Strategic

Management
Internal Analysis: Assessing
Strengths and Weaknesses

Internal Analysis

The internal analysis of an

organization deals with the
investigation into the strengths and
weakness by focusing on the factors
specific to it

VRIO

Contributed by Barney

Valuable: Organizational capabilities possessed by the

firm that help it generate revenues by capitalizing on the
opportunities and /or reducing costs by neutralizing threats.
Rare: Organizational capabilities that are possessed by the
firm exclusively or just by few other firms in Industry.
Inimitable: (incomparable)The organizational capabilities
possessed by the firm that impossible , very difficult or not
worth while to duplicate or substitute by the competitors
Organized For usage: The organizational capabilities
possessed by the firm that could be used through
appropriate organizational structure, business processes ,
control systems and reward systems that are present in the
firm.

Porters Value Chain

Born in 1947
Harvard professor
Wrote book,
Competitive
Advantage

Value Chain Analysis

This is the method of assessing the

strengths and weaknesses of an
organization based upon the series of
activities it performs.
Porter (1985) is credited with the
framework of the value chain
It was primarily designed for the
manufacturing organization
Primary

activities
Support activities.

Value Chain Analysis

Inbound Logistics: Receiving , storing and

transporting inputs
Operations: all activities that convert raw
materials to finished goods
Outbound Logistics: Receiving storing and
transporting outputs
Marketing and Sales: Activities organization
uses to sell its products
Service: Activities that organization uses to
enhance and maintain the product value

Value Chain Analysis

Support Activities:
Firm Infrastructure: Managing org for achieving
its objectives;Eg: accounting, finance , planning ,
general management, legal support
Human Resource Management: All activates
performed in relation to recruitment , selection,
training , development , appraisal and
compensation of employees
Technology Development: Product design ,
equipment design etc
Procurement: purchasing fixed assets( such as
machinery , equipments, raw material and
supplied)

The Bigger Picture

Firms value chain is part of a bigger
value chain
Competitive advantage also depends
on the management of connections
with other firms value chains

Quantitative Analysis
Financial Analysis:
1. Ratio analysis- liquidity, profitability,
leverage, activity aspects.
2. EVA - economic value added analysis
3. Activity Based Cost
Non financial Analysis:
1. Emoployee turnover, Absenteeism, market
ranking,rate of advertisiing recall, cycle time
for production, inventory units per periods,
number of patents

Qualitative Analysis

Express the tenor of corporate culture,

ability to absorb and assimilate
knowledge , level of morale of
employees.

Comparative Analysis
1. Historical Analysis: To study how well
or badly a firm has performed according
to its own past performance.
Comparing past years balance sheets,
accounts and annual reports.
Areas that show consistently good
performance are the strengths areas and
poor performance must analyzed to know
the causes and corrective measures
must be taken to remove weaknesses

2. Industry Norms

Instead of comparing with all the firms

in the industry it would be better to
consider firms that follow similar
industries. A company might check
whether its cost structure is
comparable to that of its competitors
or budget spending on advertising is
equal to that of its near rivals.

Benchmarking

Benchmark--- means a reference point

What to compare:?
Performance
Process

Benchmarking-methods and
practices
Strategic Benchmarking

Who to compare against?

Internal

benchmarking
Competitive Benchmarking
Functional Benchmarking
Generic Benchmarking

Comprehensive Analysis

Key Factor Rating:

For Financial capability Factors
For marketing capability factors
For operations capability Factors
For personal Capability factors
For information management capability
factors
For general management capability
factors

Business Intelligence
systems:

The application of BI include the

activities of decision support systems,
query and reporting , statistical
analysis and data mining.

Balanced Scorecard

Kaplan and David P. Norton

It is a performance tool which Provides executives with a
comprehensive framework that translates a companys strategic
objectives into a coherent set of performance measures.
The scorecard consists of 4 different perspectives such as:

Financial
Customer
Internal business
Innovation and Learning

(i) Financial Perspective

Return-on-capital employed
Cash flow
Project profitability
Profit forecast reliability
Sales backlog

Balanced Scorecard

Customer perspective

(iii) Internal Business Perspective

Pricing index
Customer ranking survey
Customer satisfaction index
Market share
Hours with customers on tender success rate
Rework
Safety incident index
Project performance index
Project closeout cycle

(iv) Innovation & Learning Perspective

% revenue from new services

Rate of improvement index
Staff Attitude survey
Employee suggestions
Revenue per employee