Internal Scanning

Organizational analysis
 Resource based approach
VRIO framework: you organization has some
valuable asset
Ask four questions:
a.Value: Does it provide competitive advantage?
b.Rareness:Is it rarely possessed by others?
c. Imitability: Is ir difficult for others to copy it?
d. Organization: Is the firm organized to use it?
IF ALL ANSWERS ARE YES:THAT RESOURCE IS A
STRENGTH
 Operational Value chain analysis
– Inbound Logistic Outbound logistic
R&D Production Marketing Customer

Operational Value chain

Support activities(Logistical management ,IT ,HR

etc)
 Analysis of value chain
• Examine the strength and competency
• Examine linkages
• Examine synergy
 Analyze the structure
• Simple structure
• Functional structure
• Divisional structure
• SBUs
• Conglomerate
 Simple Structure

Top
Management

Manage Manage Manage Manag

r1 r2 r3 er4
A traditional functional structure
Top
Management

Marketi Procure Producti Finan

ng ment on ce
A product based divisional Structure
Top
Management

Product Product Product Product

Division Division Division Division
A B C D
What we can’t see
•Culture
•Centralization vs decentalization
•Control mechanism
•Authority or empowerment
 The classification of structure

Centralization/Formalization

HIGH LOW

Organic
Bureucracy
 Analysis of structure
• Structure has ability to produce the desired
result
• Structure guides the behavior
• Structure guides the responsibility
• Structure guides empowerment
• For example if the structure is bureaucratic
people will rely on rules and regulation
• If the structure is organic people will be
flexible in behavior
 Strategy vs structure
• If the strategy is supported by structure – it is
strength
• ‘if the strategy is not supported by structure it
is weakness

• Example : if an organization has strategy of low cost

strategy – bureucratic structure may work
• If an organization has strategy of creation and
differentiation an empowered structure will work
 Organizational culture

• Do organizations have culture ?

• YES
• Organization has culture means – some
acceptable norms have developed
• What cultural norms can be analysed?
– Group or team spirit
– Sense of customer service
– Creativity
– cultural intensity
– etc
 Organizational Culture
Organization can guide the culture building
process
Culture can be a binding force
Culture can give identity
Culture can be control tool
• What do we analyze in culture ?
 Strategy vs behaviour
• Strategy requires certain behavior and if
culture supports the behaviour it is strength

Culture

S1 Behaviour1
S2 Behaviour2
Startegic change may require change in
behaviour and if culture supports it – it is
strength
If not ie if culture is too rigid– it may be
weakness or barrier
Culture shapes the behaviour
So strategy and culture must be supportive
 Line of consistency
• Strategy – structure - culture - behaviour is
the required line of consistency
 Strategic marketing issues
Analysis of market position
•Segment – target – position
•A company has created a comfortable position
In the market means -
-the company is producing and selling the
products as per the need of the customer in
the segment and customers are satisfied
-the company has advantage over other
products in the segment…..contd..
• A company has created a comfortable
position In the market means -
-or there is no strong competition in the
segment
- The growth prospect are high
 Analysis of marketing mix
Mix Strength weakness Remarks
Product
Price

Promotion
Place
 Analysis of marketig mix
Example(Maytag)
Mix Strength weakness Remarks
Product Design, quality service
Price(A and B A.Moderately Credit term Accepted by target
category) priced segment

B.Premium price High but value

accepted based pricing

Promotion Brand Advertising Publicity

quality based
Place Loyal retailers Lack of intensity
 Strategic financial issues
• 1.Analysis of financial leverage
• Companies maintain some DE ratio in their
capital employed and DE ratio has to be
analysed on the basis of context
• DE ratio can be high at times of growth, but
low at times of declining growth
• What can be DE ratio for investment in foreign
country ?- High or low
• 2.Capital budgeting
• Analyzing the possibility of investment
Does the organization deploy capital budgeting
techniques to analyze investment ?
• Understand the cost of capital and NPV of
investment.
Does the organization analyze the dynamic
nature of cost of capital and discount rate?
 Strategic R &D
• Understand intensity, competence and technology
transfer
Intensity : intensity of spending
Competence: Development and use of new
technology
Tech Transfer: ability to commercialize the
new tech
 Analysis of R and D MIX
Understand basic , product and process R and D
•Basic R&D: Well equipped laboratories
•Product R&D: new products
•Process R&D: quality control and other
improvements
 Analysis of strategic operations in
an organization
Production systems:
• Continuous production
• Intermittent production
• Mass customization
In continuous production layout is designed to
gain the efficiency by continuously producing
certain number of products as per the economic
lot size
In Batch production lay out is designed to
produce different batches of related products to
serve the need of different customers within the
same production time
Continuous vs Intermittent ?
PRODUCTION SET UP 1
70 Pieces
of P /per
day

PRODUCTION SET UP 2

60
Pieces/day
 Mass customization
Mass customization is ability to take very small
order and produce at reasonable price to the
customer
It is strategy of not saying no the customer
It is based on economy of scope
Continuous production is good for low cost
strategies
Intermittent production is good for
differentiation strategies
Mass customization is good for broader scale of
differentiation as well customized production
strategy or niche marketing strategy
Continuous Production – meet the cost
standard-better than competitors – Strength
Intermittent Production – Produce
differentiated products and services creating
difference in market – Strength
Mass customization -take small orders having
highly flexible production line and people with
multiple skill - Strength
A continous production line
Ability to quickly change the
production set up
Ability to quickly change the
production set up
 Experience Curve
• Experience curve is a relation between
experience and cost per unit
Experience Curve

Accumulated experience N
What are the causes behind this effect ?
a.Increased specialization
b.New Methods

If there is indication of cost advantage with

experience – Experience curve is working and
is a strength of the organization
• Normally an 80% slope is used but may
depend upon type of product
Year Unit Cost
1 2 unit Rs 100
2 4 unit Rs 80
3 8 unit Rs 64
 Analysis of HRM
• Team spirit is always a strength.
Types of team:
Cross functional teams
Self managing teams
Concurrent engineering
• Quality of work life can increase satisfaction
and productivity
• Hence good work life is always a strength of
organization
 Analysis of information system
Basic use of IT
•IT for office automation
•IT for data analysis
•IT for operation and logistics
IT for competitive advantag e- the true strength
– IT for alliance
– IT for customer service
– IT for direct marketing
• Supply chain analysis
Supply chain is logistic management
• Goods have to come in from suppliers
• Goods have to move out to distribution
channel
• The strength and weakness depends upon the
network and relation with the supply chain
members
• After you have analyzed the internal factors
you have to prepare the IFAS( Internal factors
Analysis summary) table
 External Factor Analysis
Summary(EFAS) example
weighted
Weight Rating(1-5) score Remarks
opportunities 50

threat 50

TOTAL 50 0
 Internal Factor Analysis
Summary(IFAS) example
weighted
Weight Rating score Remarks
Strengths

Weaknesses

TOTAL 0 0
3.05
The EFAS and IFAS table has to be merged to
produce the SFAS(Strategic Factor Analysis
Summary ) table .The table will summarize the
external as well as internal strategic factors
The example of Maytag SFAS will clarify the
procedure
 Strategic Factor Analysis
Summary(SFAS) example
SFAS= EFAS + IFAS
weighted
Weight Rating score Remarks
SWOT factors
Strength 1
Strength 2
Weakness 1
Weakness 2
opportunity 1
Opportunity2
Threat 1
Threat 2

TOTAL 0 0
 SFAS Matrix

51
 Preparation of TOWS Matrix
• What we do after SWOT analysis?

Internal Strengths Weaknesses

Factors
External
Factors

Opportunities

Threat
 Preparation of TOWS Matrix
• What we do after SWOT analysis?

Internal Strengths Weaknesses

Factors
External
Factors
Strategies using
Strategy using
opportunities by
Opportunities strength to use
overcoming
the opportunities
weaknesses
Threat Strategies to
Strategies using
overcome
strength to
weakness and
overcome threat
avoid threat
 Preparation of TOWS Matrix
Example
• What we do after SWOT analysis?

Internal Strengths Weaknesses

Factors 1. Latest 1.Customer Service
External Technology
Factors
Opportunities
1.Overal market
growing at 30%
Threat
2.Competitors
going to add the
capacity
 Preparation of TOWS Matrix
Example
• What we do after SWOT analysis?

Internal Strengths Weaknesses

Factors 1. Latest 1.Customer Service
External Technology
Factors
Opportunities Growth by use of Growth by
1.Overal market technology improving service
growing at 30%
Threat Use technology Improve service
2.Competitors to establish the and look for
going to add the brand name different segment
capacity
 Preparation of TOWS Matrix
Example
• What we do after SWOT analysis?

Internal Strengths Weaknesses

Factors 1. Quality 1.Weak global
External Maytag Culture position
Factors
Opportunities
1.European market
integration
Threat
2.Emerging
Japanese
companies
 Preparation of TOWS Matrix
Example
• What we do after SWOT analysis?

Internal Strengths Weaknesses

Factors 1. Quality 1.Weak global
External Maytag Culture position
Factors
Expansion in Expansion in
Opportunities European market
European market
1.European market by more
as a quality
integration differentiation
brand
Threat Consolidate the Focus high end
2.Emerging brand position as niche market and
Japanese value based focus
companies product differentiation
Whether you change the position or not
depends upon:
a. level of discrepancy seen in SFAS score
b. Vision and goal of the organization
c. Lasting nature of opportunity
d. The validity of strength
e. other task environment factors
 Change position vs revise vision
mission
Suppose an organization has a weakness that
takes another year to rectify but the vision
requires growth within a short time ..?
Vision /mission if required have to be revised
-Opportunities are very strong vs very weak
than expected
-Weaknesses are predominant
-Threats are predominant