Unit 2 - Assessing the Internal Environment (Revised - Sept 2013) (1)

8/10/2019 Unit 2 - Assessing the Internal Environment (Revised - Sept 2013) (1)

1/28

UNIT 2

Assessing the

Internal Environment

1

1


2/28

Learning Outcomes:

By the end of this Study Unit you should beable to:

1. Give examples of an organizations Strengthsand Weaknesses

2. Analyze an organizations Resources andCapabilities

3. Appraise an organizations current offerings

and performance in the marketplace4. Evaluate an organizations previousperformance

5. Describe an organizations business

relationships 2


3/28

What is the I nternal Environment?

It consists of organizationalresources, capabilities and

competences which can bemanipulated by management toachieve organizational objectives.

(Note that these are factors that are under thedirect control of management)

3

3


4/28

Components of the Internal Environment

RESOURCES

Resources are the factors of production available to anorganization, to be used in providing products and services.Types of resources include: Tangible: Financial resources (borrowing capacity), Physical Resources

(facilities, locations), Human Resources, Organizational structure(reporting structures),Technological (patents)

Intangible: Human resources (experience, training), Resources forinnovation (technical employees, facilities), Reputation, Information

COMPETENCESThe activities and processes through which an organizationdeploys its resources efficiently and effectively. It may also referto any activity or process that the organization is good at, andmay potentially be a source of competitive advantage.

4


5/28

STRATEGIC CAPABILITIES

This refers to the adequacy and suitability of theresources and competences of an organization

for it to surviveand prosper

Threshold Capabilities: Those capabilities essential forthe organization to survive, and to be able to compete in agiven market by satisfying customers minimum requirements

Competitive Advantage Capabilities: Unique

Resourcesthose resources that others cannot easily imitateor obtain. This only lasts for a period of time before it is

matched by competitors. Core Competencesthe activities

and processes through which resources are deployed in ways

that others cannot imitate or obtain. It is more likely to be a

source of competitive advantage. 5

5


6/28

Competitive Advantage

Competitive advantage is what allows a firm

to gain an edge over its rivals in attracting

customers and defending against

competitive forces.

Key challenges of competitive advantage:

1. Buildadvantage

2. Extendadvantage

3. Organisefor advantage

4. Sustainand Renewadvantage


7/28

Many routes to

Competitive Advantage

NPD

Quality

Superior customer service Achieving lower costs

Better geographic location

Technical expertise Supply chain management

Brand image / reputation


8/28

Gaining Competitive Advantage:The Resource-based view vs. Market orientation


9/28


10/28

Main differences between the resource-based

view and the market orientation view


11/28


12/28

VALUE CHAIN ANALYSIS

The Value Chain describes the sequential process of value-

adding activities within and around the organization, which

together create a product or service. It helps to establish the

cost of these value-adding activities, as well as the value to

customers i.e. the difference between the perceived benefits

received by customers and the price they are willing to pay.

1212


13/28

Value Chain Based View

The concept of customer perceived valueSources: Adapted from Anderson et al. (2007; 2008); McGrath and Keil (2007); and Smith and Nagle (2005)


14/28

Value Network:The Organizations Business Relationships

A value system is a system of inter-organizational

links (e.g. partnerships and alliances) that a firm

creates to source, augment and deliver its offerings.

It includes:

Buyer-supplier Relationships: Cooperative, Balanced Poweror Protection, or Adversarial (see Porters 5-Forces)

Relationships with Complementors: Sharing expertise,resources for mutual benefit etc. even with competitors

Relationships with Distributors: vital in ensuring availability,helps with promotion, collecting and disseminating information

etc. 1414


15/28

PORTFOLIO ANALYSIS

Portfolio analysis is used to analyze and compare the

performance of different products/ SBUs, in order to

optimize the allocation of available resources among

strong and weak products, brands or business units.The purpose is to spread organizational risk by

balancing the organizations portfolio. Tools include:

BCG Matrix GE /Mc Kinsey Business Screen

Shell Directional Policy Matrix

1515


16/28

The BCG Growth Share Matrix

16


17/28

Question marksare growing rapidly and thus consume

large amounts of cash, but because they have low market

shares they do not generate much cash. The result is a large

net cash consumption Starsare units with a high market share in a fast-growing

industry. The hope is that starsbecome the next cash cows.

Sustaining the business unit's market leadership may require

extra cash, but this is worthwhile if that's what it takes for theunit to remain a leader

Cash Cows are units with high market share in a slow-

growing industry. These units typically generate cash in

excess of the amount of cash needed to maintain the

business.

Dogsare units with low market share in a mature, slow-

growing industry. These units typically "break even",

generating barely enough cash to maintain the business's

market share. 17


18/28

GE Business Screen

18


19/28

GE Business Screen

Factors determining

Market Attractiveness

Market Size

Market growth

Market profitability Pricing trends

Competitive intensity / rivalry

Overall risk of returns in theindustry

Opportunity to differentiateproducts and services

Segmentation

Distribution structure (e.g.retail, direct, wholesale

Factors determining

Competitive Strength

Strength of assets andcompetencies

Relative brand strength

Market share

Customer loyalty

Relative cost position (coststructure compared withcompetitors)

Distribution strength

Record of technological orother innovation

Access to financial and

other investment resources19


20/28

Shell Directional Policy Matrix

20


21/28

EXPERIENCE CURVESGraph that depicts the 'experience effect' (increasesin productivity) as reflected in reduced average andmarginal costs. Unlike the learning curve, anexperience curve takes into account both fixed andvariable costs. It is closely linked with the Learning

Effect.

2121


22/28

BALANCED SCORECARD

A structured business performance measurement

and management system that analyzes

organizational success based on a mix of

financialand non-financial measures ofbusiness performance. It is designed to translate

an organization's mission statement and overall

business strategy into specific, quantifiable goalsand to monitor the organization's performance in

terms of achieving these goals.

2222


23/28

Balanced Scorecard

2323

St d t A ti it


24/28

Student ActivityPlace the 8 objectives and measures into the four balanced scorecard metric

categories of Finance, Customers, Business Processes and Learning and

Growth. Please note that objectives and measures (in the table below)may not be related i.e. objective (1) and measure (a) do not belong

together.So first place the objectives, and then place the measures.

24

OBJECTIVES MEASURES

1. To be the cost leader in our market by 20xx (a) Average time taken for customers to receive

complete orders

2. To reduce customer churn by 75% within 12 months (b) Customer retention rates

3. To lead the market in speedy delivery by 20xx (c) Return On Capital Employed (ROCE)

4. To build a sports and social club by March 20xx (d) Employee satisfaction rates

5. To increase profitability by 20% by 20xx (e) Statistical process control

6. To produce products that are right first time within 3

months

(f) Employee retention rates

7. To train and develop all team leaders by 20xx (g) Customer feedback or complaints

8. To achieve 99% customer satisfaction within 5 years (h) Unit cost


25/28

MARKETING AUDIT

Strategic tool used to review the effectiveness of amarketing program. A marketing audit is acomprehensive, systematic, periodic evaluation of acompany's marketing capabilities.

The audit examines the goals, policies, and strategiesof the marketing function as well as the methods of theorganization and the personnelwho carry out thegoals, policies, and strategies of the marketing

function. Marketing audits are performed on a regular basis byan unbiased, independent company and are used toimprove a company's overall marketing performance

or to establish new marketing plans. 2525


26/28

Components of a

Marketing Audit

6 major components of amarketing audit:

Marketing Environment

Audit Marketing StrategyAudit

Marketing OrganizationAudit

Marketing SystemsAudit

Marketing ProductivityAudit

Marketing Function

Audit 26

REVIEW FOR FURTHER DETAILS:

http://www.marketingteacher.com/lesson-store/lesson-marketing-audit.html


27/28

SWOT ANALYSISA situation analysis in whichinternal strengths andweaknesses of an organization,and external opportunities and

threats faced by it are closelyexamined to chart a strategy. Itsummarizes the key issuesfrom the business environment

and the strategic capabilities ofthe organization that are mostlikely to impact on strategydevelopment.

2727


28/28

Any

Questions?

28

Unit 2 - Assessing the Internal Environment (Revised - Sept 2013) (1)

Documents