SM 3-Internal Analysis.ppt

7/28/2019 SM 3-Internal Analysis.ppt

1/27

Approaches to Internal Analysis

1. SWOT Analysis

2. Value Chain Analysis

3. Financial Analysis

-- Liquidity Ratios (current/Quick)

-- Leverage Ratios (Debt-equity/Interest coverage/Proprietary/Debt to Assets

-- Activity Ratios (Assets turnover/Fixed Assets turnover/Working Capital turn

over/Debtors turnover/Inventory turnover)

-- Profitability Ratios (Gross Profit/Net Profit/Operating/EPS etc.,)

4. Strategic Advantage Profile (SAP)


2/27

Strategic Advantage Profile (SAP)

SAP tries to find out Organizational Strengths and weaknesses in

relation to the CRITICAL SUCCESS FACTORS within a particular industry

CRITICAL SUCCESS FACTORS are small but extremely important factors

that are essential for successfully gaining and maintaining Competitive

Advantage

CRITICAL SUCCESS FACTORS have significant bearing on the overall

growth of a firm within an industry.

The four major sources ofCRITICAL SUCCESS FACTORS :--- Industry Characteristics

--- Competitive Position

--- General Environment

--- Organizational Development


3/27

Strategic Advantage Profile (SAP)


4/27


5/27

Matching the Strengths and Weaknesses

After the analyses of External and Internal Environments, the analysts must

try to find the FIT between Corporate internal strengths and external

opportunities . One of the means useful in doing this is ETOP.

ETOP

ETOP is the acronym for environmental threat and opportunity profile .It

is nothing but a summarized picture of the environmental factors and

their likely impact on the organization

The preparation of ETOP helps a firm to identify the segments in achosen field of activity, presenting excellent growth opportunities


6/27

ETOP


7/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Value Chain AnalysisIdentifying Resources and Capabilities That Can Add Value


8/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Operati

ons

Operations



9/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Operati

ons

Operations

Outbou

nd

Outbound

Logist

ics

Logist

ics



10/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Operati

ons

Operations

Outbou

nd

Outbound

Logistics

Logistics

Marketing

Market

ing

&

Sales

&

Sales



11/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbou

nd

Outbound

Logistics

Logistics

Marketing

Market

ing

&

Sales

&

Sales

Se

rvice

Se

rvice



12/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbou

nd

Outbound

Logistics

Logistics

Marketing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice

ProcurementProcurement



13/27

Support

Activities

Primary Activities

Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Marketing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice


Technological DevelopmentTechnological Development



14/27

Support

Activities

Primary Activities



Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Market

ing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice

Human Resource ManagementHuman Resource Management



15/27

Support

Activities

Primary Activities


Human Resource ManagementHuman Resource ManagementFirm InfrastructureFirm Infrastructure


Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Market

ing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice



16/27

Support

Activities

Primary Activities




Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Market

ing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice

MARG

IN

MARG

IN

MARGIN

MARG

IN


O t i


17/27

Support

Activities

Primary Activities

OutsourcingOutsourcing




Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Market

ing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice

MARG

IN

MARG

IN

MARGIN

MARG

IN

trategic Choice to Purchase Some Activities From Outside Supplier


18/27

Support

Activities

Primary Activities




Inbound

Inbound

Logist

ics

Logist

ics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Market

ing

Market

ing

&

Sales

&

Sal

es

Se

rvice

Se

rvice

MARG

IN

MARG

IN

InboundInbound

LogisticsLogistics

OperationsOperations

OutboundOutbound

LogisticsLogistics

ServiceService

MarketingMarketing

& Sales& Sales

TechnologicalTechnological

DevelopmentDevelopment

Human Resource ManagementHuman Resource Management


MARGIN

MARG

IN

Firms often purchase a portionportionof their value-creating activities

from specialty external suppliers

who can perform these functions

more efficientlymore efficiently

OutsourcingOutsourcingStrategic Choice to Purchase Some Activities From Outside Suppliers


19/27Primary Activities

Support

Activities

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

Inboun

d

Logistics

Operations

Outbou

nd

Logisti

cs

Marketing

&

Sales

Se

rvice

MAR

GIN

MAR

G

IN

Cost

Effective MIS

Systems

Relatively Few

Management Layersto Reduce Overhead

Simplified

Planning Practicesto Reduce

Planning Costs

Consistent Policies

to Reduce Turnover

Costs

Effective Training

Programs to Improve

Worker Efficiency and

Effectiveness

Highly Efficient

Systems to Link

Suppliers

Products with

the Firms

Production

Processes

Timing of Asset

Purchases

Efficient Plant

Scale to

Minimize

Manufacturing

Costs Selection of Low

Cost Transport

Carriers

Delivery

Schedule that

Reduces Costs

National

Scale

Advertising

Products Priced

to Generate

Sales Volume

Small, Highly

Trained Sales

Force

Effective Product

Installations to

Reduce

Frequency and

Severity

of Recalls

Easy-to-Use Manufacturing

Technologies

Investments in Technology in

order to Reduce Costs

Associated with Manufacturing

ProcessesSystems and Procedures to find

the Lowest Cost Products to

Purchase Raw Materials

Frequent Evaluation Processes

to Monitor Suppliers

Performances

Located in Close

Proximity with

Suppliers

Policy Choice of

Plant Technology

Organizational

Learning

Efficient Order

Sizes

Interrelationship

s with Sister

Units

Value Creating ActivitiesValue Creating Activities Common to aCommon to a

Cost LeadershipCost LeadershipBusiness Level StrategyBusiness Level Strategy


20/27

How to Obtain a Cost Advantage

1. Determine and Control Cost Drivers

2. Reconfigure the Value Chain as needed

Alter production process

Change in automation

New distribution channel

Direct sales in place ofindirect sales

New advertising media

New raw material

Backward integration

Forward integration

Change locationrelative to suppliers orbuyers


21/27

Core Competencies--Cautions and Reminders

Never take for granted that core competencies will

continue to provide a source of competitiveadvantage

All core competencies have the potential tobecome Core Rigidities

Core Rigidities are former core competencies thatsow the seeds of organizational inertia andprevent the firm from responding appropriately to

changes in the external environmentStrategic myopia and inflexibility can strangle thefirms ability to grow and adapt to environmentalchange or competitive threats

Competiti e


22/27

Resources

* Tangible

* Intangible

Capabilities

Teams ofResources

Sources of

CoreCompetencies

CompetitiveAdvantage

StrategicCompetitiveness

Above-AverageReturns

CompetitiveAdvantage

Gained throughCore Competencies

Discovering

Core

Competencies

Value

ChainAnalysis

Valuable

Rare

Costly to ImitateNonsubstitutable

*

*

** * Outsource

Criteria of

SustainableAdvantages

Discovering Core

Competencies


23/27

Concentration

Market Development

Product Development

Horizontal Integration

Vertical Integration

Tapered Integration

Quasi Integration

Diversification


24/27

Tapered integration is a combination of Vertical

integration and market exchange.

In addition to making a particular input in-house, a firm

also buys from outside.

Coke and Pepsi having their own bottling units and also

have contacts with outside bottlers.

Adv: at low costs. Use external sources as yardstick for

bench marking

Disadv: lack of economies of scale

difficult coordination & monitoring


25/27

Quasi Integration refers to the establishment of a

relationship between vertically related businesses

Can be long term contracts to full ownership Some of the forms are: Minority equity investment,

Loans or Loan guarantees, Pre-purchase credits,

exclusive dealing agreements, Cooperative R&D etc.,

Adv: Can achieve the benefits of vertical integration without

incurring all costs, can create greater interest

between the parties lowering unit costs and reducing the

risk of demand /supply interruptionsQuasi integration does not require full capital investment

for achieving integration


26/27

Qualitative Factors in the Strategy

Evaluation and Selection Process


Evaluation and Selection Process: This

process requires the decision makers to

constantly reassess the future, to find newcongruencies as they unfold, and to blend

the organizations resources into new

balances to meet the constantly changingconditions. Under this evaluation process,

the following factors need to be studied:


27/27


Evaluation and Selection Process

i. Managerial attitudes toward risk

ii. Environment of the organization

iii. Organizational culture and powerrelationships

iv. Competitive actions and reactions

v. Influence of previous organizationalstrategies

vi. Timing considerations

SM 3-Internal Analysis.ppt

Documents

Transcript of SM 3-Internal Analysis.ppt