Download presentation
Presentation is loading. Please wait.
1
A Framework for Strategic Analysis
Stakeholders analysis Strategy formulation Environmental Analysis Strategy congruence Analysis of R&C Alternative Strategies Action plan Execution Strategy implementation Monitoring Feedback
2
Analyzing Resources & Capabilities
The assets and resources of the firm Identifying organizational capabilities Selecting capabilities of strategic importance Stakeholder expectations Identify existing strategy Assess strategy fit & congruence
3
Tangible and intangible Identify distinct resources
4
Resources as assets: the “capital” of the firm
Customer Capital Human Capital Financial Capital Intellectual Capital Physical Capital Social Capital
5
Assessing Assets and Resources
Assess company’s assets and resources relative to main competitors Distinct or same ? Unique and in-imitable, or easily imitated? Improving, or stable or eroding? You may consider more or less elaborate schemes for evaluation E.g. a grading system
6
Tangible and intangible resources
Assets that can be quantified Intangibles are gaining in significance They are major sources of value T/I: from 70 : 30 before to 30 : 70 today Accumulated over time Difficult to copy Embedded (the “genes” of the firm)
7
Financial Analysis for strategic purposes
Financial analysis is always important Need to evaluate current position and trends Using financial ratios as well as physical data But extracting the important trends Comparing with competitors, industry averages, or historical evolution Comment on the financial position of the company and draw strategic conclusions
8
Financial Analysis: an example
Ratio 2016 2017 2018 Trend Comment Annual growth of sales Annual growth of profit Gross profit % Net profit margin Return on capital Employed (ROCE) Return on Equity (ROE) Current Ratio Quick Ratio Gearing R&D/Sales SGA/Sales Sales per Employee Other ratios 8
9
Identifying Organizational Capabilities
Functional and Value Chain approaches
10
A Hierarchy of Capabilities
Cross functional Broad functional Activity related Specialized Single task Boundary spanning Individual Specialized Knowledge 7 7
11
Higher level Capabilities
Cross functional E.g. new product development and launching Boundary spanning E.g. network of relations with…
12
Some companies are recognized for some unique capabilities
FUNCTION CAPABILITY EXEMPLARS Corporate Management Financial management Exxon, Coca Cola, GE, General Electric Strategic Control Emerson Electric, GE Coordinating decentralized business units ABB, Shell Managing Acquisitions Nationsbank, ConAgra MIS Speed and responsiveness through rapid information transfer American Airlines, LL Bean R&D Research capability Mereck, AT&T Development of innovative new products Sony, 3M Manufacturing Efficient volume manufacturing Briggs & Stratton Continuous Improvement Nucor, Motorola Flexibility Benetton Design Marketing Design Capability Apple, Swatch, Brand Management Procter & Gamble, PepsiCo Sales & Distribution Promoting reputation American Express Responsiveness to market trends The Gap Sales Responsiveness Microsoft, Glaxo Efficiency and speed of distribution Federal Express Customer Service Walt Disney
13
A Value Chain Approach Firm Infrastructure Human Recourse Management
Margin Support Activities Technology Development Inbound Logistics Operations Outbound Logistics Marketing &Sales Service Primary Activities Source: M.E. Porter 6 6
14
Evaluating R & C along functions or Value Chain: a plastics firm
Similar to others Easy to imitate Unique Difficult to imitate Operations Installations/ Machinery Blue collar workers Process know-how Some experienced technicians log with the company Sales/ Marketing Salesmen Standard methods Sensing of customer needs Relations with customers Finance Credit worthiness Banking connections Listed in international stock markets HR Productivity Turnover rates Certain top class executives Training Logistics Ordinary fleet Personnel Dealing with variety of product types R&D Commercial exploitation of incremental innovations Production linked know-how of process innovation
15
The strategic importance of R & C
Unique resources and capabilities a basis for competitive advantage
16
Evaluating Resources and Capabilities
Similar to others Easy to imitate Unique Difficult to imitate Resources Assets and resources similar to competitors, or can be found in the market Accumulated assets and resources which competitors find difficult to match Capabilities Ordinary capabilities, typical or not distinctive Simple, low- level Composite, high- level Capabilities that are distinctive, costly to imitate, with strategic potential embedded in the specific context work in combination with others
17
Selecting Capabilities that count: VRIO criteria
VRIO Criteria: R & C must be Valuable Rare / unique In-imitable, costly to imitate Have organizational support, be protected Assessing strategic importance Overall importance for building sustainable competitive
18
Or use selected areas in which capabilities count (targeted search)
E.g. John Kay argues that four types of distinctive capabilities count: Architecture (of relations) Reputation Innovation Strategic Assets …and combinations of the four 18
19
Appraising the strategic importance of R&C
10 Key Strengths Superfluous Strengths Relative Strength 5 Key Weaknesses Zone of Irrelevance 1 1 5 10 Strategic Importance 9
20
Appraising the capabilities of Int MBA
(illustrative only) 5 6 9 3 2 4 8 10 7 1 C1 Alumni relations C2 Student placement C3 Teaching C4.Administration C5 Course devlpmnt C6 Student recruitment C7 Research C8 Corporate relations C9 Marketing C10 IT C11 PR C12 HRM Superior Superfluous strengths Key strengths Relative Strength Parity Inconsequential weaknesses 11 12 Key weaknesses Deficient Not important Critically important Importance
21
Is strategy based on unique R&C?
4. Develop strategy in relation to CA: (a) fully exploiting unique R & C (b) strengthening these R & C Potential for Sustainable Competitive Advantage 3. Identify the changes required in the organization in order to create competitive advantage on the basis of the selected R&C 2. Assess which of these are unique and difficult to imitable , or which may add value (VRIN criteria, ARIS) Selection R&C Analyze resources and capabilities 10 10
22
Assessing resources and capabilities: conclusion
Which R&C are unique, or which capabilities are distinct? Which of those are of strategic importance? Are they fully utilized in current strategy? Are they adequately protected? Can these capabilities be further developed? 22
23
Expectations and Values
Stakeholder Analysis Expectations and Values
24
Stakeholder Analysis – key aspects
Who are our stakeholders? What are their expectations from the organization? Who are the “key players”: with high interest for the organization, and power to influence? How satisfied are these from the current strategy? How are the likely to react if they are dissatisfied and how their reactions would affect us? Concerning the proposed strategy how likely is it that our key stakeholders will support both the strategy itself and its implementation? 24
25
Stakeholder analysis: power- interest matrix
Interest in the firm Low High Key players High Power Passive Low 25
26
Stakeholder matrix Expectations met? Yes No
Keep satisfied, use as advocates Neutralise, buy them off or try to meet expectations High Power Monitor, in particular see that they do not form coalitions with other dissatisfied stakeholders Low priority, but monitor Disclose info, care for social desirability Low 26
27
Strategy “Congruence” with E – R – V
Strategy “fit” Strategy “Congruence” with E – R – V
28
What is the current strategy?
Formal strategy Competitive, overall and fuctional Stated (e.g. in MOST) Actual strategy Inferred from actions & behavior May not coincide with formal
29
Evaluating strategy fit or congruence
Does it fit to changing environment exploiting opportunities, avoiding threats Does it fit with resources and capabilities does it utilize unique R&C, builds on strengths, avoids weaknesses Does it meet the expectations of key stakeholders Does it carry the commitment of employees , shareholders, key players Is it internally consistent within MOST and down the organization, “rowing” in the same direction Is the risk / benefit ratio acceptable Risk from misfit and stretch of resources
Similar presentations
