Internal Scanning:

Internal Scanning: Organizational Analysis 2012 Prentice Hall

A Comprehensive Strategic Management Model Feedback Perform external audit Develop Mission statement Establish long term objectives Generate, Evaluate, and select strategies Establish policies and annual objectives Allocate resources Measure and evaluate performance Perform internal audit Formulation Evaluation Implementation 2012 Prentice Hall

Situational Analysis • SWOT -- • Internal • Strengths/Weaknesses • External • Opportunities/Threats 2012 Prentice Hall

TOWS Matrix 2012 Prentice Hall

Resource-Based Approach Internal strategic factors: Critical strengths and weaknesses that are likely to determine if the firm will be able to take advantage of opportunities while avoiding threats. 2012 Prentice Hall

Resource-Based Approach Resource: An asset, competency, process, skill, or knowledge controlled by the corporation. 2012 Prentice Hall

Evaluating Key Resources VRIO Framework • Barney, in his VRIO framework of analysis, proposes four questions to evaluate a firm’s 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? • If the answer is yes to all it is considered distinctive competence. 2012 Prentice Hall

Core and distinctive competencies • Capabilities: organization ability to utilize its resources. Its business process and routine. • Competency: cross-functional integration and coordination of capabilities. E.g., new product development. • Core-competency: collection of competencies that crosses divisional boundaries. E.g., new product development is a core-competency if it goes beyond one division. • Distinctive competencies: when core- competencies are superior to those of the competitions. 2012 Prentice Hall

Keys of Strategic Outsourcing Success 1- Understand the bus core competencies. ‘What it gives competitive Differentiation’ Core comp. Is the integration of technologies, constituent skills and collective learning which makes healthy bus. 2- Mapping out the work of bus. 3- Requires trust between parties 4- Understand the type of work of bus. 2012 Prentice Hall

Competitive advantage analysis • Analyzing competences and core competences: The analysis here determines how resources are deployed Competitive advantage is built on the uniqueness of resources or on the core competences. 2012 Prentice Hall

Strategic Outsourcing for Competitive Advantage • Used mainly for downsizing and cost reductions at corporations. • Usually corps outsourcing non-essential work, why? To free valuable resources and focus on its areas of competitive advantage. To do this org. must know its core competences. 2012 Prentice Hall

Resource-Based Approach 5-Step approach to strategy analysis: • 1- Identify & classify firm’s resources • What are the Strengths & weaknesses • 2- Combine firm’s strengths into capabilities • Core competencies • Distinctive competencies 2012 Prentice Hall

Resource-Based Approach 5-Step approach to strategy analysis: • 3- Appraise the Profit potential of resources\capabilities. - Identify the competitive advantages. - Sustainable competitive advantage • 4- Select strategy • Exploits firm’s resources relative to external opportunities • 5- Identify resource gaps • Invest in upgrading weaknesses 2012 Prentice Hall

Why some nations are more competitive than others? • M. Porter in his diamond, suggests that there are inherited reasons why some nations are more competitive, and there organizations are as well, than others. • Porter believes that national home base of an organization influence the global success of organization. 2012 Prentice Hall

Porter’s Determinants of National Advantage There are four forces: 1- The conditions of the nation, availability of skills, infrastructure. 2- Home country’s demand for products. 3- The presence or absence of supporting industries. 4- The firm’s strategy, structure, rivalry, establishment process.. 2012 Prentice Hall

Four Nation’s Distinct Strategies • S-O, or maxi-maxi • S-T, or maxi-mini • W-O, or mini-maxi • W-T, or mini-mini 2012 Prentice Hall

Determining the Sustainability of an Advantage • Two characteristics determine the sustainability of a firms’ distinctive competency: durability and limitability. 2012 Prentice Hall

Determining the Sustainability of an Advantage Durability: Rate at which a firm’s underlying\basic resources and capabilities (core competencies) depreciate or become obsolete. E.g., new technology can make the company core competency irrelevant. 2012 Prentice Hall

Sustainability of an Advantage Imitability: Rate at which a firm’s underlying resources and capabilities (core competencies) can be duplicated by others?. Competitors will do what they can to learn and imitate that set of skills and capabilities. 2012 Prentice Hall

Core Competencies Imitability of core competencies determined by: • Transparency/clearly understood. Gillette’s razor design is very difficult to copy; complicated manufacturing equipment. • Transferability. Ability of competitors to gather necessary resources and capabilities to support a competitive challenge. • Replicability/ do it exactly by the competitors :imitate other firms’ success. 2012 Prentice Hall

Core Competencies Is it easy to imitate another company’s core competency? Depends if it comes from: Explicit Knowledge: • Knowledge that can be easily articulated and communicated. Tacit/unexpressed Knowledge: • Knowledge that is not easily communicated because it is deeply rooted in employee experience or in a corporation’s culture . 2012 Prentice Hall

Resource Sustainability 2012 Prentice Hall

Business models • How firms earn revenue and make profit. This is based on business model used which is usually composed of 5 elements: • Who it serves • What it provides • How it makes money • How it differentiates and sustains competitive advantage. • How it provides its products. 2012 Prentice Hall

Competitive advantage analysis • Steps of analyzing competences: 1- Value chain analysis: describes the activities within and around the organization, and relates them to an analysis of the competitive strength of the organization. 2- the bases of core competences. 2012 Prentice Hall

Corporate Value Chain 2012 Prentice Hall

Corporate Value Chain Analysis steps: • Examine each product line’s value chain • Core competencies & core deficiencies • Examine the “linkages” within each product line’s value chain • Connections between the way one value activity is performed and the cost of performance of another activity • Examine the synergies among the value chains of different product lines or business units • Economies of scope 2012 Prentice Hall

How can value chain analysis help identify a company's strengths and weaknesses? • The systematic examination of individual value activities can lead to a better understanding of a corporation's strengths and weaknesses. Its advantage over other methods of analyzing a firm's internal environment is, its ability to visualize a company in terms of strings of product value chains. 2012 Prentice Hall

Competitive advantages • When competitive advantage is materialized? When a firm earns persistently higher rate of profit over its rivals. • Determinants of profit level 1- Value of company products in customers’ eyes. 2- Company production cost. 2012 Prentice Hall

Competitive advantage • It can be created in certain industrial field, through the adoption of low-cost-differentiation strategy. . M. Porter 2012 Prentice Hall

What is the success strategy • The strategy which enables organizations developing new advantages, or maintaining the existing advantages. 2012 Prentice Hall

Market segmentation analysis • It aims to identify similarities and differences between groups of customers or users . Not all customers are the same. • Some criteria for market segmentation: • Characteristics of customers (e.g., income, gender), • Purchase situation (e.g., behavior, its size, importance), • Users needs and preferences for product characteristics (e.g., quality, price, brand). 2012 Prentice Hall

What is efficiency and effectiveness? Management (cont.) elements of definition Efficiency - getting the most output from the least amount of inputs “doing things right” concerned with means Effectiveness - completing activities so that organizational goals are attained “doing the right things” concerned with ends 1-32 2012 Prentice Hall

Boston Consulting Group Matrix • It portrays differences among divisions in terms of relative market share position and industry growth rate. • The matrix allows multidivisional corp. to manage its portfolio of business effectively. 2012 Prentice Hall

Boston Consulting Group Matrex مصفوفه بوستن Relative market share الحصة السوقية high 11 low 0.5 0.0 20+ high Industrial Growth Rate معدل نمو الصناعة % 0 low 20- 2012 Prentice Hall

Benchmarking • .Benchmarking is the search for the best practices among competitors or non-competitors that lead to their superior performance. • The benchmarking process typically follows four steps. • a. A benchmarking planning team is formed. The team’s initial task is to identify what is to be benchmarked, identify comparative organizations, and determine data collection methods. • b. The team collects internal and external data. • c. The data is analyzed to identify performance gaps and to determine the cause of the difference. • d. An action plan is prepared and implemented. 2012 Prentice Hall

Steps In Benchmarking Best Practices Gather internal and external data Analyze data to identify performance gaps Form a benchmarking planning team Prepare and implement action plan © Prentice Hall, 9-36 2012 Prentice Hall

Suggestions for improving benchmarking • Link benchmarking efforts with strategic objectives. • Have the right size team -6-8 persons. • Involve those people who will be directly affected by the benchmarking. • Focus on specific targeted issues rather than broad. • Set realistic timetable. 2012 Prentice Hall

Exercise • Use a benchmarking to develop the MBA program at IUG. 2012 Prentice Hall

Case study • CASE 12 GOOGLE, Inc.(2010): THE FUTURE OF THE INTERNET SEARCH ENGINE • Evaluate the corporate governance? • Analyze the industrial environment of Google? • Does Google have a distinctive competency? If yes, what is it? 2012 Prentice Hall

Management Audit Checklist • Does the firm use strategic management concepts? • Are objectives/goals measurable? Well communicated? • Do managers at all levels plan effectively? 2012 Prentice Hall

Management Audit Checklist • Do managers delegate well? • Is the organization’s structure appropriate? • Are job descriptions clear? • Are job specifications clear? • Is employee morale high? 2012 Prentice Hall

Management Audit Checklist • Is employee absenteeism low? • Is employee turnover low? • Are the reward mechanisms effective? • Are the organization’s control mechanisms effective? • This checklist can help determine specific strengths and weaknesses. “No” answers indicate potential weaknesses, while “Yes” answers indicate areas of strength. 2012 Prentice Hall

Marketing • Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services. 2012 Prentice Hall

Marketing Marketing Functions Customer analysis Selling products/services Product & service planning Pricing Distribution Marketing research Opportunity analysis 2012 Prentice Hall

Marketing Marketing Audit Checklist of Questions Are markets segmented effectively? Is the organization positioned well among competitors? Has the firm’s market share been increasing? Are the distribution channels reliable & cost effective? Is the sales force effective? 2012 Prentice Hall

Marketing Opportunity Analysis Does the firm conduct market research? Are product quality & customer service good? Are the firm’s products/services priced appropriately? Does the firm have effective promotion, advertising, and publicity strategies? 2012 Prentice Hall

Marketing Opportunity Analysis Are the marketing, planning, and budgeting effective? Do the firm’s marketing managers have adequate experience and training? 2012 Prentice Hall

Finance/Accounting Audit • Does the firm have sufficient working capital? • Are capital budgeting procedures effective? • Are dividend payout policies reasonable? • Are the firm’s financial managers experienced & well trained? 2012 Prentice Hall

Finance/Accounting Audit • Effective Financial Analysis Requires: • Analysis of how the ratios have changed over time • How the ratios compare to industry norms • How the ratios compare with key competitors 2012 Prentice Hall

Production/Operations Audit • Are suppliers of materials, parts, etc. reliable and reasonable? • Are facilities, equipment, and machinery in good condition? • Are inventory-control policies and procedures effective? 2012 Prentice Hall

Internal Scanning: