CHAPTER 4

INTERNAL SCANNING:
ORGANIZATIONAL ANALYSIS

Environmental
Scanning
External
Societal
Environment
General forces
Task
Environment
Industry analysis
Internal
Structure
Chain of command
Culture
Beliefs,
expectations,
values
Resources
Assets, skills
competencies,
knowledge

Strategy
Formulation
Mission
Reason for
existence
Objectives
What results
to accomplish
Strategies
by when
Plan to
achieve the
mission &
objectives

Strategy
Implementation

Evaluation
and control

Policies
Broad
guidelines for
decision
making

Programs
Activities
needed to
accomplish Budgets
a plan
Cost of the Procedures
programs
Sequence
of steps
needed to
do the job

Feedback/Learning

Performance

Actual
results

4.1 A Resource-Based Approach to Organizational

analysis

Using resources to Gain Competitive Advantage

1. Identify and classify the firms resources in terms of strengths
and weaknesses
2. Combine the firms strengths into specific capabilities.
3. Appraise the point potential of these resources and capabilities
in terms of their potential of for sustainable competitive
advantage and the ability to harvest the profits resulting from
the use of these resources and capabilities.
4. Select the strategy that best exploits the firms resources and
capabilities relative to external opportunities.
5. Identify resource gaps and invest in upgrading weaknesses.

Determining the sustainability of an advantage

Durability is the rate at which a firms underlying resources and

capabilities and (core competencies) depreciate or become
obsolete.
Imitability is the rate at which a firms underlying resources and
capabilities (core competencies) can be duplicated by others.
Transparency, the speed with which other firms can understand the
relationship of resources and capabilities supporting a successful
firms strategy.
Transferability, the ability of competitors to gather the resources and
capabilities necessary to support a competitive challenge.
Replicability, the ability of competitors to use duplicated resources
and capabilities to imitate the other firms success.

Level of Resource Sustainability

High
(Hard to
Imitate)

Slow-cycle
Resources
Strongly shielded
Patents, brand name
Gillette: Sensor razor

Low

Standard-Cycle
Standardized mass
production
Economies of scale
complicated
processes
Chrysler: Mini-van

Figure. Continuum of Resource sustainability

Fast-Cycle
Resources

(Easy to
Imitate)

Easily duplicated
Idea driven
Sony: Walkman

4.2 Value-Chain Analysis

Raw
Materials

Primary
Manufacturing

Fabrication

Product
Producer

Distribution

Retailer

Figure. Typical value chain for a manufactured product

Industry value-chain analysis

Corporate value0chain analysis

Next

Firm Infrastructure
(general management, accounting, finance, strategic planning)

Support
Activities

Human Resource Management

(recruiting, training, development)
Technology Development
(R&D, product and process improvement)

Profit
Margin

Procurement
(purchasing of raw materials, ,machines, supplies)
Inbound
Logistics (raw
materials
handling and
warehousing)

Operations
(machining,
assembling,
testing)

Outbound
Logistics
(warehousing
and distribution
of finished
product)

Marketing
and sales
(advertising,
promotion,
pricing,
channel
relations)

Primary Activities
Figure. A Corporations value chain

Service
(installation,
repair,
parts)

4.3 Scanning function resources

Basic Organizational Structures
I. Simple Structure
Owner-Manager
Workers

II. Functional Structure

Top Management

Manufacturing

Sales

Finance

Personnel

Next

IIII. Divisional Structure

Top Management

Product Division A

Manufacturing

Product Division B

Finance

Sales

Personnel

Manufacturing

Finance

Sales

Personnel

Next

 Simple structure has no functional or product categories and is

appropriate for a small, entrepreneur-dominated company with one or
two product lines that operates in a reasonably small, easily
identifiable market niche.
Functional structure is appropriate for a medium-sized firm with
several product lines in one industry.
Divisional structure is appropriate for a large corporation with many
product lines in several related industries.
Strategic business units (SBUs) are a recent modification to the
divisional structure.
Conglomerate structure is appropriate for a large corporation with
many product lines in several unrelated industries.

 Corporate Culture: The Company Way

Corporate culture is the collection of beliefs, expectations, and
values learned and shared bay a corporation's members and
transmitted from one generation of employees to another.
Cultural intensity is the degree to which members of a unit accept
the norms, values, or other culture content associated with the
unit.
Cultural integration is the extent to which units throughout an
organization share a common culture.

Strategic Marketing Issues

Market position and segmentation
Marketing Mix
Product Life Cycle

Strategic Financial Issues

Financial leverage
The concept of financial leverage (the ratio of total debt to total assets) is helpful in
describing how debt is used to increase the earnings available to common shareholders.
Capital Budgeting
Capital budgeting is the analyzing and ranking of possible investments in fixed assets such
as land, buildings, and equipment in terms of the additional outlays and additional receipts
that will result from each investment.

Strategic research and development 9R7D) issues

The R&D manager is responsible for suggesting and implementing a companys technological
strategy in light of its corporate objectives and policies. The managers to use within the
therefore, involves (1) choosing among alternative new technologies to use within the
corporation, (2) developing methods of embodying the new technology in new products and
processes, and (3) deploying resources so that the new technology can be successfully
implemented.

Strategic operations issues

Strategic human resource (HMR) Issues

Experience curve
Flexible manufacturing for mass customization

Use of teams
Union relations and temporary workers
Quality of work life and human diversity

Strategic information systems issues

4.4 The strategic audit: a checklist for organizational analysis

4.5 Synthesis of internal factors
4.6 Global issues for the 21st Century

The 21st century global society feature in this chapter illustrated.

As more and more industries become hypercompetitive

Expect an increasing number of corporations to contract various functions

Although the SBU structure has become widespread in most large corporations around the world.

Expect corporate culture and human resources to increase in importance in hypercompetitive global industries.

Autonomous work teams should lead nor only to gather efficiency through a reduction of supervisors.