assessing the internal environment of the firm

COMEROS, MARRYFLORJAPIN, YVONNELOZANO, SHERIE MAEMIRA, GRETCHENPLANAS, CLAIRE JOSEPHINE

ASSESSING THE INTERNAL

ENVIRONMENT OF THE FIRM

Objectives:The benefits and limitations of SWOT analysis in

conducting the internal analysis of the firm.The primary and support activities of the firm’s value

chainAdvantage of value chain within the firm and between

the firm and its customers and suppliers.The different type of tangible and intangible

resources, as well as organizational capabilities.The four criteria that a firms resources must posses

to maintain a sustainable advantage.The usefulness of financial ratio analysis as well as its

inherent limitations.How to make meaningful comparison of performance

across a firm.The value of recognizing how the interests of a

variety of stakeholders can be interrelated.

Importance of Internal Analysis

• To identify strengths to build on and weaknesses to overcome as they formulate strategies for competitive advantages..

• A method for assessing strengths and weaknesses divides the business into a number of linked of activities that may each produce value for the customer.

Value Chain

Value Chain

General administration

Procurement

Technology Development

Human Resource Management

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Primary Activities

Some Factors to consider in Assessing a Firm’s Primary

Activities

Inbound Logistics:Location of distribution facilities to minimize shipping times.

Excellent material and inventory control systems.

Systems to reduce time to send “returns” to supplier.

Warehouse layout and designs to increase efficiency of operations for incoming materials.

Operations:

Efficient plant operations to minimize costs.

Appropriate level of automation in manufacturing.

Quality production control systems to reduce costs and enhance quality.

Efficient plant layout and workflow design.

Outbound Logistics:Effective shipping processes to provide quick delivery and minimize damages.

Efficient finished goods warehousing processes.

Shipping of goods in large lot sizes to minimize transportation costs.

Quality material handling equipment to increase order picking.

Marketing and Sales:Highly motivated and competent sales force.

Innovative approaches to promotion and advertising.

Selection of most appropriate distribution channels.

Proper identification of customer segment s and needs.

Effective pricing strategies.

SERVICE:Effective use of procedures to solicit

customers feedback and to act on information.

Quick response to customer needs and emergencies.

Ability to furnish replacement parts and equipment inventory.

Quality of service personnel and ongoing training.

Appropriate warranty and guarantee policies.

ASSESSING A FIRM’S

SUPPORT ACTIVITIES

Procurement Refers to the function of purchasing inputs used in the firms value chain, not the purchased inputs themselves.

Technology Development The array of technologies employed in most firms is very broad, ranging from technologies used to prepare documents and transport goods to those embodied in processes and equipment or the product itself.

Human Resource

Consist of activities involved in the recruiting, hiring, training, development, and compensation of all types of the personnel.

General Administration Consists of number of activities, including general management, planning , finance, accounting, legal, government affairs, quality management, and information systems.

Resources-Based View

• Perspective on understanding a firm’s overall success as a based on its internal resources has emerged.

Resource-Based view of the Firm

Types of the Firm Resources:1. Tangible Resources2. Intangible Resources

3. Organizational Capabilities

Tangible ResourcesFinancial oFirms cash account and cash equivalentoFirm’s capacity to raise equityoFirms borrowing capacity

Physical oModern plant and facilitiesoFavorable manufacturing locationsoState-of -the-art machinery and

equipment

Intangible Resources

Human Experience and capabilities of employees Trust Managerial skills Firm specific practices and procedures

Innovation and Creativity Reputation Technical and scientific skills Innovation capacities Brand name Reputation with customers for quality and reliability Reputation with suppliers for fairness, non-zero-sum

relationships

Organization activitiesFirm competencies or skills the firm employs to transfer inputs to outputs.

Capacity to combine tangible and intangible resources, using organizational processes to attain desired end.

Is the resource or capability…. Implications

1.Valuable Neutralize threats and exploit opportunities

2.Rare Not many firms possess

3.Difficult to imitate Physically uniquePath dependency Causal ambiguitySocial complexity

4.Difficult to substitute No equivalent strategic resources or capabilities

Four criteria for Assessing Sustainability of Resources and Capabilities:

The Balances Scorecard

• Represents a series of cause and effect relationship in which success measured from one perspective contributes to success as measured from other perspective.

Integrating Financial Analysis and Stakeholder Perspective: The Balanced Scorecard

1. Customers Perspective

2. Internal Business Perspective

3. Innovation and Learning

Perspective

4. Financial Perspective