session 5 internal scanning: organizational analysis a search for strengths & weaknesses

Strategic Management

Searching for strengths & weaknesses

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Session 5Internal Scanning: Organizational AnalysisA search for strengths & weaknesses

ETS Field test signups

Write a S, W, O, of T for Dell 2003 on the board

One per studentMust be unique from others on the board

Three Approaches to internal scanning: organizational analysis

Strategic Management Searching for strengths & weaknesses

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Industry Competitors

Rivalry Among Existing Firms

Potential Entrants

Suppliers

Other Stakeholders

Buyers

Substitutes

Threat of SubstituteProducts or Services

Bargaining PowerOf Buyers

Threat of New Entrants

Relative Power of Unions, Government,Etc.

Bargaining PowerOf Suppliers

Industry Analysis (Porter)


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Identifying Opportunities and Threats using Porter’s industry analysis model

What opportunities & threats does relative power of Porter’s forces lead to?

Buyers power Suppliers power Other stakeholders

power Substitutes—alternative

ways to satisfy need Rivalry among existing

firms Potential new entrants

Opportunities

Threats

Wrapping up from last session


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Session 5:Internal Scanning: Organizational AnalysisA search for strengths & weaknesses

Development of Opportunities and Threats Environmental analysis Areas of concern

Issues and priorities O & T Industry analysis (Porter model) Areas of

concern O & T Development of Strengths & Weaknesses

Competencies and resource-based analysis S & W Value chain analysis S & W Scanning internal resources & capabilities S & W

Analyzing strategic factors Generating alternative strategies Selecting & implementing chosen strategy


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Competencies—a path to competitive advantage

Core competencies: things the organization can do exceedingly well

Distinctive competencies: core competencies that are superior to the competition

Sustainability of distinctive competencies depends on Durability Imitability: transparency, transferability, and

replicability


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Resource-based analysis Identify resources/capabilities in terms of strengths &

weaknesses Identify core competencies, things they can do very

well Identify distinctive competencies, things they do better

than competition (competitive edge) Assess sustainability:

durability imitability (transparency, transferability, replicability)

Identify capability/resource gaps Define strategies Define plans to address resource/capability gaps

Apply the resource-based approach to determine the firm’s competitive advantage.

Apply the resource-based approach to determine the firm’s competitive advantage.

What strengths and weaknesses are revealed by this analysis?

What strengths and weaknesses are revealed by this analysis?


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Value chains (external)

Industry value chain (Fig. 4.2)—show activity flow from raw materials to consumer

Corporate value chain—examines How inputs are converted to outputs Processes by which value is added

”Differences among competitor value chains are a key source of competitive advantage.” Porter


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Corporate value chain analysis (internal)

Examines internal operations to understand which parts add value Only value-adding parts contribute to

above average returns (profits) Seeks to identify multiple means to

implement chosen business strategy

See Nordstrom’s example


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Mar

gin

Margin

The corporate (internal) value chain

Primary Activities

Su

pp

ort

Act

ivit

ies

Procurement

Serv-ice

Technology Development

Human resource management

Firm infrastructure

InboundLogistics

Opera-tions

Out-bound

Logistics

Market-ingand

sales

Which cells are strong?

Which are weak?

Which offer competitive opportunities?

Which cells are strong?

Which are weak?

Which offer competitive opportunities?

What issues, strengths, and weaknesses are revealed by this analysis?

What issues, strengths, and weaknesses are revealed by this analysis?


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Functional strategy

The approach a function takes to support business strategy & achieve objectives

The path chosen to define and assure effectiveness of the function


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STRENGTHS – S WEAKNESSES - W

OPPORTUNITIES – O

SO STRATEGIES

WO STRATEGIES

THREATS - T

ST STRATEGIES WT STRATEGIES

Internal

External

SWOT analysis & Alternative Strategies

Word and PowerPoint versions of this form are available on Assignments and Forms web page

See description of each cell in H&W Figure 5.2


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Assignment for next time: Developing Strategic Alternatives Study

H&W Ch 5, Section 5.4 Business Strategies Readings in Vista on:

Netflix, Southwest Airlines, Dell 2003, Dell 2005, and Dell 2006 Value chain analysis

Illustrate the development of each strategy cell, e.g., SO, WO, ST, WT (Reference H&W, Fig 5.2). (TOWS forms are available from the course web site in Assignments and Forms section.) One entry per strategy cell is sufficient. a. State S and O b. State SO strategy that follows from the S and O c. Include results in a SWOT or TOWS slide

Repeat above steps for WO, ST, and WT. A different firm can be used for each, but be sure to identify the firm.

Submit a paper copy at the beginning of class. Be prepared to use the value chain model and distinctive

competency concepts to justify each strategy presented.


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Checklist for stating alternative strategies

Begin with an action verb--which helps us keep an present future focus

Build on intersecting internal/external forces

Apply learned concepts Assure strategy has value Consider if strategy is feasible and realistic Consider if strategy will give a good return

on resources required


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Analysis concepts Strategy: purpose, formulation vs. implementation & elements of each; generic types Strategic Management: process & sub tasks, strategic decision making, top

management’s role Hierarchy of strategy: corporate, business, functional Organizational effectiveness: goal, RB, IP, stakeholders Objectives vs. goals: criteria to distinguish; requirements of objectives Analyzing external environment: societal & task; how to do it, Porter model, Analyzing internal environment

Resource-based: core & distinctive competencies, elements of sustainability Value chain Scanning internal resources: structure, culture, functional capabilities

Strategic audit (appendix 11C) SWOT and building a TOWS matrix of alternative strategies Corporate strategy: directional (growth, stability, retrenchment), portfolio analysis,

parenting Functional strategies: outsourcing, marketing, finance, R&D, operations, HR, IT 3 tests of distinctive competency Financial performance and condition Implementing strategy: role of programs, budgets, procedures


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Generating strategic alternatives Analyze your

S W O T

To set strategies SO WO ST WT

S

STRENGTHS

W

WEAKNESSES

O

OPPORTU-NITIIES

SO

STRATEGIES

WO

STRATEGIES

T

THREATS

ST

STRATEGIES

WT

STRATEGIES

H&W Fig. 5.4 describes cell contents

session 5 internal scanning: organizational analysis a search for strengths & weaknesses

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