Lecture 04

The Internal Assessment

Assessing Strengths and Weaknesses

External and Internal Analyses

Environment

Technological
General

Po
lit
ica
En
l/
v ir
Le
on
ga
m
l
en
t

ra
ph
i

og

De

Ge
n

al
t
ob
en
Gl
m
on

vir
En

Competitor
Environment

l
ra
ne
ic
Ge
m
no

Industry
Environment

o
Ec

er
a

Sociocultural

By studying the external

environment, firms identify
what they might choose to
do

Opportunities and
threats

External and Internal

Analyses
By studying the internal
environment, firms identify
what they can do

Unique resources,
capabilities, and core
competencies
The Firm

(sustainable
competitive
advantage)

Why Do an Internal Analysis?

Enables a firm to identify its strengths and

weaknesses.

Enables a firm to make good strategic

decisions.

Information from internal environment

provides basis for developing strategic
alternatives.

Challenge of Internal Analysis

How do we effectively manage current core

competencies while simultaneously

developing new ones?
How do we assemble bundles of resources,
capabilities and core competencies to create
value for customers?
How do we learn to change rapidly?

Key Internal Forces

Functional Business Areas:
Vary by organization
Divisions have differing strengths & weaknesses

Distinctive Competencies:
Firms strengths that cannot be easily matched or
imitated by competitors
Building competitive advantage involves taking
advantage of distinctive competencies

Internal Audit

Parallels process of
external audit
Key to Organizational
Success

Information from:
Management

Marketing
Finance/accounting

Production/operations

Research & Development

Management information
Systems
Ch 4 -7

Involvement in performing an
internal strategicmanagement audit provides
vehicle for understanding
nature and effect of decisions
in other functional business
areas of the firm
Coordination & understanding
among managers from all
functional areas
Functional Relationships
Financial Ratio Analysis

Resource Based View (RBV)

Approach to Competitive
Advantage
Internal resources are more
important than external factors
Three All-Encompassing Categories

1. Physical resources: plant,

equipment, location, tech, raw
materials, machines

Not easily
substitutable

2. Human resources : employees,

training, experience,
intelligence, knowledge, skills,
abilities
3. Organizational resources :
structure, planning process,
information system, patents,
trademarks, copyrights,
database,
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Empirical Indicators

Rare
Hard to imitate

Integrating Strategy & Culture

Organizational Culture

Pattern of behavior
developed by an
organization as it
learns to cope with
its problem of
external adaptation
and internal
integration . . . is
considered valid
and taught to new
members

Organizational Culture
Can Inhibit Strategic
Management

Miss external changes

due to strongly held
beliefs
Natural tendency to
hold the course
even during times of
strategic change

Integrating Strategy & Culture

Values
Beliefs

Legends

Heroes

Symbols

10

Cultural
Products

Myths

Rites

Rituals

11

Management
Function
Planning

Stage When Most

Important
Strategy Formulation

Organizin
g

Strategy
Implementation

Motivatin
g

Strategy
Implementation

Staffing

Strategy
Implementation

Controllin
g
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Strategy Evaluation

Management
Forecasting
Establishing objectives
Planning

Devising strategies
Developing policies
Setting goals

Ch 4-13

Management

Organizing

Organizational design
Job specialization
Job descriptions
Job specifications
Span of control
Unity of command
Coordination
Job design
Job analysis

Ch 4-14

Management

Motivating

Leadership
Communication
Work groups
Job enrichment
Job satisfaction
Needs fulfillment
Organizational change
Morale

Ch 4-15

Management

Staffing

Wage & salary admin.

Employee benefits
Interviewing
Hiring
Discharging
Training
Management
development
Affirmative action
EEO
Labor relations

Ch 4-16

Management

Controlling

Quality
Financial
Sales
Inventory
Expense
Analysis of variance
Rewards
Sanctions

Ch 4-17

Marketing
Customer Needs/Wants for
Products/Services
1. Defining

2. Anticipating
3. Creating
4. Fulfilling

Ch 4-18

Marketing
Marketing Functions
1. Customer analysis
2. Selling products/services
3. Product & service planning
4. Pricing
5. Distribution
6. Marketing research
7. Opportunity analysis

Ch 4-19

Marketing
Customer surveys
Consumer information
Customer
Analysis

Market positioning
strategies
Customer profiles
Market segmentation
strategies

Ch 4-20

Marketing

Selling
Products/Service
s

Advertising
Sales
Promotion
Publicity
Sales force
management
Customer relations
Dealer relations

Ch 4-21

Marketing

Planning
Product/Service

Test marketing
Brand positioning
Devising warrantees
Packaging
Product
features/options
Product style
Quality

Ch 4-22

Marketing

Pricing

Forward integration
Discounts
Credit terms
Condition of sale
Markups
Costs
Unit pricing

Ch 4-23

Marketing

Distribution

Warehousing
Channels
Coverage
Retail site locations
Sales territories
Inventory levels
Transportation

Ch 4-24

Marketing

Marketing
Research

Data collection
Data input
Data analysis
Support business
functions

Ch 4-25

Marketing

Assessing costs
Assessing benefits
Opportunity
Analysis

Assessing risks
Cost/benefit/risk
analysis

Ch 4-26

Finance/Accounting
Finance/Accounting Functions
Does the firm have sufficient
working capital?
Are capital budgeting
procedures effective?
Are dividend payout policies
reasonable?
Are the firms financial
managers experienced & well
1. Investment decision (Capital
trained?
budgeting)
2. Financing decision
3. Dividend decision

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Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
Workforce
Quality

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Research & Development

Research & Development
Functions
Development of new products
before competitors
Improving product quality
Improving manufacturing
processes to reduce costs

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Management Information
Systems

Information Systems
CIO/CTO
Security
User-friendly
E-commerce

30

(1) Value Chain Analysis

Value Chain Analysis

Customers want (demand) some type of value from

the goods and services they purchase or obtain
Customer value arises from
(1) Uniqueness of product or service
(2) Low-priced product/service
(3) Quick response to specific or distinctive customer needs

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Allow assessment of cost competitiveness of

organization with those of its rivals

The Value Chain

The value chain identifies the separate
activities and business processes
performed to design, produce, market,
deliver, and support a product/service and
how well they create customer value.
Consists of two types of activities

Primary activities : create customer value

Support activities: Support primary activities

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Inbound logistics, Operations; Outboard logistics; Sales &

Marketing; & Customer Service
Procurement; Technological development; HRM; General
Administration (Firm infrastructure)