Powerpoint Templates Page 1 Organizational Appraisal
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Organizational Appraisal
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Organizational resources +Organizational behavior
Strengths and weakness
Synergistic effects
competencies
Organizational capability
Strategic advantage
Framework for the Development of strategic Advantage by an organization
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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
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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?
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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
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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
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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
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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
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Examples: Distinctive Competencies
ToyotaLow-cost, high-quality
manufacturing of motor vehicles
StarbucksInnovative coffee drinks and
store ambience
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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
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Organizational Capability Factors
• Financial Capability
• Marketing Capability
• Operations Capability
• Personnel Capability
• Information Management Capabilitty
• General Management Capability
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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
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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
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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
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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
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Fig. 4.3: A Representative Company Value Chain
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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
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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
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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
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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
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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
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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
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Qualitative Analysis
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Comparative Analysis
• Historical Analysis
• Industry Norms
• Benchmarking
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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
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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
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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
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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
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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
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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
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Generic benchmarking
• Is a comparison of one’s own processes against the best practices anywhere in any type of organization
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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
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Key Factors Rating
• A compherhensive method which can be used in association with financial analysis
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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
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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
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For operations capability factors
• Questions related to the production system
• Questions related to operations and control
• Questions related to the R&D system
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For personnel capability factors
• Questions related to the personnel system
• Questions related to organization and employee characteristics
• Questions related to industrial relations
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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
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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
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