Chapter 4

Internal Scanning: Organizational Analysis

PowerPoint Slides Anthony F. Chelte Western New England College

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Chapter 4 Wheelen/Hunger

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.
Prentice Hall, 2002 Chapter 4 Wheelen/Hunger

Resource-Based Approach
Resource:

An asset, competency, process, skill, or knowledge controlled by the corporation.

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Evaluating Key Resources

VRIO Framework
Value: Does it provide competitive advantage? Rareness: Do other competitors possess it? Imitability: Is it costly for others to imitate?

Organization: Is the firm organized to exploit the resource?

Chapter 4 Wheelen/Hunger

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Resource-Based Approach
5-Step approach to strategy analysis: Identify & classify firms resources
Strengths & weaknesses

Combine firms strengths into capabilities

Core competencies Distinctive competencies

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Resource-Based Approach
5-Step approach to strategy analysis:
Profit potential of resources
Sustainable competitive advantage

Select strategy
Exploits firms resources relative to external opportunities

Identify resource gaps

Invest in upgrading weaknesses
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Sustainability of an Advantage
Durability:
Rate at which a firms underlying resources and capabilities (core competencies) depreciate or become obsolete.
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Sustainability of an Advantage
Imitability:
Rate at which a firms underlying resources and capabilities (core competencies) can be duplicated by others.
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Core Competencies
Imitability of core competencies determined by: Transparency Transferability Replicability
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Core Competencies
Explicit Knowledge:
Knowledge that can be easily articulated and communicated.

Tacit Knowledge:
Knowledge that is not easily communicated because it is deeply rooted in employee experience or in a corporations culture .
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Resource Sustainability

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Corporate Value Chain

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Corporate Value Chain Analysis

Examine each product lines value chain
Core competencies & core deficiencies

Examine the linkages within each product lines 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

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Basic Organizational Structures: Simple and Functional

I. Simple Structure

Owner-Manager

Workers

II. Functional Structure Top Management

Manufacturing

Sales

Finance

Personnel

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Basic Structures of Corporations: Divisional

III. Divisional Structure* Top Management

Product Division A

Product Division B

Manufacturing

Finance

Manufacturing

Finance

Sales

Personnel

Sales

Personnel

*Conglomerate structure is a variant of the division structure.

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Corporate Culture

Defined:
Collection of beliefs, expectations, and values learned and shared by a corporations members and transmitted from one generation of employees to another.

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Corporate Culture
Distinct Attributes
1. Cultural intensity
Degree to which members of a unit accept the norms, values, or other culture content associated with the unit.

2. Cultural integration
Extent to which units throughout an organization share a common culture.

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Corporate Culture
Important Functions
Sense of identity for employees Generate employee commitment Stability of organization Guide for appropriate behavior

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Strategic Marketing Issues

Market Position:
Who are our customers?

Market Segmentation:
Niches, new product development

Marketing Mix:
Combination of key variables under the corporations control used to affect demand and gain competitive advantage.
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Marketing Mix Variables

Product Quality Features Options Style Brand name Packaging Sizes Services Warranties Returns Place Channels Coverage Locations Inventory Transport Promotion Advertising Personal selling Sales promotion Publicity Price List price Discounts Allowances Payment periods Credit terms

Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 89. Copyright 1980. Reprinted by permission of Prentice-Hall, Inc.

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The Product Life Cycle

Introduction

Growth* Time

Maturity

Decline

*The right end of the Growth stage is often called Competitive Turbulence because of price and distribution competition that shakes out the weaker competitors. For further information, see C. R. Wasson, Dynamic Competitive Strategy and Product Life Cycles, 3rd ed. (Austin, Tex.: Austin Press, 1978).

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Strategic Financial Issues

Financial Leverage:
Ratio of total debt to total assets.

Capital Budgeting:
Analyzing and ranking possible investments in fixed assets.

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Strategic R&D Issues

R&D Intensity:
Spending on R&D as a percentage of sales revenue.

Technological Competence:
Development and use of innovative technology.

Technology Transfer:
Process of taking new technology from the lab to the marketplace.
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Technological Discontinuity
What the S-Curves Reveal

Product Performance

Mature Technology
New Technology

Research Effort/Expenditure
In the corporate planning process, it is generally assumed that incremental progress in technology will occur. But past developments in a given technology cannot be extrapolated into the future, because every technology has its limits. The key to competitiveness is to determine when to shift resources to a technology with more potential. Prentice Hall, 2002 Chapter 4 Wheelen/Hunger Source: P. Pascarella, Are You Investing in the Wrong Technology? Industry Week (July 25, 1983), p. 38. Copyright 1983 Penton/IPC. All rights reserved. Reprinted by permission.

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Strategic Operations Issues

Intermittent systems:
Manufacturing systems where items are normally processed sequentially but the work and sequence of the process vary.

Continuous systems:
Laid out as lines where products are continuously assembled or processed.
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Strategic HRM Issues

Teams
Autonomous (self-managing) Cross-functional Concurrent engineering

Unionization
13.9% of labor force overall 12% of private labor force

Temporary Workers
Increase flexibility; avoid layoffs
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Strategic HRM Issues

Quality of Worklife
Participative problem solving Restructuring work Innovative reward systems Improvements in work environment

Human Diversity
Different races, cultures and backgrounds in the workplace.
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Strategic Information Systems Issues

Automate back-office processes Automate individual tasks Enhance key business functions Develop competitive advantages

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Strategic Information Systems Issues

Intranet:
Information network within an organization that also has access to the external worldwide Internet.

Extranet:
Information network within an organization available to key suppliers and customers.
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Internal Factor Analysis Summary (IFAS)

Internal Factors Strengths 1

Weight 2

Rating 3

Weighted Score
4

Comments 5

Weaknesses

Total Weighted Score

1.00

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Internal Factor Analysis Summary (IFAS): Maytag as Example

Internal Factors Weight Strengths

Rating

Weighted Score

Comments

1 Quality Maytag culture Experienced top management Vertical integration Employee relations Hoovers international orientation

2
.15 .05 .10 .05 .15 5 4 4 3 3

3
.75 .20 .40 .15 .45

5
Quality key to success Know appliances Dedicated factories Good, but deteriorating Hoover name in cleaners

Weaknesses
Process-oriented R&D Distribution channels Financial position Global positioning

.05 .05 .15 .20

2 2 2 2

.10 .10 .30 .40

Manufacturing facilities

Total Weighted Score

.05

.20

Slow on new products Superstores replacing small dealers High debt load Hoover weak outside the United Kingdom and Australia Investing now

1.00
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Impact of the Internet

Virtual Teams:
Groups of geographically and/or organizationally dispersed coworkers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task.

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Impact of the Internet

Virtual Teams
Flatter organizational structures Turbulent environments Employee autonomy Higher knowledge requirements Globalization of trade
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