Internal Resources, Capabilities and competences

The position Audit, resources & limiting factor

Competences & critical success factors Outputs the product portfolio

The value chain

Internal Analysis

Organizational structure

Marketing and customer base

Internal Analysis for strengths and weaknesses

Definition

Critical Success Factors

Critical success factors(CSFs) are the performances and resources that confirms a competitive advantage to an organization over its rivals and change as per environment. CASE EXERCISE What are the critical success factors of some of the global companies

Internal Analysis for strengths and weaknesses

Critical Success Factors

A bias for action (do it, fix it and try it) Close to customers (Francis G v.p. IBM says many of the innovative ideas come from listening, intently and regularly to the customers) Autonomy and entrepreneurship Productivity through people (respect for the people) Hands on, value driven (IMB Watson & HP;s W. Hewlett walking the plant door) (McDonalds Ray Kroc concerns for QSC & V) Sticking to the knitting Never acquire a business you do not know to run Simple staff, lean staff Simultaneous Loose-tight properties Tom Peter and Waterman, In search of excellence

Internal Analysis for strengths and weaknesses

Successful American Companies

Hi-Technology Hewlett-packard(HP)Intel, and Texas Instruments (TI) Consumers goods Procter & Gamble (P&G),Johnson & Johsons General Industrial goods companies Caterpillar, Dana and 3M(Minnesota, Mining and manufacturing Service Industry Delta Airlines, Marriot, McDonalds and Disney Production Project Management Companies Bechtel and Fluor Resource based companies Atlantic-Richfield(Arco, Dow Chemical, and Exxon Walmart, ACCA (education), Earnest Young, British Airlines

Internal Analysis for strengths and weaknesses

Value Chain Analysis
Value chain satisfy the need of knowing the activities offering value addition or need improvement.
Porter emphasis on the need of consistency, effective linkage and better coordination between all activities that is divided into five primary and four

secondary.

Value Networks
Confirms the exchange of both tangible(political support includes goods, services or revenue) and intangible assets(trade favours include strategic information, planning knowledge, processes knowledge, tech help, collaborative designs etc.) and eliminate isolation of operations.

CASE What may be the benefits of V.N.

Internal Analysis for strengths and weaknesses

Value Networks

Benefits
Revenue profitability Return on investment Market Share Employees Development Number of products raised Cash flow stabilized

Internal Analysis for strengths and weaknesses

BENCHMARKING
The Best Practices to be adopted for the best performance

Internal Analysis for strengths and weaknesses

BENCHMARKING
Advantages
To keep up with the best advantage To enhance the efficiency & effectiveness To avoid reinvention of the wheel(bn.m exercise 4 quicker results As performance indicator to motivate managers or workers

Further
For planning and control For non financial control

Internal Analysis for strengths and weaknesses

BENCHMARKING
Problems
Do not always take into account the resources On achieving targets managers donot put their effort tp gat more we ignore expolioting different resources or linkages in value chain, out-sourcing etc

It bases on coping industry leaders rather doing better and innovative ways.

Internal Analysis for strengths and weaknesses

BENCHMARKING
it can be on two bases
The best way to design and run a field sales force (the optimum balance of salary and commission, the most appropriate way of designing and setting targets. the performance of the sales teams as it is currently managed in the light of other field sales forces, the content of the targets

Internal Analysis for strengths and weaknesses TYPES OF BENCHMARKING

Internal Benchmarking Functional Benchmarking Competitive Benchmarking Strategic Benchmarking

Internal Analysis for strengths and weaknesses

Benchmarking has seven stages

Setting of objectives Key performance Measures Selecting of ideal organization Comparison of both organization Design and implement of programs Monitor

Internal Analysis for strengths and weaknesses

Advantages
Position Audit Training of the managers in modern context Focuses on quality & quantity Information sharing for better decision

Internal Analysis for strengths and weaknesses

Problems
One best way of doing business Yesterdays solution to tomorrows problem A catching up exercise rather than development Invalidity of information

Internal Analysis for strengths and weaknesses

Conclusion of the environmental influence as opportunities and threats

Input for practical business strategy

Strategic gaps not exploited by competitors Potential substitute products technology New use of the existing products strategic groups through deregulation or technology break through Finding complementary products or services

For commercial organization FIVE FORCES coupled with Strategic groups analysis PESTEL

Internal Analysis for strengths and weaknesses

QCIS

Success
Strategic capabilities
Resources + competences Activities, processes and methodology

Tangible + Intengible
Physical assests / Non Physical assests Machinery, labour/ knowledge, brand reputation finance

Internal Resources, Capabilities and competences

Position Audit:
(a part of planning process) a review of physical and financial resources and systems.(products, brands and markets. Operating systems like production and distribution. Internal organization, current results and financial resources) Managers need to understand the internal resources and competences of an organisation to enable them to formulate and implement a strategy. In particular they need to know if they are adequate and suitable.

Internal Resources, Capabilities and competences

Position Audit: (a part of planning process) Resource Audit: discovers gaps and limiting
factors in organizational activities and includes:

material inputs- sources, supplies, waste,

new materials, cost, availability, future provision Human Resource- Number, skills wages, costs, efficiency, labor turnover, industrial relations Management- size, skills, loyalty, career programs, structure

Internal Resources, Capabilities and competences

Position Audit: (a part of planning process)
Fixed Assists- Age, condition, utilization rate, value, replacement, tech up to date Working capital- credit and turnover periods, cash surplus and deficient Finance- Short term and long term gearing levels Intangible assets- patents, goodwill, brands Organization- culture and structure Knowledge- Ability to generate and deliver ideas, innovation
RESOURCES ARE OF NO VALUE UNTILL THEY ARE ORGANISED INTO SYSTEM

Internal Resources, Capabilities and competences Position Audit: (a part of planning process)
Limiting Factors
Any activity or resource that may cause ineffective operation or damage spirit of competition is a limiting factors. less production capacity personnel distribution network poor finance managers or few poor system of strategic intelligence inadequate research lack of money trained staff

NOTE: identify and eliminate any of the factors to confirm better performance

Internal Resources, Capabilities and competences

This is the first stage whether adopting a resource based approach to strategy (ie find the environment that fits our capabilities) or a position based approach (ie finding the resources to meet the environment). Manpower: An analysis of human resources Money: An analysis of financial resources Machinery An analysis of operational resources Materials Purchasing and suppliers factors Markets Issues of marketing and distribution to the customers Management The corporate, tactical and operational stewardship of the company Methods Processes used to create outputs from inputs Make Up Organisational structure and culture Management Information Systems

Internal Resources, Capabilities and competences

Position Based STG (in a competitive
environment)

Value Chain: how value can be added to the business by effectively utilizing resources Competence: skill to have a fit between environment and organizations capability

Internal Resources, Capabilities and competences

TIPS Don't apply value chain analysis till you are asked to do so. 7S frame work can be used for internal analysis Both internal and external analysis can not be isolated

Internal Resources, Capabilities and competences

Threshold capabilities (minimum

required capabilitiese)like resources, competences to grab market share.

Capabilities for competitive Advantage

Uniqueness that benefits customers physical and psychological needs,

Internal Resources, Capabilities and competences

Coca-Cola
memorable advertisements, careful sponsorships, (diet light products)
superior skills in optics

Canon beat Xerox in photocopying machines based on

Marriot. Creating better activities in hotel industry Sony & Honda project and collective operations
Unique resources can not be imitated or obtained easily. These may be knowledge, cultures, integrations, designs and marketing skills, HR, Financial Analysis, etc

Internal Resources, Capabilities and competences

Resources
Money, management, manpower, manufacturing, markets, materials, brands and IS/IT.

Cost Efficiency
Cost efficiency depends on economies of scales, EXPERIENCE (learning curve), supply and production cost, product process and design.
Examples: Dell computers (inventory and production system General motors & Ford motors & Toyota

Internal Resources, Capabilities and competences

Cost efficiency
First movers advantage Out-Sourcing ILC (industrial life cycle)

Internal Resources, Capabilities and competences

How strategy, resources, capabilities and competences confirm profitability
resources

Distintive competences

Shape Strategies

Competitive Advantage

Superior Profitibility

capabilities

Internal Resources, Capabilities and competences

BJs Wholesale
Costoco

Walmart K-Mart

1996

1997

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2003

Internal Resources, Capabilities and competences

Sustaining Competitive Advantage

Customers based products and services Utilization of unique resources against competitors Capabilities must be hard to imitate Example: Dyson vacuum against Hoover and Philips Value:innovative, bag less, hi-tech styled Rarity: High amount spent on research and development Robustness: patented process to centrifuge dust into the collection containers.
CASE: Match for the above VRR to any of the world class product or services

Internal Resources, Capabilities and competences

Importance of innovation
It confirms strategic success as a result of hot competition and market volatility. Research & Development plays a vital role in the advancement of tech & services and helps in Customers satisfaction and competitive advantages Acquiring new Technology due to pull effects Amazon in selling books through CDs & web based approach got edge over other competitors.

Internal Resources, Capabilities and competences

Successful companies have the following features
Is outward looking, has accepted the reality of constant change
and reviews its product-market policy continuously.

Is always looking to the future towards new markets:

innovative products, better design, new processes, improved quality and increased productivity.

Welcome changes for the better: Stimulate creativity, and rewards ideas and support individuals
and team abilities.

Internal Resources, Capabilities and competences

Successful companies

resources
Superior Efficiency Quality Innovation Customer responsiveness Differentiation Value Creation Low Cost Superior Profitibility

Distintive competences

capabilities

Value chain
Porter says that competitive advantage is achieved by the way a firm organises and performs activities

A restaurant's activities can be divided into buying food, cooking it, and serving it. The ultimate value a firm creates is measured by the amount customers are willing to pay for its products or services above the cost of carrying out value activities. A firm is profitable if the realised value as perceived by customers exceeds the collective cost of performing the activities.

Internal Resources, Capabilities and competences

The restaurant has a number of choices as to how to create value. (a) Efficiency, by automating the production of food as in a fast food restaurant. (b) The chef can develop relationships with growers to obtain the best quality produce. (c) The chef can specialize in a particular type of cuisine (d) The restaurant can be sumptuously decorated and have highly trained staff for those customers who value 'atmosphere' and a sense of occasion, in addition to the restaurant's purely gastronomic pleasures.

Internal Resources, Capabilities and competences

Porter analysed the various activities of an organisation into a value chain.

Internal Resources, Capabilities and competences

Primary Activities: Design, creation and delivery of the products. R & D: Improving processes and products like online banking & smart credit and debit card. Now ATM, credit & debit cards. Production: high value at low cost. Honda & Toyota against G. motors. Marketing: crating value. Pfizers with zoloft. Customers Service: After sales service & support.Caterpiller parts delivfery within twenty four hours in all over the world.

Internal Resources, Capabilities and competences

Support Activities: Input to Design, creation and delivery of the products. Materials Management: Creating value in material managemt from input to output. Like walmart and DELL. HRM: high value through training & development, motivation and superior skills which can not be copied. Information System: I.T & I.S. usages for managing inventory, tracking sales and ultimate crating value. Cisco, IBM. Infrastructure: Control, Systems & culture.

Internal Resources, Capabilities and competences

Value system
A company's value chain is not bounded by a company's borders, its connected to what Porter describes as a value system.

Internal Resources, Capabilities and competences

Knowledge
Organisational knowledge is the collective and shared experience accumulated through systems, routines and activities of sharing across the organisation. As organisations become more complex and larger the need to share and pool what people know becomes more of a challenge but more important for sustainable competitive advantage. Information technology is beginning to provide systems for the capture of and management of knowledge.

Internal Resources, Capabilities and competences

Knowledge takes different forms (a) Explicit which is objective and codified and transmitted in formal ways (b) Tacit which is personal and context specific and is therefore hard to formalise and transmit. In order to be successful organisations must establish competencies in transmitting both types of knowledge.

Internal Resources, Capabilities To do this an organisation may seek to be a learning organisation that: (a) recognises the significance of peoples intuition (b) welcomes different/conflicting view; and (c) makes experimentation the norm Truly innovative companies are the ones that can modify and enlarge the knowledge of individuals to cause a spiral of interaction between tacit and explicit knowledge.and competences

Internal Resources, Capabilities and competences

Internal Resources, Capabilities and competences

Socialisation the informal process by which individuals share and transmit their tacit knowledge (eg coffee machine chat). Externalisation converts tacit knowledge into explicit knowledge (eg writing down Procedures and policies.

Internal Resources, Capabilities and competences

Internalisation the learning process by which individuals acquire explicit knowledge and turn it into their own tacit knowledge (eg accessing an intranet, attending briefings, reading news sheets, ). Combination brings together separate elements of explicit knowledge into larger, more coherent systems and little or no knowledge is tacit (eg knowledge management is active and effective and part of the organisations culture).