - Value Chain Analysis Corporate / Company Porter’s Generic Value Chain (Corporate Value Chain Analysis) Firm Infrastructure (general management, accounting, finance, Strategic planning) Human Resource Management Technological Development Procurement Inbound Logistics (raw materials handling and warehousing ) Operations (Machining, Assembling, testing) Outbound Logistics (Warehousin g and distribution of finished products) Marketing and Sales (Advertising, promotion, pricing, channel relations) Services (Installation, Repair, Parts) Profit Margin Support Activities Primary Activities Prof. Vijay K S, MBA Programme`-BIET, Davangere
  15. 15. Internal Analysis - SWOT Analysis SWOT Analysis Internal Assessment of the Organisation External Assessment of the Environment Potential Strengths and Competitive Assets Potential Weaknesses and Competitive Deficiencies Potential Market Opportunities Potential External Threats to a Company’s Future Profitability Prof. Vijay K S, MBA Programme`-BIET, Davangere
  16. 16. Internal Analysis - SWOT Analysis Potential Strengths and Competitive Assets Potential Strengths and Competitive Assets • Competencies that are well matched to industry KSF. • Ample financial resources to grow the business. • Strong brand-name image/company reputation. • Economies of scale and/or learning and experience curve advantages over rivals. • Other cost advantages over rivals. • Attractive customer base. • Proprietary technology, superior technological skills, important patents. • Strong bargaining power over suppliers or buyers. • Resources and capabilities that are hard to copy and for which there are no good substitutes. • Superior product quality. • Wide geographic coverage and/or strong global distribution capabilities. • Alliances/joint ventures that provide access to valuable technology, competencies, and/or attractive geographic markets. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  17. 17. Internal Analysis - SWOT Analysis Potential Weakness and Competitive Deficiencies Potential Weakness and Competitive Deficiencies • No clear strategic vision. • No well-developed or proven core competencies. • No distinctive competencies or competitively superior resources. • Lack of attention to customer needs. • A product/service with features and attributes that are inferior to those of rivals. • Weak balance sheet, short on financial resources to grow the firm, too much debt. • Higher overall unit costs relative to those of key competitors. • Too narrow a product line relative to rivals. • Weak brand image or reputation. • Weaker dealer network than key rivals and/or lack of adequate distribution capabilities. • Lack of management depth. • Plagued with internal operating problems or obsolete facilities. • Too much underutilized plant capacity. • Resources that are readily copied or for which there are good substitutes. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  18. 18. Internal Analysis - SWOT Analysis Potential Market Opportunities Potential Market Opportunities • Sharply rising buyer demand for the industry’s product. • Serving additional customer groups or market segments. • Expanding into new geographic markets. • Expanding the company’s product line to meet a broader range of customer needs. • Utilizing existing company skills or technological know-how to enter new product lines or new businesses. • Falling trade barriers in attractive foreign markets. • Acquiring rival firms or companies with attractive technological expertise or capabilities. • Entering into alliances or joint ventures to expand the firm’s market coverage or boost its competitive capability. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  19. 19. Internal Analysis - SWOT Analysis Potential External Threats to a Company’s Future Profitability Potential External Threats to a Company’s Future Profitability • Increasing intensity of competition among industry rivals-may squeeze profit margins. • Slowdown in market growth. • Likely entry of potent new competitors. • Growing bargaining power of customers or suppliers. • A shift in buyer needs a d taste away from the industry’s product. • Adverse demographic changes that threaten to curtail demand for the industry’s product. • Adverse economic conditions that threaten critical suppliers or distributers. • Changes in technology-particularly disruptive technology that can undermine the company’s distinctive competencies. • Restrictive foreign trade policies. • Costly new regulatory requirements. • Tight credit conditions. • Rising prices on energy or other key inputs. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  20. 20. Internal Analysis - Benchmarking Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can take place both inside a particular industry, and also in other industries Benchmarking is the tool that allows a company to determine whether the manner in which it performs particular functions and activities represent industry best practices when both cost and effectiveness are taken into account. It is a point of reference against which performance is measured and compared. Prof. Vijay K S, MBA Programme`-BIET, Davangere
  21. 21. Internal Analysis - Benchmarking Application of benchmarking involves four key steps: (1) Understand in detail existing business processes (2) Analyse the business processes of others (3) Compare own business performance with that of others analysed (4) Implement the steps necessary to close the performance gap Prof. Vijay K S, MBA Programme`-BIET, Davangere
  22. 22. Internal Analysis - Benchmarking Benefits of Benchmarking  It ensures best practices will be identified, which in turn assures appropriate improvement.  It provides a deeper understanding of the organisation’s process.  It stimulates the company to try some thing different.  Identify new technology Prof. Vijay K S, MBA Programme`-BIET, Davangere
  23. 23. Internal Analysis - Benchmarking Types of Benchmarking  Strategic Benchmarking  Performance or Competitive Benchmarking  Process Benchmarking  Functional Benchmarking  Internal Benchmarking  External Benchmarking  International Benchmarking Prof. Vijay K S, MBA Programme`-BIET, Davangere

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