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University of Information Technology & Sciences (UITS)

Assignment on

Strategic management

Topic: Assessment on internal environment of strategic management.

Submitted to : Dr. Md. Fashiul Alam Department of management University of Chittagong. -------

Submitted by : Mahtabul Alam Id No 10335173 42nd Batch UITS. ------

Date of submission: 23-10-2010

Content
Introduction
Strengths and weaknesses Challenges of internal analysis Identifying and Building Core Competencies
Valuable Capabilities Rare Capabilities Costly to Imitate Capabilities Non-substitutable capabilities

The Value Chain Primary Activities in the Value Chain



Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Supporting Activities in the Value Chain



Procurement Technology Development Human Resource Management (HR) Firm Infrastructure

The Result of the Value Chain Linkages within the Value Chain
Linkages within supplier Value Chain The buyers Value Chain

SWOT Analysis TOWS Matrix Conclusion

Introduction
The internal environment of a business is that part over which you as a manager have control. You can influence the things that go on in the business. In the following I try to give my best effort to assessment about internal environment of strategic management.

Strengths and weaknesses


Strengths and weaknesses are the internal side of a SWOT analysis. SWOT is a tool for auditing an organization and its environment. It is the first stage of planning and helps managers focus on key issues. Once key issues have been identified, they feed into objectives. It can be used in conjunction with other tools for audit and analysis, such Porter's Five-Forces analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. For example, a strength could be your specialist expertise. A weakness could be the lack of good genetics. Opportunities and threats are external factors. For example, an opportunity could be a developing market such as the Internet. A threat could be a new competitor in your home market. During the SWOT exercise, the four titles are often written on a page. List factors under each title. It's that simple. This presentation is only on the internal factors.

Challenges of internal analysis Consider marketing Consider people


products/services price/promotion distribution/location management farm hands office staff/other Sales force

Consider operations/facilities
Implementation facilities/equipment cost management/efficiency

Consider finances
profitability debt position/capital structure inventory/receivable management

Resources
Business cards are resources they can be used to network, develop, foster, and protect business relationships. Land and machinery are resources. Probably some of the most important resources are intangible resources. Yet, we often have difficulty identifying and understanding how to capitalize on out intangible resources.

Capabilities If there are two identical farms but one is doing better than the other, it is the capabilities of the managers to use the buildings and tractors and intangible resources that likely make the difference A farm with 1,200 sows may be the lowest cost/efficient operation in the area but without an ability to discover and foster a market, raising hogs is pointless. That is a capability that the manager brings to the business.

Identifying and Building Core Competencies


Using key employees as an example of core competencies.
Valuable Capabilities

A unique capability to higher employees that are good with equipment and capable of fixing problems.
Rare Capabilities

In todays farm labor pool, loyal long-term employees that are good with equipment and can work on it are pretty few and far between. A farm that has this type of staisfied employee base likely has a key competitive advantage.
Costly to Imitate Capabilities

Because of the historical knowledge base contained by these key employees, it is costly if not impossible for other farms to gain this capability. Many times it is not even clear why these employees are so much better with equipment than others. Of course, the educational focus of our society puts well trained employees with the kind of skills needed in too high of a wage bracket for most farm businesses.
Non-substitutable capabilities

Certainly there are some substitutes for employees that are good with machinery. Good mechanics in the region, renting equipment, etc. However these are imperfect substitutes at best and erode the competitive advantage obtained with key employees. The Value Chain The Value Chain is one way to help identify core competencies in your business. The value chain is a systematic approach to examining the development of competitive advantage. It was created by Michael E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization. The 'margin' depicted in the diagram (next slide) is the same as added value. The organization is split into 'primary activities' and 'support activities.

Strateg

The Value Chain, or value plate illustrates how to break down the functions of a company into its activities. The bottom half of the figure contains the primary activities that the firm conducts. These include inbound logistics, or the way in which the company receives, stores, etc. its inputs. Operations is the basic activity of producing your product. Outbound logistics are the activities associated with storing and distributing your final product. Marketing and sales are all of the activities associated with attracting and keeping customers for your products. Service is the activities associated with providing support to your customers for your products including users manuals, help lines, warranties, etc. Inbound logistics and Operations relate to your suppliers. Outbound logistics, marketing and sales and service relate to buyers. As you move from left to right the primary activities move through time and adding further value to the end product. Linking these five primary activities together forms a chain.

The Val

Firm

The top half of the graph represents a set of activities that are conducted to support the primary activities of the firm. These would include procurement which are all of the activities associated with negotiating, financing, and paying for all inputs necessary for the business from raw inputs used in the final product to pencil used in the accounting office. Technology development is the activities associated with research and development and included R&D in all phases of the primary activities not just R&D associated with new product development (things like process improvement research, distribution improvement research, market research activities to support marketing, etc. Human resources are the support activities associated with hiring, firing, compensating, retaining, and training personnel for the company. Finally firm infrastructure is the top management activities of the firm which include, negotiating with the government, negotiating with competitors, developing the firms long-term strategy, development and maintenance of information systems for assessing firm performance, etc. The next slides further explain the activities.

Hum

Tec

Proc

g n i t r o p u S

s e v i t c A

What do you do with this figure? That is, what support and primary activities do you do better than your competitors and which ones do you not do so well relative to your competitors. This is a great tool for helping you assess your strengths and weaknesses in a more structured way. It helps think about ALL of the activities that you conduct in your business and critical assess whether you are doing each activity as well as you can. This figure helps you focus on specific activities that you do well relative to your competitors so that you can determine what your core competencies are relative to your competitors. Primary Activities in the Value Chain
Inbound Logistics

Here goods are received from a company's suppliers. They are stored until they are needed in the production. Goods are moved around the organization.
Operations

This is where goods are grown or produced. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine.
Outbound Logistics

The products are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer whatever the next step in the industry chain.

Marketing and Sales

In true customer orientated fashion, at this stage the organization prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.
Service

This includes all areas of service such as after-sales service, complaints handling, and so on. Marketing strategy has four components, known as the 4 Ps (Product, Price, Place and Promotion). We in agriculture have tended to think of marketing as only a factor of Price, (in terms of future/options, the market price etc). But it is much broader. All sorts of things can be done to sell your product. This is asking your elevator manager if you can do something different. Can you deliver to the elevator at an off-peak time (an example of place)? Finding ways to solve someone elses problem is how you create and capture value. Supporting Activities in the Value Chain
Procurement

This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organizations).
Technology Development

Technology is an important source of competitive advantage. Farms need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, and many other technological developments.
Human Resource Management (HR)

Employees are an expensive and vital resource. An organization would manage recruitment and selection, training and development, and rewards and compensation. The mission and objectives of the organization would be driving force behind the HR strategy.
Firm Infrastructure

This activity includes and is driven by corporate or strategic planning. It includes the mechanisms for planning and control such as accounting. The Result of the Value Chain The customer has to be willing to write a check for what you do.

Strate

Lets go through an example of a value chain. This one will be of a grain producing division of a farm. The next slides will identify specific actions in each activity.

The Va
Fi

Strate

Here is the bottom half of the value chain. These are the primary activities a grain farm performs as it creates and delivers its product.

Primary

Strate

Support Inboun

Logistic

These activities are the supporting activities for the value chain of a grain farm that a business has to perform in able to effectively perform its primary activities.

Value Chain Analysis The analysis is helpful to you as you think about what you do well and what you can improve on. Benchmarking your performance to what your competitors do well is an important part of knowing if you are performing on par. Linkages within the Value Chain some farm examples brought into the discussion?? Eric Akins? Same functions can be performed in different ways.

Strategic

The value chain a firm has for a product is just a part of the industry. The supplier sells to a buyer and buys from a supplier, each of which have their own value chains.

Value C Supply C

Strategic

Who gets the value? It depends on the bargaining power.

Linkage Strategi Chain

For instance, the suppliers Marketing Support Function relates directly to the buyers Procurement Function.

Linkages The Buye firms cha to enhan

A firms

Strateg

Here is the SWOT tool we introduced in the Business Environment section. SWOT is a conceptual framework for a systematic analysis that helps organize the external threats and opportunities with the internal weaknesses and strengths of the organization. To use it you simply list the strengths/weaknesses you have in your business and the opportunities and threats you face. You can use the IFAS and EFAS tables to help list those items. SWOT analysis is the simplest way to conduct environmental scanning. A SWOT analysis should result in the identification of an organizations core competencies, and of opportunities that the company is unable to take advantage of due to a lack of, or insufficient, current resources. Lets take this a step further and develop some useful strategies out of the assessments youve done, using the TOWS matrix.

SWOT

Internal

Strat

Now we have the TOWS matrix which uses the same basic breakdown by the external and internal analysis. But were going beyond basic assessment of the situation and onto strategy formulation. The next slide shows how it is organized.

The model starts with threat (The T in TOWS) because in many situations a company undertakes strategic planning as a result of a perceived crisis, problem, or threat.

TOW

Tech com

Stra

The TOWS tool combines the ingredients of SWOT (our assessment of the internal and external environments, which used the EFAS and IFAS tables) in a way that can suggest some strategies. It matches external opportunities and threats facing a particular company with that companys internal strengths and weaknesses to result in four sets of possible strategic alternatives. Have we got some examples of some strategies? SO Strategies ST Strategies WO Strategies WT Strategies

TOW

From Internal Analysis

Conclusion I tried to explain shortly the internal environment assessment of strategic management on upper side description with the term of strength & weakness, challenges, Identifying and Building Core Competencies & many more.

Source: Adapted from Long-Range Planning, April 1982, H. Weihrich, The TOWS MatrixA Tool for Situational Analysis. and Wheelen and Hunger