ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM

1. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM STRATEGIC MANAGEMENT BUAD 4980

2. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Limitations of SWOT Analysis • Strengths identified in SWOT analysis may limit focus to single solutions • SWOT analysis provides a point in time perspective, not a dynamic perspective • SWOT without understanding of changes in the global environment may lead to strategies that can be negated by other factors STRATEGIC MANAGEMENT – BUAD 4980 2

3. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Value-Chain Analysis • Strategic analysis of an organization that focuses on value-creating activities • Value is what consumers are willing to pay for what the organization produces, measured by total revenue STRATEGIC MANAGEMENT – BUAD 4980 3

4. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Value-Chain Analysis • Primary activities that create value: • Inbound logistics for product inputs • Physical creation of a product or service • Outbound logistics for delivering products • Marketing and sales • Service provided at all stages of initial sales, production and post-sale activities STRATEGIC MANAGEMENT – BUAD 4980 4

5. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Value-Chain Analysis • Support activities that create value: • General Administration • Human Resource management • R&D / Technology development • Procurement STRATEGIC MANAGEMENT – BUAD 4980 5

6. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM The Value-Chain STRATEGIC MANAGEMENT – BUAD 4980 6

7. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Primary Value-Chain Activity: Inbound Logistics • Transporting, receiving, storing and redistributing input materials for further production or conversion • Inbound transportation logistics • Location of facilities relative to suppliers and intermediate conversion operations • Warehousing systems, layout and design STRATEGIC MANAGEMENT – BUAD 4980 7

8. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Primary Value-Chain Activity: Operations • Conversion of raw materials or process inputs into intermediate or finished products • Productive and efficient plant facilities • Incorporation of latest technologies for production • Workflow and process design STRATEGIC MANAGEMENT – BUAD 4980 8

9. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Primary Value-Chain Activity: Outbound Logistics • Assembly, packaging, in-process storage and distributing product or service to customers • Efficient storage and shipping operations • Optimizing lot sizes for shipping • Delivery logistics STRATEGIC MANAGEMENT – BUAD 4980 9

10. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Primary Value-Chain Activity: Marketing and Sales • Features associated with products and services and inducements to purchase • Innovative and compelling promotion and advertising • Customization of products or services to meet customer needs STRATEGIC MANAGEMENT – BUAD 4980 10

11. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Primary Value-Chain Activity: Service • Services offered to maintain or enhance the value of products • Prompt service and response to emergencies, repairs or product enhancements • Well-trained customer service staff and customer support systems STRATEGIC MANAGEMENT – BUAD 4980 11

12. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Support Value-Chain Activity: Procurement • Activities related to acquisition of process inputs • Procurement of high quality, low priced raw materials • Mutually-advantageous supplier relationships • Establishment of back-up suppliers to prevent stock-outs or excessive lead times STRATEGIC MANAGEMENT – BUAD 4980 12

13. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Support Value-Chain Activity: Human Resource Management • Activities associated with staffing needed functions, training / development and retaining personnel • Recruitment, development and retention of employees • Effective Labor relations and quality / productivity standards • Incentives, rewards or motivational programs for employees STRATEGIC MANAGEMENT – BUAD 4980 13

14. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Support Value-Chain Activity: Technology Development • Activities that enhance products and processes at various levels of the organization • R&D for product development, quality or process improvement • Close collaboration between R&D and other functions or departments that may benefit from new technology • Retention of intellectual property, attracting high quality technical talent STRATEGIC MANAGEMENT – BUAD 4980 14

15. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Support Value-Chain Activity: General Administration • Supports the entire value chain, not just individual functions • Planning and tracking systems • Funding capital improvements and research • Maintains relationships and harmony among stakeholders • Supports management and information systems for the entire organization STRATEGIC MANAGEMENT – BUAD 4980 15

16. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Interrelationships Among Value-Chain Activities Within and Across Organizations • Two levels of interrelationships • Interrelationships among value-chain activities within an organization • Interrelationships among value-chain activities across firms (ie, with suppliers, customers or other production partners) STRATEGIC MANAGEMENT – BUAD 4980 16

17. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Value-Chains in Service Organizations STRATEGIC MANAGEMENT – BUAD 4980 17

18. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Resource-Based View of the Firm • Two components of resource-based view: • Identification and evaluation of the internal resources available to the firm • Comparison of the firm’s internal resources with those of competitors in an attempt to determine competitive advantages those resources provide STRATEGIC MANAGEMENT – BUAD 4980 18

19. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Types of Resources • Tangible Resources • Organizational assets that are relatively easy to identify due to their physical attributes • Physical assets • Financial resources • Organizational resources • Technological resources STRATEGIC MANAGEMENT – BUAD 4980 19

20. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Types of Resources • Intangible Resources • Organizational assets that are difficult to identify because they are embedded in routine practices and systems that the organization may have developed over time • Human resource knowledge and development • Innovations, inventions or unique processes • In-house management systems • Business reputation STRATEGIC MANAGEMENT – BUAD 4980 20

21. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Types of Resources • Intangible Organizational Capabilities • Organizational practices that add value but are difficult to quantify • Outstanding customer service • Teamwork • Innovation • Organizational adaptability and flexibility (cross-training) STRATEGIC MANAGEMENT – BUAD 4980 21

22. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Firm Resources and Sustainable Competitive Advantages • To provide sustainable competitive advantages and value, resources must: • Provide opportunities unique to a firm • Neutralize threats to the firm • Be rare or difficult for a current or potential competitor to duplicate • Have no strategically equivalent substitutes STRATEGIC MANAGEMENT – BUAD 4980 22

23. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Sources of Inimitability • Physical Uniqueness • Complexity of conversion or processing • Difficult to determine how end result was achieved or re-create attributes • Complexity of organizational interactions or systems STRATEGIC MANAGEMENT – BUAD 4980 23

24. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Evaluating Firm Performance • Financial Analysis • Balance Sheet • Income Statement • Historical comparisons • Comparisons with industry norms • Comparisons with key competitors • Stakeholder Evaluation • Employees • Customers • Owners STRATEGIC MANAGEMENT – BUAD 4980 24

25. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Evaluating Firm Performance • Financial Ratio Analysis • Short-term solvency or liquidity • Long-term solvency • Asset Management / turnover • Profitability • Market Value STRATEGIC MANAGEMENT – BUAD 4980 25

26. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Evaluating Firm Performance • Financial Ratio Analysis Comparisons • Historical trends • Industry norm comparisons • Competitor comparisons STRATEGIC MANAGEMENT – BUAD 4980 26

27. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Evaluating Firm Performance STRATEGIC MANAGEMENT – BUAD 4980 27

28. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Evaluating Firm Performance • Stakeholder Evaluation of Performance • Customer satisfaction and service • Internal scorecard of achievement and organizational effectiveness • Industry benchmarking • Owner / shareholder evaluation STRATEGIC MANAGEMENT – BUAD 4980 28

29. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Case Analysis: Adapting Oreos to the Chinese Market • Kraft Foods had to re-invent its Oreo cookie for the Chinese market • Sales of the original American version Oreo in China had remained flat for 5 years, despite tremendous growth of the Chinese market • After investigating the market reasons for the lackluster Oreo sales in China, it was discovered that the American product was too sweet and too expensive for the Chinese consumer • Kraft re-invented the product, testing it extensively to verify that it met Chinese consumer’s preferences • The Oreo was also re-packaged in a smaller pack with fewer Oreos at a lower price-point STRATEGIC MANAGEMENT – BUAD 4980 29

30. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Case Analysis: How Cookshack Gets “Free” Customer Service • Cookshack is a small, specialty outdoor oven producer based in Oklahoma • The company uses an online customer forum to allow customers to offer suggestions about product use or favorite recipes for all kinds of foods • The forums cover over a thousand topics with over 10,000 posts • The customer forum adds post-sale value to existing customers and helps convince potential customers of the product benefits STRATEGIC MANAGEMENT – BUAD 4980 30

31. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Case Analysis: Removing Individual Metrics in Performance Evaluations • Non-US employees often take offense at numerically scaled performance evaluations • In Asia, receiving an average “3” on a scale of 1-5 may represent a loss of face to an employee • In such cases, high employee turn-over may result from the performance evaluation process • This appears to be true in more socialized countries, where workers judge their status to be more equal to managers and therefore the workers question the right of a manager to “rate” them STRATEGIC MANAGEMENT – BUAD 4980 31

32. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Case Analysis: Environmental Sustainability Via an Energy-Efficient Supply Chain • In the UK, a processor of potatoes found that paying for raw potatoes by weight caused potato growers to not dry their potatoes fully • This caused increased transportation costs (and related emissions) and increased drying time at the processing plant (also increasing emissions) • The processing company revised its moisture standards for the raw potatoes, encouraging suppliers to let them naturally dry longer • The result was a supply chain that expended much less energy and generated fewer emissions STRATEGIC MANAGEMENT – BUAD 4980 32

33. ANALYZING THE INTERNAL ENVIRONMENT OF THE FIRM Case Analysis: Blogs, Social Networking and Corporate Reputations – A Lethal Combination? • The use of blogs, social networking sites and user-generated content sites can dramatically increase a company’s visibility • It can also negatively impact a company’s image very rapidly • A bad customer experience captured in a blog or on YouTube can be telegraphed to millions of people in a matter of hours • Companies can attempt to diffuse these events by contacting the source customer and making amends • Once the damage is done, it is very difficult to reverse STRATEGIC MANAGEMENT – BUAD 4980 33