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A View from the Top Chapter 5 Analyzing an Organization’s Strategic Resource Base. Team III M Isabel Castaneda Cal Wallace Patrick McGregor. Introduction. Assessing strategic resources and capabilities is important when determining a companies strategy.

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a view from the top chapter 5 analyzing an organization s strategic resource base

A View from the TopChapter 5Analyzing an Organization’s Strategic Resource Base

Team III

M Isabel Castaneda

Cal Wallace

Patrick McGregor

introduction
Introduction
  • Assessing strategic resources and capabilities is important when determining a companies strategy.
  • Analyzing a company’s internal strategic environment has two principal components:
    • Cataloging and valuing current resources and core competencies for creating competitive advantages.
    • Identifying internal pressures for change and forces for resistance.
strategic resources
Strategic Resources
  • A company’s strategic resource base is composed of physical financial, human resource, and organizational assets.
  • To evaluate the relative worth of a company’s strategic resources four questions must be asked.
physical assets
Physical Assets
  • A company’s physical assets can affect its competitiveness.
  • i.e. Airline companies, the average age of the fleet affects customer perceptions, routine flexibility, and operating and maintenance costs.
analyzing a company s financial resource base
Analyzing a Company’s Financial Resource Base
  • For the corporate level, evaluations of the financial position involves thorough analysis of the company’s financial statements.
  • Financial ratio analysis can provide an overview of an organization’s current and past profitability, liquidity, leverage, and activity.
profitability ratios
Profitability Ratios
  • Measure how well a company is allocating its resources.
  • Ratios
    • Gross Profit Margin
    • Net Profit Margin
    • Return on Assets
    • Return on Equity
liquidity ratios
Liquidity Ratios
  • Measure cash flow generation and ability of an organization to meet its current obligations.
  • Ratios
    • Current Ratio
    • Quick Ratio
    • Inventory to Net Working Capital
leverage
Leverage
  • Can indicate potential improvements in the financing of operations.
  • Ratios
    • Debt-to-assets ratio
    • Debt-to-equity ratio
    • Long-term debt-to-equity ratio
activity ratios
Activity Ratios
  • Measure productivity and efficiency
  • Ratios
    • Inventory Turnover
    • Fixed Asset Turnover
    • Average Collection
dupont formula
DuPont Formula
  • Used to analyze an organization’s return on assets directly links operating variables to financial performance.
  • Accounting-based measures have generally been found inadequate indicators of a business unit’s economic value.
shareholder value analysis
Shareholder Value Analysis
  • Focuses on cash flow generation to determine economic value.
  • It is helpful to answer the following questions:
    • Does the current strategic plan create shareholder value.
    • How does the business unit’s performance compare with others in the corporation.
    • Would an alternative strategy increase shareholder value more than the current.
economic value added
Economic Value Added
  • Economic value added and market value added have supplemented accounting based performance measures.
  • Advantages:
    • Help align employee and owner interest through employee compensation.
    • Can be the basis for a single competitive performance measure called MVA.
    • Indicates if returns lag the cost of capital
analyzing a company s financial resource base1
Analyzing a Company’s Financial Resource Base
  • Cost analysis deals with identification of strategic cost driver.
  • Cost benchmarking is useful in assessing a firm’s cost relative to those competing firms, or for comparing a company’s performance against best-in-class competitors.
human capital a company s most valuable strategic resource
Human Capital: A Company’s Most Valuable Strategic Resource
  • Firms are run by and for people.
  • More focus on attracting, developing, and retaining.
  • Continuous employee development is critical
  • Ex- Fed Ex has an 11 week training and “Leadership Institute”
organizational strategic resources
Organizational Strategic Resources
  • Knowledge
  • Intellectual Capital Base
  • Reputation with customers, partners, and suppliers and financial community
  • Specific competencies, processes, and skill sets
  • Corporate Culture
organizational strategic resources continuation
Organizational Strategic Resources Continuation
  • Intellectual Capital- hard to measure
  • Patents- protect and preserve competitive advantage
  • Knowledge- better knowledge » better performance and enhanced learning
the importance of brands
The Importance of Brands
  • Brands provide guarantee of reliability and quality
  • Customers must trust the brands
  • Ex- Ranking 100 Best Global Brands by dollar value.
the importance of brands continuation
The Importance of Brands Continuation
  • Ranking 100 Best Global Brands by dollar value
  • Identifiable Qualities:
    • Do not fear public flops
    • Face your weaknesses
    • Protect your culture
core competencies
Core Competencies
  • Great capabilities that enable a company to build a competitive advantage.
  • Focus on creating a value, and change as customer’s requirements change
  • Hamel and Prahalad three tests for identifying core competencies
internal change forces and the capacity for change
Internal Change Forces and the Capacity for Change 
  • Internal Change Forces
    • Four basic forms of resistance
    • Structural, Organizational rigidities
    • Closed mind-sets reflecting support for obsolete business beliefs and strategies
    • Entrenched cultures reflecting values, behaviors, and skills that are not conductive to change.
    • Counterproductive change momentum that isn’t in tune with current strategic requirements
the company life cycle
Founding

Establishment of:

Vision and Purpose

Direction

Allocation of Capital and Resources

Growth

Requires

Organizational Learning

Delegation of Authority

Leadership challenges

Responding to external and internal change.

Working together as a cohesive unit

The Company Life Cycle 
mckinsey 7 s model
Frameworks

Strategy

Structure

Systems

Skills

Staff

Style

All link to Shared Values

Particulars of the Model

Not hierarchical

Change in one force will occur a change in another

Fixing problems in one area without attention to others is counterproductive.

Align each factor accordingly for a desired direction of a particular goal.

Mckinsey 7-S Model 
stakeholder analysis
Stakeholder Analysis 
  • What roles do they play?
    • Internal or External
    • Rights and Interest
    • Returns
    • Competition
    • Laws and Regulations
    • Demands of the Stakeholders
slide24
SWOT 
  • SWOT- the sizing up of a company’s strengths, weaknesses, external opportunities, and threats.
  • Strengths and Weaknesses are internal
  • Opportunities and Threats are external
  • FIGURE 5-5 on page 69
work cited
Work Cited
  • Kluyer, C (2006). Strategy: A View from the Top. Upper Saddle River, New Jersey: Pearson Education.
  • Building Brands. Retrieved June 7, 2009, from Building Brands: Mckinseys 7-S Model Web site: http://www.buildingbrands.com/didyouknow/14_7s_mckinsey_model
  • Oxford Analytical, (2009, May, 27). Emerging Economies Must Maintain Social Programs. Forbes, Retrieved June 7, 2009, from http://www.forbes.com/2009/05/26/health-education-politics-business-oxford_print.html