II JAI SRIGURUDEV II

Sri Adichunchanagiri Shikshana Trust

SJB INSTITUTE OF TECHNOLOGY
BGS Health & Education City
Dr. Vishnuvardhana Road, Kengeri, Bengaluru - 560 060.

DEPARTMENT OF MBA

 STRATEGIC MANAGEMENT
20MBA25
II SEM MBA

MODULE-III
Internal Analysis

Prepared by : Dr Harshini C S

Designation : Associate Professor

CONTENTS
Internal Analysis
• Strategic Vision, Mission, Goals, Long Term
Objectives, Short-Term Objectives and their Value
to the Strategic Management Process
• Resources, Capabilities, Competencies
• Resource Based View of the firm (RBV)
• Balanced Score Card
• SWOC Analysis
• Value Chain Analysis
• Benchmarking.
 Vision and Mission statement
• Statement which defines current and future
directions for an organisation
• Mission statement defines company’s action
to reach its vision
Goals

• Help the company to build or achieve it’s

mission over a period of time.
• It helps in Setting priorities
• Allocating resources
• Budget allocations
• Capability requirements
• Align employee efforts
• Coordinate company activities
Objectives

• Sort of performance goal(launching new

product, increasing profitability, or to leverage
market share etc) a company tries to achieve.
They refer to the targets that can be easily
understood by everyone associated with it.
 Long Term Objectives, Short-Term Objectives

• Goals that take longer duration to achieve are

long term objectives and those which can be
accomplished in shorter duration or very soon
are short term objectives.
• Short term goals are simpler form of long term
goals. Short term goals are assumed to be
more realistic and have a higher possibility of
attainment.
 Goals Vs Objectives
• A goal is an achievable outcome that is
generally broad and longer term while an
objective is shorter term and defines
measurable actions to achieve an overall goal.
• For example, the goal to “provide excellent
customer service” is intangible, but the
objective to “reduce customer wait time to one
minute” is tangible and helps in achieving the
main goal.
 SWOT Analysis
Strengths
Internal strengths of an organization are:
• Distinctive competencies in key areas
• Manufacturing/ Service efficiency
• Skilled workforce
• Adequate financial resources and superior image and
reputation
• Economies of scale
• Superior technological skills
• Insulation from strong competitive pressures
• Product and service differentiation.
 SWOT Analysis
Weakness
• No clear strategic direction
• Outdated facilities
• Lack of innovation
• Poor research and developmental programs
• Lack of management vision, depth and skills.
• Inability to raise capital
• Weaker distribution network
• Obsolete technology
• Low employee morale
• Too narrow product line
• Poor market image
 Opportunities
• Strong Economy
• Possible new markets
• Emerging new Technologies
• Complacency among competing organisations
• Vertical or Horizontal integrations
• Expansion of product line to meet broader range
of customer needs
• Falling trade barriers in attractive foreign markets
 Challenges
• Entry of low cost foreign competitors cheaper
technology adopted by rivals
• Rising sales of substitute products
• Shortage of resources
• Changing buyers needs and preferences
• Recession in Economy
• Adverse shifts in trade policies of foreign
governments
Value of the Resources, Capabilities, Competencies to the Strategic
Management Process:

• Value of resources is indicated by the degree to

which they add value to the organisational
development.
• Capabilities refer to the ability of an organisation
to utilize its resources in an optimal way.
• By exploiting the resources companies try to
create value for its customers.
 Identifying competitively important
resources and capabilities
• A skilled specialized expertise
• Valuable physical assets
• Valuable human assets and intellectual capital
• Valuable organisational assets
• Valuable intangible assets
• Competitively valuable alliances or
cooperative ventures
Resource Based View of an Organization (RBV)
COMPETENCIES VS. CORE COMPETENCIES VS.
DISTINCTIVE COMPETENCIES

• A competence is the product of organizational

learning and experience and represents real
proficiency in performing an internal activity
• A core competence is a well-performed internal
activity central (not peripheral or incidental) to a
company’s competitiveness and profitability
• A distinctive competence is a competitively
valuable activity a company performs better than
its rivals
 The Balanced Scorecard

• The Balanced Scorecard analysis requires that firms

seek answers to the following questions
• 1. How well is the firm continually improving and
creating value along measures such as innovation,
technological leadership, product quality, operational
process efficiencies, and so on?
• 2. How well is the firm sustaining and even improving
upon its core competencies and competitive
advantages?
• 3. How satisfied are the firm’s customers?
Balanced Score Card
BSC is a Performance Management tool for
measuring whether the smaller-scale
operational activities of a company are
aligned with its larger-scale objectives in
terms of vision and strategy.
By focusing not only on financial outcomes
but also on the operational, marketing and
developmental inputs
 Why balanced scorecard

• Allows managers to look at the business from four

important perspectives.
• Provides a balanced picture of overall performance
highlighting activities that need to be improved.
• Combines both qualitative and quantitative measures.
• Relates assessment of performance to the choice of
strategy.
• Includes measures of efficiency and effectiveness.
• Assists business in clarifying their vision and
strategies and provides a means to translate these into
action.
Balanced Score Card
 The Balanced Scorecard

• The Balanced Scorecard is an important strategy-

evaluation tool. It is a process that allows firms to
evaluate strategies from four perspectives. Then
develop matrix, collect data and analyze it relative to
each of these perspectives:
• 1. Financial performance
• 2. Customer knowledge
• 3. Internal business processes
• 4. Learning and growth.
• 1. Financial performance/Perspective
Revenues
Expenses
Net Income
Cash flow
Asset Value
2. Customer knowledge/Perspective
Customer Satisfaction
Customer retention
Brand strength
Market share
• 3. Internal business processes/Perspective
Work completion rate
Work load and Employee utilization
Transactions per employee
Quality control
• 4. Learning and growth Perspective
Employee satisfaction
Employee retention and turnover
Training hours and resources
Technology investment
The Balanced Scorecard
 Value Chain Analysis

• Process of analysing those set of activities that

can add value at the input and output processes
of an organisation.
• It includes primary set of activities at the raw
material entry of the organisation.
• It includes those processes that indirectly make
an impact on the organisational functioning.
Value Chain Analysis
 BENCHMARKING
• It is process to compare an organisation’s
practises with those of Industry accepted
standards.
• The comparision might be with respect to
internal processes of it’s own system or of
competitors.
• Comparision is done through metrics.
 BENCHMARKING
• A continuous systematic process for evaluating the products,
services and work of organizations that are recognized as
representing best practices for the purpose of organizational
improvement – Spendolini, 1992.

• A continuous search for, and application of, significantly better

practices that lead to superior competitive performance- Watson,
1993.

• A disciplined process that begins with a thorough search to identify

best-practice organizations, continues with the careful study of
one‟s own practices and performance , progresses through
systematic site visits and interviews , and concludes with an
analysis of results, development of recommendations and
implementation – Gravin, 1993.
 Types of Benchmarking:
1. Internal and External Benchmarking
Comparing the tasks or processes in one’s own organisation,
helps to meet standards. External benchmarking is comparing
processes of an organisation with that of other organisations or
of competitors.
2. Competitive and performance (Funtional) benchmarking
A type of benchmarking where competitor’s success factors are
benchmarked. Benchmarking performance related practices
such as KPI is performance benchmarking
3. Strategic and practice Benchmarking
Competetor’s successful strategies are benchmarked and
practiced. Practice benchmarking helps in identifying the gaps
related to organisation’s performances.
4. Generic benchmarking
• It refers to comparisons, which focus on
excellent work processes rather than on the
business practices of a particular organization
(human resources are managed using “big data analytics”) .
5. Benchmarking Wheel:
 Application of benchmarking involves four key steps:

• i) Understand in detail existing business

processes.
• ii) Analyze the business processes of others
• iii) Compare own business performance with
that of others analyzed
• iv) Implement the steps necessary to close the
performance gap
 Advantages of Benchmarking
• Easy to understand and use.
• If done properly, it’s a low cost activity that offers
huge gains.
• Brings innovative ideas to the company.
• Provides you with insight of how other companies
organize their operations and processes.
• Increases the awareness of your costs and level of
performance compared to your rivals.
• Facilitates cooperation between teams, units and
divisions.
 Disadvantages of Benchmarking:
• You need to find a benchmarking partner.
• It is sometimes impossible to assign a metric to
measure a process.
• You might need to hire a consultant.
• If your organization is not experienced at it, the
initial costs could be huge.
• Managers often resist the changes that are
required to improve the performance.
• Some of best practices won’t be applicable to
your whole organization.