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STRATEGIC CAPABILITIES(Lec:3)
Asst. Professor Mngt. Science (USA),
IMRAN HUSSAIN
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Objectives
Value Chain Process.
Benchmarking.
SWOT Analysis.
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Value Chain Process
Point No. 1
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Michael Porters Value Chain
Model
Firm Infrastructure (General Management)
Human Resource Management
Technology Development
Procurement
InboundLogistics
Ops. OutboundLogistics
Sales &Marketing
Service andSupport
PRIMARY ACTIVITIES
SUPPORTACTIVITIES
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Continued
Developed in 1985 by Michael E. Porter in
Competitive Advantage
Highlights cost advantages anddistinctive capabilities--the value
processes.
4-5
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Value Chain and the QCT Triangle
VC allows alignment of processes with
customers. This generates a quality
advantage.
VC focuses costmanagement efforts.
VC provides for efficient processes which
improves the timeliness of operations.
4-6
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Value Chain Benefits
Identifies value processes
Identifies areas for cost improvement
4-7
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Value Chain Elements
Customer value added
Margin orientation
Primary activities
Inbound logistics Operations
Outbound logistics
Sales and marketing
Service and support
Support Activities
Human resources
(general and admin.)
Tech. development
Procurement
4-8
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Goals For Value Chain
Driven by customer perceptions
Increase margins
Focus on value processess
Distinctive capabilities
Cost advantages
Some examples
Southwest Airlines Intel Corporation
4-9
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Value Chain Analysis
Document the activities
Understand the cost and margins at each step.
Use Activity Based Costing
Map the value chain to the industry value
chain
Look for core competencies
Map the cost structure
Note that external values drive cost advantages
4-10
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Discovering Your Own Value
Processes
Distribute a summaryof the value chain model.
Create functionalprocess lists.
Transfer lists to color-coded labels.
Pin the processon a large VC diagram.
Identifyappropriate processes as: $ (cost advantage) CC (core competency)
4-11
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Using the Value Chain
Helps you to stay out of the No Profit Zone
Presents opportunities for integration
Aligns spending with value processes Provides for reconfiguration of the value chain
outsourcing
off-shoring
co-location with customers or suppliers redesign for efficiency
Involves chain partners: customers & suppliers
4-12
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Value Chain and the TBC Triangle
Technical: Increases knowledge of no profit zones
Increases knowledge of forward and/or backward integration opportunities
Identifies value processes
Identifies win-win alliance opportunities
Behavioral: Focus shifts to the customer
Focus shifts from conflict to partnering with customers & suppliers
Cultural Creates externally focused mindset
Generates information sharing environment with respect for confidentiality
4-13
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Benchmarking
Point No. 2
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Benchmarking
Definitions of Benchmarking.
Types of Benchmarking.
Steps of Benchmarking.
Benefits of Benchmarking.
Limitations of Benchmarking.
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Definition of Benchmarking
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Definitions
The term benchmark also commonly applies to
specially-designed programs used in benchmarking A benchmark should:
be domain specific (the more general the benchmark, the lessuseful it is for anything in particular)
be a distillation of the essential attributes of a workload
avoid using single metric to express the overall performance Computational benchmark kinds
synthetic: specially-created programs that impose the load on thespecific component in the system
application: derived from a real-world application program
17
Benchmark: a standardized problem or test that serves as a basis for evaluation or
comparison (as of computer system performance)[Merriam-Webster]
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Continued...
Benchmarking is an improvement process that
is used to identify best practice within a peer
group and facilitate its incorporation into your
organization.
Benchmarking is a systematic tools that allows
a company to determine whether its
performance of organization processes andactivities represent the best practices.
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Purpose of Benchmarking
To define the playing field
To provide a tool enabling quantitative comparisons
Acceleration of progress
enable better engineering by defining measurable andrepeatable objectives
Establishing of performance agenda
measure release-to-release or version-to-version progress
set goals to meet be understandable and useful also to the people not
having the expertise in the field (managers, etc.)
19
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Properties of a Good
Benchmark
Relevance: meaningful within the target domain
Understandability
Good metric(s): linear, orthogonal, monotonic
Scalability: applicable to a broad spectrum ofhardware/architecture
Coverage: does not over-constrain the typicalenvironment
Acceptance: embraced by users and vendors Has to enable comparative evaluation
Limited lifetime: there is a point when additionalcode modifications or optimizations becomecounterproductive. 20
Adapted from: Standard Benchmarks for Database Systemsby Charles Levine, SIGMOD 97
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Why best practice
Best practice refers to techniques, methods or
processes that are more effective at delivering
a desired outcome.
Incorporating best practice into your
organization can lead to greater efficiency and
effectiveness and a happier customer.
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Problems with Benchmarking
Problems with benchmarking occur where:
Data is not obtained for the process beingmeasured and analysis becomes subjective.
No peer group/best practice identified (includingdata available).
The gap between current state and best practice iscaptured but nothing is done about it.
Assumed best practice isn't best practice.
Benchmarking happens as a one off event and notreviewed periodically.
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Importance of Data
In order to measure the gap between themeasuring organization and best practicequantifiable measures need to be taken.
This requires data. Unless this method is followed results can be
subjective and inaccurate.
Follow on improvement activity can havenegligible impact.
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Using your Peer-group
Benchmarking relies on a partner organization
or peers which will be measured against.
Peers could be a different group in the same
organization (e.g. two purchasing
departments in a multinational organization)
or a completely separate company.
The importance is measuring your
performance against another peer with a
different standard.
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Types of Benchmarking
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Internal Benchmarking
Benchmark within a corporation.
(for example: Between Business Units)
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Competitive Benchmarking
Benchmark performance or processes with
competitors.
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Financial Benchmarking
Benchmark similar processes within an
industry.
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Generic Benchmarking
Comparing operations between unrelated
industries.
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Collaborative Benchmarking
Carried out collaboratively by groups of
companies.
(for example: Subsidiaries of multinational in
different countries or an industry
organization.)
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Steps of Benchmarking
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Steps of Benchmarking
Scope of definition.
Choose benchmark partner(s).
Determine measurement methods, units
indicators and data collection method. Analysis of the discrepancies.
Present the result and discuss implications/improvement areas and goals.
Make improvement plans or new procedures.
Monitor progress and plan ongoing benchmark.
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Benefits of Benchmarking
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Benefits of Benchmarking
Benchmarking helps identify the gapsbetween the organization that is undertakingthe benchmarking assessment and bestpractice.
Undertaking benchmarking can lead toimprovements being incorporated intoprocesses and systems delivering gains inefficiency and effectiveness.
Benchmarking can help align improvementactivity with strategic goals and objectives.
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Continued...
In outsouring projects.
Budgetary reason.
Improving communication.
Professionalizing the organization/processes.
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5- Limitations of Benchmarking
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Limitations of Benchmarking
Benchmarking should be viewed as a
continuous improvement method.
Regular reviews of performance should be
taken especially if improvement activity is
underway to transition to best practice.
Regular reviews of the peer group should be
taken to cater for any changes/improvementmade.
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Continued...
Benchmarking is a tough process that needs a
lot of commitment to succeed.
Time consuming and expensive.
Comparing performance and processes with
best in class is important and should ideally
be done on a continuous basis.
What are the downsides of adopting a
practice.
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SWOT Analysis
Point No. 3
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SWOT Analysis
Internal and external factors.
Major benefits of SWOT analyses.
Creating a SWOT analysis using post harvest
losses as a case study.
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SWOT
A widely used framework for organizing and
using data and information gained from
situation analysis.
Encompasses both internal and external
environments.
One of the most effective tools in the analysis
of environmental data and information.
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SWOT description
A SWOT analysis generates information that ishelpful in matching an organizations or agroups goals, programs, and capacities to the
social environment in which they operate. It is an instrument within strategic planning.
When combined with a dialogue, it is aparticipatory process.
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SWOT
Factors affecting an organization can usuallybe classified as:
Internal factors
Strengths (S) Weaknesses (W)
External factors
Opportunities (O) Threats (T)
Strengths
Opportunities
Weaknesses
Threats
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SWOT: internal factors
Strengths:
Positive tangible and intangible attributes,
internal to an organization. They are within
the organizations control.
Weaknesses:
Factors that are within an organizations
control that detract from its ability to attain
the core goal. In which areas might the
organization improve?
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SWOT: external factors
Opportunities External attractive factors that represent the
reason for an organization to exist and develop.What opportunities exist in the environmentwhich will propel the organization?
Identify them by their time frames.
Threats
External factors, beyond an organizations control,which could place the organizations mission oroperation at risk. The organization may benefit byhaving contingency plans to address them shouldthey occur
Classify them by their seriousness and
probability of occurrence.
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Create a plan of action
What steps can you take to:
Capitalize on your strengths.
Overcome or minimize your weaknesses.
Take advantage of some new opportunities.
Respond to the threats.
Set goals and objectives, like with any otherplan.
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Major Benefits of SWOT Analyses
Simplicity.
Flexibility.
Integration and synthesis. Collaboration.
Lower costs.
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For a Productive SWOT analysis
Stay focused. Be specific and avoid grey areas.
Keep your swot short and simple. Avoid
complexity and over analysis.
Collaborate with other functional areas.
Examine issues from the customers/
stakeholders perspective.
Look for causes, not characteristics.
Separate internal issues from external issues.
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1- Stay focused
It can be a mistake to complete just one
generic SWOT analysis for the entire
organization.
When we say SWOT analysis, we mean SWOT
analyses.
2 C ll b t ith
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2- Collaborate with
other functional areas
Information generated from the SWOTanalysis can be shared across functional areas.
SWOT analysis can generate communicationbetween managers that ordinarily would notcommunicate.
Creates and environment for creativity andinnovation.
3 Examine issues from
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3- Examine issues from
stakeholders perspectives
To do this, the analyst should ask:
What do stakeholders (and non-stakeholders) believeabout us as an organization?
What do stakeholders (and non-stakeholders) think ofour product quality, service quality, customer service,price, overall value, convenience, and promotionalmessages in comparison to our competitors?
What is the relative importance of these issues asstakeholders see them?
Taking the stakeholders perspective is the cornerstone ofa well done SWOT analysis.
4- Look for Causes not
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4 Look for Causes not
Characteristics
Causes for each issue in a SWOT analysis can often befound in the organizations and competitorsresources.
Major types of resources:
Financial Organizational
Intellectual
Informational
Legal Relational
Human
Reputation
5 Separate internal
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5- Separate internal
and external issues
Failure to understand the difference between
internal and external issues is one of the
major reasons for a poorly conducted SWOT
analysis.
Know yourself.
Know your customer/stakeholder. Know your competitors.
Know your environment.
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The elements of a SWOT analysis
Strengths and weaknesses:
Scale and cost economies.
Size and financial resources.
Intellectual, legal, and value of reputation.
Opportunities and threats:
Trends in the competitive environment.
Trends in the technological environment.
Trends in the socio-cultural environment.
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SWOT-driven planning
1. The assessment of strengths and weaknesses should lookbeyond products, services and resources to examineprocesses that meet customers or stakeholders needs.
2. Achieving goals and objectives depends on transforming
strengths into capabilities by matching them withopportunities.
3. Weaknesses can be converted into strengths with strategicinvestment. Threats can be converted into opportunitieswith the right resources.
4. Weaknesses that cannot be converted become limitationswhich must be minimized if obvious or meaningful tocustomers or stakeholders.
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The SWOT matrix
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Caution
SWOT analysis can be very subjective. Do not
rely too much on it. Two people rarely come
up with the same final version of a SWOT.
Use it as a guide and not as a prescription.
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Example - Post Harvest losses
Strengths:
- Sri Lanka possesses strong institutional capacity
that can contribute to changes in the current
situation.- There is increasing governmental interest in the
fisheries sector.
-
Many fishermen co-operatives are wellorganized and capable to support developmentsto reduce PHL.
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Weaknesses (1): Little political pressure from fishermen and
boat owners.
Lack of infrastructure. Inferior design of multi-day boats andfishery harbours.
Lack of awareness.
Acceptance of low quality fish and lowpurchasing power of consumers in thedomestic market.
Example - Post Harvest losses
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Weaknesses (2):
Rapid policy changes due to frequent changes inpolitically elected authorities within thegovernmental sector.
Limited knowledge of financial accounting amongfishermen.
Tropical weather conditions.
High volume harvests of cultivated fish when
seasonal tanks are being emptied. Excess governmental subsidies to increase
fishermen recruitment without them havingproper training or fishing equipment.
Example - Post Harvest Losses
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Opportunities:- Possibilities to increase nutritional and
economical value of fish products.
- Possibilities for fishermen- and vessel owners to
increase their revenue and income by reducingPHL.
- Possibilities to increase export volume and valueof fish products by reducing PHL.
- Possibilities to strengthen financial resources ofcostal fisheries communities.
- Vessel owners have recently formed anassociation at the national level that is likely to
support developments to reduce PHL.
Example - post harvest losses
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Threats:
PHL reduce the chances of fishermen and vessel
owners to maintain profitable and sustainable
livelihood. PHL reduces the nutritional value of fish products.
Insufficient availability of clean water, improper
sewage management, poor hygiene practices on
boats and lack of facilities at landing sites and in
harbours increases the likelihood of PHL.
Example - Post Harvest losses
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THANK YOU