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Internal Analysis

Internal Analysis . Internal Analysis. Strategic Managers must evaluate the Internal Environment of the organization. What is the process? Identify and classify variables within an organization as strengths or weaknesses. STRENGTH = factor that is better than: past performance

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Internal Analysis

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  1. Internal Analysis

  2. Internal Analysis • Strategic Managers must evaluate the Internal Environment of the organization. • What is the process? • Identify and classify variables within an organization as strengths or weaknesses.

  3. STRENGTH = factor that is better than: • past performance • key competitors • industry as a whole • WEAKNESS = factor that is worse than: • past performance • key competitors • industry as a whole

  4. Approaches for scanning and analyzing Internal Variables • Functional Analysis • Value Chain Analysis • Core Competencies Analysis

  5. Functional Analysis

  6. Management 1. General Management 2. Human Resource Management

  7. General Management Factors • Structure of the organization • Organizational Culture • Record in Achieving Objectives • Top management skills, capabilities, & interests. • Reputation of the Organization and Top Management • Social Responsibility record

  8. Human Resource Management • Number of employees • Unionization • Employee skills and morale • Quality of Work/Life Issues • Recent downsizings • Recognition/promotion/reward systems • Training programs; educational reimbursement

  9. Operations (Manufacturing or Service Firms) • Quality Initiatives • Quality certifications • Policies and procedures for quality • Six sigma quality = 3.4 manufacturing defects per million items • Location of facilities • Outsourcing • Flexible manufacturing • Raw material costs and availability

  10. Operations - Continued(Manufacturing or Service) • Economies of scale • decreasing fixed costs/ unit when producing more • Economies of scope • common parts of different products manufactured together. • Re-engineering • Percentage of cost of goods sold to sales

  11. Information Systems • Chief Information Officer • Network Capabilities • Hardware and software upgrades • Y2K compliance & costs • Internet page • quality; features

  12. Research and Development • Expenditures • Over time • In relation to competitors/industry • Percentage of sales • Product to market time • Own labs/facilities or lease?

  13. Finance • Currency risk management • Global impact • Financing decisions

  14. Financial Ratios

  15. Value Chain Analysis

  16. Firm Infrastructure general management,accounting finance Human Resource Management recruiting, training, development Technology Development R&D, product and process improvement Procurement purchasing raw materials; machines, supplies Support Activities Profit Margin Service instal- lation, repair, replace- ment Inbound Logistics raw matl handling ware- housing Operations machining assembling testing packaging Outbound Logistics ware- housing distri- bution Marketing and Sales advertising promotion pricing channel relations PRIMARY ACTIVITIES

  17. Core Competencies Core Competencies

  18. Core Competencies of the Corporation • Real sources of advantage - not based on businesses. • management’s ability to consolidate corporatewide technologies and production into competencies. • Core competencies are collective learning in the organization, especially: • how to coordinate diverse production skills by integrating multiple streams of technologies.

  19. Three tests to identify core competencies • Provide potential access to a wide variety of markets. • Make a significant contribution to the perceived customer benefits of the end product. • Are difficult to imitate.

  20. Engines Powertrains Optics Imaging Microprocessor controls Cars; motorcycles; lawn mowers; generators Copiers; laser printers; cameras; image scanners; medical imaging examples Core Competencies Products/businesses

  21. More kinds of core competencies: • Systems Integration • Virtual reality • Bioengineering • Delighting the customer

  22. Purpose of Internal Analysis • Identify and evaluate what’s going on inside the firm. • The goal is to assess what are strengths and what are weaknesses. • Critical in making decisions about the future of the organization.

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