بسم الله الرحمن الرحيم
Strategic Management
Internal Analysis
Introduction
Coherence on in Strategic Direction
1. Company vision
• Massively inspiring
• What do we want to become
• Long-term
• Guidance and evokes passion
• Fundamental statement of the organization’s :
• Values
• Aspiration
• Goals
2. Mission statements :
• Purpose of the company
• Basis of competition and competitive advantages
• More specific than vision
• Focused on the means by which the firm will compete
3. Strategic objectives
• Operationalize the mission statement
• Provide guidance on how the organization can fulfill or move toward the “higher goals”
• More specific
• Cover a more well-defined time frame
• urable ,Specific ,Appropriate ,Realistic ,Timely ,Challenging , Meas Resolve conflicts that arise ,Yardstick for rewards and incentives .
Goals
Having stated a vision that is founded on customer-orientated definition of company’s business and having articulated some key values , the company can take the next step in formulation of mission statement-establish major goals . A goal is a desired future stat a company attempts to realize .
Goals Characteristics
1. Well-constructed goals are precise and measurable .
2. Well-constructed goals is that they address important issues .
3. Well-constructed goals is that they should be challenging but realistic .
4. Well-constructed goals is that , when appropriate , they should specify a time period in which they should be achieved .
Long-Term Goals
§ To guard against the dangers of short-run behavior , managers need to ensure that they adopt goals whose attainment will increase the long-run performance and competitiveness of their enterprise .
§ Long-term goals are related to such issues as customer satisfaction , employee productivity and efficiency , product quality , and innovation .
§ The thinking is that in order to attain such goals , companies have to make long-term investments in plant , equipment , R&D , people , and processes .
The Three Basic Resources :
• Tangible assets
• Intangible assets
• Organizational capabilities : Involve skills – ability to combine assets, people, and processes – used to transform inputs into outputs
Types of Resources :
- Tangible Resources : Relatively easy to identify, and include physical and financial assets used to create value for customers :
• Financial resources .
• Physical resources .
• Technological resources .
• Organizational resources .
2. Intangible Resources : Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time :
• Human .
• Innovation and creativity .
• Reputation .
3. Organizational Capabilities : Competencies or skills that a firm employs to transform inputs to outputs, and capacity to combine tangible and intangible resources to attain desired end .
Resource Imitation :
• Easy to imitate . Cash, commodities.
• Difficult to imitate . Brand loyalty, employee satisfaction, reputation for fairness
• Cannot be imitated . Patents, unique locations, unique assets
Resources and Capabilities
• As we know, company resources can be divided into tangible and intangible resources .
• To give rise to distinctive competency, a company’s resources must be unique and valuable .
• A unique resource is one that no other company has .
• Capabilities refer to a company’s skills at coordinating its resources and putting them to productive use . These skills reside in an organization’s routines, that is, in the way a company makes decisions and manages its internal processes in order to achieve organizational objectives.
Using the RBV in Internal Analysis , It is helpful to :
• Disaggregate resources – break them down into more specific competencies rather than use broad categories
• Utilize a functional perspective in disaggregating tangible and intangible assets and organizational capabilities
• Look at organizational processes and combinations of resources, not only at isolated assets or capabilities
• Use the value chain approach to uncover potentially valuable capabilities, activities, and processes
SWOT Analysis
A traditional approach to internal analysis :
• SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm.
• SWOT analysis is a historically popular technique through which managers create a quick overview of a company’s strategic situation.
SWOT Analysis based on assumption an effective strategy derives from a harmony “ fit ” between a firm’s internal resources and its external situation .
1. Strengths . A resource advantage relative to competitors and the needs of markets firm serves .
2. Weaknesses . A limitation or deficiency in one or more resources or competencies relative to competitors .
3. Opportunities . A major favorable situation in a firm’s environment .
4. Threats . A major unfavorable situation in a firm’s environment .
What is a Value Chain : The term value chain describes a way of looking at a business as a chain of activities that transform inputs into outputs that customers value . The process of transforming inputs into outputs is composed of number of primary activities and support activities , each activity adds value to the product .
Primary Activities
1. Inbound Logistics . Associated with receiving, storing and distributing inputs to the product :
– Location of distribution facilities
– Material and inventory control systems
– Systems to reduce time to send “returns” to suppliers
– Warehouse layout and designs
2. Operations . Associated with transforming inputs into the final product form :
– Efficient product operations
– Appropriate level of automation in manufacturing
– Efficient product layout and workflow design
3. Outbound Logistics . Associated with collecting, storing, and distributing the product or service to buyers :
– Effective shipping processes
– Efficient finished goods warehousing processes
– Shipping of goods in large lot sizes
– Quality material handling equipment
4. Marketing and Sales . Associated with purchases of products and services by end users and the inducements used to get them to make purchases :
– Highly motivated and competent sales force
– Innovative approaches to promotion and advertising
– Selection of most appropriate distribution channels
– Proper identification of customer segments and needs
– Effective pricing strategies
5. Service . Associated with providing service to enhance or maintain the value of the product :
– Effective use of procedures to solicit customer feedback and to act on information
– Quick response to customer needs and emergencies
– Ability to furnish replacement parts
– Effective management of parts and equipment inventory
– Quality of service personnel and ongoing training
– Warranty and guarantee policies
Support Activities
1. General Administration . Typically supports the entire value chain and not individual activities :
– Effective planning systems
– Ability of top management to anticipate and act on key environmental trends and events
– Ability to obtain low-cost funds for capital expenditures and working capital
– Excellent relationships with diverse stakeholder groups
– Ability to coordinate and integrate activities across the value chain
– Highly visible to maintain organizational culture, reputation, and values
2. Human Resource Management . Activities involved in the recruiting, training, development, and compensation of all types of personnel :
– Effective recruiting, development, and retention mechanisms for employees
– Quality relations with trade unions
– Quality work environment to maximize overall employee performance and minimize absenteeism
– Reward and incentive programs to motivate all employees
3. Technology Development . Related to a wide range of activities and those embodied in processes and equipment and the product itself :
– Effective R&D activities for process and product initiatives
– Positive collaborative relationships between R&D and other departments
– Culture to enhance creativity and innovation
– Excellent professional qualifications of personnel
– Ability to meet critical deadlines
4. Procurement . Function of purchasing inputs used in the firm’s value chain :
– Procurement of raw material inputs
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