Analysis of internal environment

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Internal Analysis

 StrategicManagers must evaluate the

Internal Environment of the
organization.
 What is the process?
 Identifyand classify variables within an
organization as strengths or weaknesses.

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Purpose of Internal Analysis

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Understanding strengths and
weakness
 STRENGTH = factor that is better than:
 WEAKNESS = factor that is worse than:

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Approaches for scanning and analyzing
Internal Variables
 Functional Analysis
 Value Chain Analysis
 Core Competencies Analysis

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Functional
Analysis

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Management
1. General Management
2. Human Resource Management

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General Management Factors

 Structure of the organization

 Organizational Culture
 Record in Achieving Objectives
 Top management skills, capabilities, &
interests.
 Reputation of the Organization and Top
Management
 Social Responsibility record

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Human Resource Management

 Number of employees
 Unionization
 Employee skills and morale
 Quality of Work/Life Issues
 Recent downsizings
 Recognition/promotion/reward systems
 Training programs

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Operations (Manufacturing or
Service Firms)
 Quality Initiatives
 Quality certifications
 Policies and procedures for quality
 Six sigma quality = 3.4 manufacturing defects per
million items
 Location of facilities
 Outsourcing
 Flexible manufacturing
 Raw material costs and availability
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Operations - Continued
(Manufacturing or Service)
 Economies of scale
 decreasing fixed costs/ unit when producing more
 Percentage of cost of goods sold to sales

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Information Systems

 Chief Information Officer

 Hardware and software upgrades
 Internet page
 quality; features

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Research and Development

 Expenditures
 Over time
 In relation to competitors/industry
 Percentage of sales
 Product to market time
 Own labs/facilities or lease?

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Finance
 Financing decisions

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Value Chain
Analysis

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 Firm Infrastructure
general management,accounting finance
Support Human Resource Management
Activities recruiting, training, development
Technology Development
R&D, product and process improvement
Procurement

Margin
Profit
purchasing raw materials; machines, supplies
Inbound OperationsOutbound Marketing Service
Logistics machining Logistics and Sales instal-
raw matl assembling ware- advertising lation,
handling testing housing promotion repair,
ware- packaging distri- pricing replace-
housing bution channel ment
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PRIMARY ACTIVITIES
Core Competencies
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Three tests to identify core
competencies
 Provide potential access to a wide variety
of markets.
 Make a significant contribution to the
perceived customer benefits of the end
product.
 Are difficult to imitate.

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