organisational_apprasiallect

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Organizational Appraisal


Organizational resources +Organizational behavior

Strengths and weakness

Synergistic effects

competencies

Organizational capability

Strategic advantage

Framework for the Development of strategic Advantage by an organization


Organizational resources

• Organization can be best understood in the context of the resource based view of strategy

• A firm is a bundle of tangible and intangible resources

• Resources of an organization can lead to strategic advantage


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Resources

• Types of Resources– Tangible resources

• Financial resources

• Physical resources

• Technological resources

• Organizational resources

– Intangible resources• Human resources

• Innovation resources

• Reputation resources


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TABLE 3.1 Tangible Resources

Financial Resources • The firm’s borrowing capacity

• The firm’s ability to generate internal funds

Organizational Resources • The firm’s formal reporting structure and its formal planning, controlling, and coordinating systems

Physical Resources •Sophistication and location of a firm’s plant and equipment

• Access to raw materials

Technological Resources • Stock of technology, such as patents, trademarks, copyrights, and trade secrets


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TABLE 3.2 Intangible Resources

Human Resources • Knowledge• Trust• Managerial capabilities•Organizational routines

Innovation Resources • Ideas• Scientific capabilities• Capacity to innovate

Reputation Resources • Reputation with customers• Brand name• Perceptions of product quality, durability, and reliability• Reputation with suppliers• For efficient, effective, supportive, and mutually beneficial interactions and relationships


Determining the CompetitivePower of a Company Resource

• To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a “resource” must pass 4 tests:

1. Is the resource hard to copy?

2. Is the resource durable – does it have staying power?

3. Is the resource really competitively superior?

4. Can the resource be trumped bythe different capabilities of rivals?


competence

• A Competence is something an organization is good at doing

• It is always the product of experience, representing an accumulation of learning and build up of proficiency in performing an internal activity

A Competence is an activity that a company has learned to perform well


Core Competence• A core Competence is a proficiently performed

internal activity that is central to a company’s strategy and competitiveness

• A core competence is a competitively important activity that a company performs better that other internal activities

• A core competence is knowledge based ,residing in people and in a company’s intellectual capital and not in its assets on the balance sheets


Examples: Core Competencies

• Expertise in integrating multiple technologiesto create families of new products

• Know-how in creating operating systemsfor cost efficient supply chain management

• Speeding new/next-generation products to market

• Better after-sale service capability

• Skills in manufacturing a high quality product

• Capability to fill customer orders accurately and swiftly


Distinctive Competence

• A distinctive competence is a competitively valuable activity that a company performs better than its rivals:-it thus represents a competitively superior resource strengths

• .A distinctive competence thus signifies even greater proficiency than a core competence


Examples: Distinctive Competencies

ToyotaLow-cost, high-quality

manufacturing of motor vehicles

StarbucksInnovative coffee drinks and

store ambience


Strategic Advantage V/s Competitive advantage

• Strategic advantage is measurable in absolute terms using parameters

• Profitability could be used to measure strategic advantage. the higher the better strategic advantage

Competitive advantage is a special case strategic advantage

Competitive advantage is relative rather than absolute it can be measured with respect to rivals


Organizational Capability Factors

• Financial Capability

• Marketing Capability

• Operations Capability

• Personnel Capability

• Information Management Capabilitty

• General Management Capability


Methods and Techniques used for organizational Appraisal

• Methods and techniques used for organizational appraisal can be identical to those used for the performance evaluation of an organization

• There is difference between evaluation and appraisal


Methods and techniques used for organizational appraisal can be classified in three parts

• Internal Analysis

a. Value chain Analysisb. Quantitative AnalysisI. Financial analysis II .Non financial quantitative analysis

• Comparative Analysis

a) a. Historical analysisb) b. Industry normsc) Benchmarking

• Comprehensive analysis

a) Balanced Scorecardb) Key factor rating


Internal Analysis :-Value Chain Analysis

• A method for assessing the strengths and weaknesses of an organization

• Porter is credited with the introduction of the framework called value chain

• A value chain is a set of interlinked value creating activities performed by an organization

• These activities may begin with procurement of basic raw materials ,go through its processing in various stages and continue right up to the end products finally marketed to the ultimate customer


Value Chain Activities

• The value chain contains two types of activities

– Primary activities (where most ofthe value for customers is created)

– Support activities that facilitateperformance of the primary activities


Fig. 4.3: A Representative Company Value Chain


Example: Value Chain Activities

for a Bakery Goods Maker Primary Activities

• Supply chain management

• Recipe development and testing

• Mixing and baking

• Packaging

• Sales and marketing

• Distribution

Support Activities

• Quality control

• Human resource management

• Administration


Example: Value Chain Activitiesfor a Department Store Retailer

Primary Activities• Merchandise selection

and purchasing

• Store layout and product display

• Advertising

• Customer service

Support Activities

• Site selection

• Hiring and training

• Store maintenance

• Administrative activities


Example: Value ChainActivities for a Hotel Chain

Primary Activities

• Site selection and construction

• Reservations

• Operation of hotel properties

• Managing lineupof hotel locations

Support Activities

• Accounting

• Hiring and training

• Advertising

• Building a brand and reputation

• Generaladministration


Quantitative Analysis

• Relying on numbers is a popular technique for assessing the performance of an organization

• Financial figures are used for performance evaluation and assessment of strengths and weakness

• Financial figures are note sole basis for analysis


Financial Quantitative Analysis

• Ratio Analysis assesses the liquidity ,profitability, leverage and activity aspects of any organization

• Financial Ratio Analysis can serve the purpose if at used with care• Precautions need to be taken to include realizing the limitations of

ratio analysis, taking sufficiently long term data to explore trends • EVA :- Economic Value added analysis:- is used to determine the

wealth of a company.• EVA is a representation of the simple idea that an organization

needs to earn more from a business than the cost of the capital invested in it

• ABC (Activity based Cost) helps in identifying the factors that

Determine the cost and the areas where the cost are actually incurred


Non Financial Quantitative Analysis

• Non financial quantitative measures are :-

Employee turnover ,absenteeism, market ranking, total cycle time of production ,inventory units used per period, service call rate, number of patents registered per period and so on


Qualitative Analysis


Comparative Analysis

• Historical Analysis

• Industry Norms

• Benchmarking


Historical Analysis

• Historical Analysis is a good measure of how well or badly an organization has progressed with respect to its own performance

• Areas which have shown consistently good performance are an indicator of strengths in those areas and the reverse is also true

• Continuous improvement which is an important objective can be measured adequately through historical analysis


Limitations of historical Analysis

• Focus should not only be on areas of bad performance as it only shows where an organization is lacking

• Historical Analysis is only meant to show up improvements with regards to one’s own performance


Industry Norms

• Industry to which a business belongs is the most oblivious choice for comparison

• Limitations:-

1. Comparisons based on industry norms aim at averages and so could lead to erroneous conclusions regarding one’s capability

2. Industry norms are aggregated figures of several different types of firms in the industry

3. Industry norms are difficult to gather and obtain as the competitors guard the information which may be use to other firms


Benchmarking• A Bench marking is a reference point for the purpose of

measuring .• The process of benchmarking is aimed at finding the best

practices within and outside the industry to which an organization belongs

• The purpose of benchmarking is to find the best performers in one an area so that one could match one’s own performance with them or even surpass them

• According APQC

• “the practice of being humble enough to admit that some one

else is better at something and being


Performance Benchmarking

• Performance benchmarking is to compare one’s own performance with that of some other organization for the purpose of determining how good one’s own organization is

Process benchmarking• Is to compare the methods and practices for performing

processes


Strategic benchmarking• Is to compare the long term significant decisions and

actions undertaken by other organization to achieve their objectives

Internal benchmarkingIs a comparison between units or departments of the same

organization

Competitive benchmarking• Is a direct comparison of one’s own performance against

the best competitors

Functional BenchmarkingIs a comparison of processes or functions against non

competitive organization within the same sector or technological area


Generic benchmarking

• Is a comparison of one’s own processes against the best practices anywhere in any type of organization


Balanced Score Card

• Proposed by Robert S Kalpan and David P Norton• Attempts to do away with the bias in performance measures

towards financial indices to build a holistic system of measurement• Is considered as “a set of measures that gives top managers a fast

but comprehensive view of business• It includes financial measures that tell the results of action already

taken, it compliments the financial measures on customer satisfaction, internal processes and the organization’s innovation and improvement activities

• Balanced scorecard identifies four key performance measures as follows

• Customer prespective,internal business prespective,innovation and learning perspective


Key Factors Rating

• A compherhensive method which can be used in association with financial analysis


For financial Capability Factors

1. Questions related to sources of funds

2. Questions related to usage of funds

3. Questions related to management of funds


For marketing Capability Factors

• Questions related to products or service

• Questions related to price

• Questions related to promotion

• Questions related to integrative and systemic factors


For operations capability factors

• Questions related to the production system

• Questions related to operations and control

• Questions related to the R&D system


For personnel capability factors

• Questions related to the personnel system

• Questions related to organization and employee characteristics

• Questions related to industrial relations


For information management capability factors

• Questions related to acquisition and retention of information

• Questions related to the processing and synthesis of information

• Questions related to retrieval and usage of information

• Questions related to transmission and dissemination

• Questions related to integrative ,systematic and supportive factors


For general management capability

• Questions related to the general management system

• Questions related to general management

• Questions related to external relationships

• Questions related to organizational climate


organisational_apprasiallect

Documents

intangible resources

distinctive competence

financial analysis

company resource

internal activitya competence

historical analysis

parts internal analysis

value chain analysis