7 analysing the organisation handout

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Makerere University Business SchoolStrategic Management Course

ANALYSING THE ORGANISATION

INTRODUCTION The central challenge of using our managerial

competences to create particular/specific competitive advantage (s)-In terms of financial performance, individual departmental capabilities, appropriateness of our organizational structure, goal contract, customer value adding activities, identifying/anticipating performance gaps etc

You should examine the competence/incompetence of your functional areas / departments in relation to your competitors

Identify those critical strengths and weaknesses in each of these departments (functional analysis)

1)Financial Performance Analysis Basing on the financial ratios from the trend

analysis, has our financial standing improved or deteriorated over time? What is the financial health of our business?

Are we financially stronger compared to our rivals in the industry at this point in time? If so, can we continue maintaining this position? Key stakeholders need to be sure of this before deciding to/continuing to deal with.

You have to combine leverage, liquidity, activity, and profitability ratios in order reasonably establish your firm’s financial standing and performance

Continuation You can not fully rely on financial ratio analysis

because;

1. The analysis is based on past records which rarely consider the currently situation on ground

2. Different organizations use/follow different accounting standards and procedures even when using ISs (in determining materiality)

3. Bases on quantitive data ignoring qualitative data

4. The source documents may not be accurate hence giving a wrong picture

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2)Functional Area Analysis Key activities of the company’s function

areas have to be analyzed to identify those areas where we are performing well (strengths), and where we need to improve (weaknesses)

Barriers between departments should be avoided for synergy

Both resource &competence- related tangible and intangible factors should be considered

Marketing Department Responsible for identifying, anticipating,&

satisfying the right customer needs and expectations.

Market share (strength & competitiveness in the market), and size of our loyal customer/corporate account base?

Our marketing information systems’ efficiency &effectiveness?

Level of market research and development (in relation to customers, markets, & competitors)

Product/brand positioning & corporate image? Branding and packaging (are they unique and

preferred by our target customers?)

Customer service/care and customer loyalty programs? Doing it well-strength, Need to improve-weakness

Promotion effectiveness? Giving us competitive advantages-strengths, a competitive disadvantage to us-weakness

Appropriateness of our pricing strategies to our customers?

Appropriateness of our distribution channels?

Etc

Finance and AccountingResponsible for ensuring the financial soundness

Financial strengths and stability (financial ratios)?

Financial planning capabilities (strengths), incapability (weakness) ?

Finance & A/cing-continues We avoid some taxes without evading

taxes (strength), dealing mainly in taxable transactions (weakness)

We can raise additional capital when needed by appropriately balancing own vs debt sources (strength), if not (weakness)

Accuracy, Completeness, and Timeliness of financial statements/reports?

How good are our relationships with our stockholders?

Human Resource Dept. Responsible for attracting and maintaining the

right/competent (and compatible) human resources / employees and managers in the right positions, at the right time, for achieving organizational goals

Organization structure, climate, and culture give us a competitive advantage (strengths)-inappropriate to the company’s strategic direction (weakness)

We have qualified and experienced/competent staff who are compatible with our business (strengths), unqualified/inexperienced/incompatible staff who need training or to be transferred (weakness

Is the staff morale enough, sense of goal contract, and team work?

Stable workforce/is our labour turn over low?

Conti- Our staff are proud of working for our

organization-strength, if not-weakness Productivity of staff/our record for

achieving objectives compared to our rivals? Better-OPP, Poor-Weakness

Is there an ‘HR Strategic Fit’ ? ,i.e are our HR policies and programs compatible with our human capital? Core competence-OPP, No fit-Weakness

Production and operations Responsible for turning the product design/ideas/raw

materials into the right finished products (services) to be sold to our customers. Benchmark with WCM practices or even trend set.

Are we producing high quality products/operating at lower overall costs compared to our rivals?

How efficient and effective are our production processes, systems, and strategies?

Can we produce the required capacity to meet our customers’ demand (s)?

Strategic location and layout of facilities (the plant, offices, equipment, raw materials, information, etc)?

Plant and equipment maintenance (including its age)

Inventory control systems/relationship with our suppliers?

Quality control measures-are they customer oriented?

Do we have a high (weakness) or low level (strengths) of rejects?

Flexibility in operations-do we have alternatives like generators, a pool of casual staff, compatible staff, and alternative systems of production?

Are our lead times especially during peak periods? Delays-weakness, quick service-strength

TASK: Analyze the following; Procurement and supplies dept. Research and development Top management’s/CEO’s/General

Manager’s Department IT/Information systems department Other units in case of

product/customer-based/market/project organizational structures.

Etc.

Procurement & Supplies Dept Securing products and services at the right quality,

quantity, price, place, and from the right sources How high/low are our procurement costs (e.g. cost

per order or overall procurement costs)? What is / is our relationship with our core suppliers

improving? Are we effectively controlling our supply chain? Is our procurement documentation accurate enough

for auditing purposes? How much procurement bypasses the

department/is done out of contract/is there appropriate contract compliance?

Continuation If we are using e-procurement, how are those

ICTs interoperated/compatible with our other procurement systems?

After placing in a requisition, how long does it take to receive the goods?

Can the system used provide management with real-time visibility of the procurement activities?

Does the system ensure Corporate governance (transparency, accountability, disclosure, and trust)?

4)Value Chain Analysis1. What do our current and potential

customers value most?2. Are our primary and supportive value

chain activities creating customer value?3. Primary Value Chain Activities-in bound

logistics, production/operations, out bound logistics, marketing and sales, after sale service

4. Supportive Activities-Company infrastructure, HR management, procurement, value-adding technology

Some questions to answer How can we best provide that customer value at

reduced cost and make better profits?

Which activities are now core or non core in relation to creating better customer value?

Which ones are we known to have competence in/give us a competitive advantage (core competence)?

How can we strategically manage such activities either by ourselves or through well controlled out-sourcing to competent firms?

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Strategic Gap Analysis A futuristic strategic gap in performance

Involves some proactive control/management

If it is there, what new strategies do we need to correct this gap

Adjust the tactics or change the strategy in place?


Cont- The analysis is in stages1. Consider the past trend and project into the

future in relation to your goal/objective2. Why might the future trend be that way?,

with reasons adjust your projection3. What assumptions are we basing on , and

how do they affect our projection?4. If corrective action is taken, what do we now

predict?5. Consider other factors besides the initial one6. If there is a gap, when is it likely to occur ?


Key Success Factors Things your company must be

good/excel at in order to succeed in a given industry

Premising/bench marking with those best-in-class rivals helps you to identify them

They differ from one industry to another under different conditions

Different from Key Result Areas


Chief Executives Strategic level managers Strategic planning and policy formulation as

directed by the board of directors They also provide effective leadership , are

strategic information bearer, advisers to the board among other roles

Issues to analyze may among others include;1. Their responsiveness and adaptability2. Attitude to risk3. Generic skills and experiences ,etc