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4-1 Strategic Analysis 3 Chapter MANDEEP KAUR HARSHIL SHAH MONISH SHAH

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  • 1. Chapter 3 Strategic Analysis MANDEEP KAURHARSHIL SHAHMONISH SHAH 4-1

2. Chapter Roadmap Analysing Companys Resources &Competitive Position Core Competencies & DistinctiveCompetitiveness Organisational Capability Profile Strategic Advantage Profile4-2 3. Strategic Management Strategic Management is the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives. Elements of Strategic Management: Strategic Analysis Strategic Choice Strategic Implementation Strategic Analysis is the investigation of the objective factors being considered in the process of strategic choice.StrategicStrategic StrategicAnalysis Choice ImplementationEvaluation Process 4-3 4. PYRAMID OF STRATEGY STRATEGY PLANSPROGRAMMES PROJECTSBUDGET Policies, Procedures, Rules, Regulations, etc4-4 5. Approaches to Assess How Wellthe Present Strategy Is Working Qualitative assessment Quantitative assessment What is the strategy? What are the results? Completeness Is company achieving itsfinancial and strategic Internal consistencyobjectives? Rationale Is company an above-average industry Relevance performer? 4-5 6. Key Indicators of How Well the Strategy Is Working Trend in sales and market share Acquiring and/or retaining customers Trend in profit margins Trend in net profits, ROI Overall financial strength and credit ranking Efforts at continuous improvement activities Trend in stock price and stockholder value Image and reputation with customers Leadership role(s) Technology, quality, e-commerce, innovation, etc. 4-6 7. Analysing Companys Resources &Competitive Position S W O T represents the first letter inS trengthsW eaknessesO pportunitiesT hreats For a companys strategy to be well-conceived, it must be Matched toits resource strengths and weaknesses Aimedat capturing its best market opportunities and erecting defenses against external threats to its well-being4-7 8. Identifying Resource Strengthsand Competitive Capabilities A strength is something a firm does well or an attribute thatenhances its competitiveness Valuable competencies or know-how Valuable physical assets Valuable human assets Valuable organizational assets Valuable intangible assets Important competitive capabilities An attribute that places a company in a position of market advantage Alliances or cooperative ventures with partners 4-8 9. Identifying Resource Weaknessesand Competitive Deficiencies A weakness is something a firm lacks, does poorly, or acondition placing it at a disadvantage Resource weaknesses relate to Inferior or unproven skills, expertise, or intellectual capital Lack of important physical, organizational, or intangible assets Missing capabilities in key areas Resource weaknesses and deficiencies are competitive liabilities! 4-9 10. Identifying a Companys Market Opportunities Opportunities most relevant to a company are thoseoffering: Good match with its financial and organizational resource capabilities Best prospects for profitable & long-term growth Potential for competitive advantage 4-10 11. Identifying External Threats Emergence of cheaper/better technologies Introduction of better products by rivals Entry of lower-cost foreign competitors Onerous regulations Rise in interest rates Potential of a hostile takeover Unfavorable demographic shifts Adverse shifts in foreign exchange rates Political upheaval in a country 4-11 12. Role of SWOT Analysis inCrafting a Better Strategy The most important part of S W O T analysis is notdeveloping the 4 lists of strengths, weaknesses,opportunities, and threats, but rather Usingthe 4 lists to draw conclusions about a companys overall situation and Acting on the conclusions to Better match a companys strategy to its resource strengths and market opportunities, Correct the important weaknesses, and Defend against external threats4-12 13. Competencies vs. Core Competencies vs. Distinctive Competencies A competence is the product of organizational learningand experience and represents real proficiency inperforming an internal activityA corecompetence isawell-performedinternal activity central (not peripheral or incidental)to a companys competitiveness and profitability A distinctive competence is a competitively valuableactivity a company performs better than its rivals4-13 14. Core Competencies -- AValuable Company Resource A competence becomes a core competence when thewell-performed activity is central to a companyscompetitiveness and profitability Often, a core competence results from collaborationamong different parts of a company Typically, core competencies reside in a companyspeople, not in assets on a balance sheet A core competence gives a company a potentiallyvaluable competitive capability and represents a definitecompetitive asset 4-14 15. Examples: Core Competencies Know-how in creating operating systems for costefficient supply chain management Speeding new/next-generation products to market Better after-sale service capability Skills in manufacturing a high quality product System to fill customer orders accurately and swiftly 4-15 16. Distinctive Competence -- A Competitively Superior Resource Its a specific ability possessed by a particularorganization exclusively, or in a relatively large measure A distinctive competence is a competitively significantactivity that a company performs better than itscompetitors A distinctive competence Represents a competitively valuable capability rivals do not have Presents attractive potential for being a cornerstone of strategy Canprovide a competitive edge in the marketplace 4-16because it represents a competitively superior resource 17. Examples: Distinctive Competencies Sharp Corporation Expertise in flat-panel display technology Toyota and Honda Low-cost, high-quality manufacturing capability and short design-to-market cycles Intel Abilityto design and manufacture ever more powerful microprocessors for PCs Wal-Mart Low-cost distribution and use of state-of-the-art retail technology 4-17 18. Determining the Competitive Value of a Company Resource To qualify as competitively valuable or to be the basis forsustainable competitive advantage, a resource mustpass 3 tests:1. Should provide access to potential market.2. Should contribute to the customer benefits of the endproduct.3. Should be difficult for the rivals to imitate. 4-18 19. Organisational Capability Profile Organisational capability means the potential of the company to use its strengths & to overcome its weaknesses with a view to avail the opportunities provided & face the threats posed by its external enviornment. Organisational Capability Profile includes 3 factors: 4-19 20. General Management Factors Itis concerned with the accomplishment oforganisational objectives by utilising physical, financial& human resources. A Manager performs 5 basic functions: 4-20 21. PlanningSuitable Organisational structureOptimum RightLevels ofPeople in ControlRightEffective Places PlanningEffectiveEffectiveMethods of LeadershipMotivation4-21 22. Organising Means to an end. It is essential to carry out pre-determined course of action Organising includes: Giving a structure to a task Authority Responsibility Relationship. Co-ordination Control Pressure to complete the desired objectives. Organising is a medium to complete tasks as per priority 4-22 23. Directing Itinvolves efforts directed towards achievingorganisational goals The basic function of management is: Motivating Commanding Leading Activating It deals with inducing the willingness & cooperation ofemployees towards attaining the objectives It also enables a sense of coordination of activities4-23 24. Staffing Centered around human resource management. It includes: Job Design & Analysis HR Planning Recruitment & Selection Training & Development Performance Appraisal & Compensation Union Mgmt & Grievance Handling Maintaining records It is one of the most complicated task to handle.4-24 25. Controlling It includes all activities that are undertaken to ensure theactual performance confirm to the planned performance The controlling activities include: Establish performance standards Measure actual performance Compare actual performance to planned standardsTake corrective action 4-25 26. Functional ManagementFactors Functional competence refers to the strengths of theorganisation in the functional areas of management viz; 4-26 27. Marketing ManagementCustomerAnalysis Social Responsibili Buying ty Opportunity Selling AnalysisProduct & Marketing Service ResearchPlanningPrice Distribution Planning 4-27 28. Contd Marketing System Audit Marketing Intelligence system Market & Sales Forecast Marketing Cost Marketing Productivity Audit Profitability Cost Reduction Marketing Function Audit Product line & offerings Distribution Pricing 4-28 29. Financial Management Investment Financing DecisionDecisionDividend Decision 4-29 30. Contd Financial Checklist Liquidity Activity(Turnover) Profitability Growth 4-30 31. Production & OperationManagement Managing the resources required to produce the productsor render services provided by the organisation. It reflects: Product Design Product Cost Production Efficiencies Production Process Inventory Work Force Product Quality 4-31 32. Human Resource Management It is said that, the difference between two organisations in term of competencies is due to the difference in the capabilities of their Human Resources. Human Resource Department HRHumanIndustrialEmploymentCompensation DevelopmentRelations Relations 4-32 33. Research & Development It is concerned with: creationof knowledge; design of goods & services; & the operation of production process Survival & Development 4-33 34. Value Chain Analysis It separates the activities of the firm into a sequentialchain. Michael Porters representation of the value chaindistinguishes between: PrimaryActivities (those involved with the transformation of inputs and interface with the customer) Support Activities (those involved with other activities which support the primary function of the organisation) 4-34 35. Support ActivitiesFIRMS INFRASTRUCTUREHUMAN RESOURCE MANAGEMENTTECHNOLOGY DEVELOPMENT PROFIT MARGIN PROCUREMENT I LO O L M SN OP U O A E E RB GT G R R KO IA B I E VU ST O S T IN TI U T I CD IO N I N E N D C GC Primary Activities 4-35 36. Strategic Advantage ProfileStrategic Advantage Organisational CapabilityCompetenciesSynergistic EffectsStrengths & WeaknessesOrganisational Resources + Organisational Behaviour 4-36 37. Strategic Advantage It is the outcome of organizational capabilities The rewards are in terms of financial parameters (eg. Profit, shareholder value) or in terms on non-financial parameters (eg. Market share, goodwill) 4-37 38. 4-38