1. Management, Organizational Policies and Practices
Lecture 4

2. Recap Lecture 3 Industrial Organizational View
Macro Environment – PESTEL
Industry Environment – Porter Five Forces
Competitive – Strategic Groups

3. The Internal Assessment
Lecture 4
Dr Amna Yousaf PhD-HRM
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4. Basis for objectives & strategies:
Clear statement of vision and mission
External opportunities/threats
Internal strengths/weaknesses
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5. Internal Audit Gather & assimilate information from:
Management
Marketing
Finance/accounting
Production/operations
Research & development
Management information systems
Key to organizational success:
Coordination and understanding among managers from all functional areas
Are quality-control policies and procedures effective?
Are facilities, resources, and markets strategically located? Does the firm use strategic-management concepts?
Are company objectives and goals measurable and well communicated?
Do managers at all hierarchical levels plan effectively?
Do managers delegate authority well?
Is the organization’s structure appropriate
Does the firm have technological competencies?
Are job descriptions and job specifications clear?
Is employee morale high?
Are employee turnover and absenteeism low?
Are organizational reward and control mechanisms effective?
Does the firm conduct market research?
Are product quality and customer service good?
Are the firm's products/services priced appropriately?
Does the firm have an effective promotion, advertising, and publicity strategy?
Are markets segmented effectively?
Is the organization positioned well among competitors?
Has the firm’s market share been increasing?
Are present channels of distribution reliable and cost effective?
Does the firm have an effective sales force?
Are marketing planning and budgeting effective?
Do the firm’s marketing mangers have adequate experience and training
Where is the firm strong and weak as indicated by financial ratio analysis?
Can the firm raise needed short-term capital?
Can the firm raise needed long-term capital through debt and/or equity?
Does the firm have sufficient working capital?
Are capital budgeting procedures effective?
Are suppliers of raw materials, parts, and subassemblies reliable and reasonable?
Are facilities, equipment, machinery, and offices in good condition?
Are inventory-control policies and procedures effective?
Are dividend payout policies reasonable?
Does the firm have good relations with its investors and stockholders?
Are the firm’s financial managers experienced and well trained?
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6. External Analyses’ Outcomes
Opportunities and threats
By studying the external environment, firms identify what they might choose to do.
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7. Internal Analyses’ Outcomes
Unique resources, capabilities, and competencies (required for sustainable competitive advantage)
By studying the internal environment, firms identify what they can do
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8. Resource Based View
Organizational Resources provide competitive advantage that can be sustained
Traditional resources such as labor costs, access to financial resources and raw materials continue to be sources of competitive advantage but to a lesser degree
Globalization and openenss of markets make these resources accessable worldwide and mobile
Need to identify new sources of competitve advantage- do the internal audit
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9. Key Concepts - Resources
Types of Resources
Tangible resources
Financial resources
Physical resources
Technological resources
Organizational resources
Intangible resources
Reputation
Innovation
Resources
Are a firm’s assets, including people and the value of its brand name.
Represent inputs into a firm’s production process, such as:
Capital equipment
Skills of employees
Brand names
Financial resources
Talented managers
Raw Material
Strategic Location
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10. Types of Resources Threshold Resources
The resources needed to meet customer’s minimum requirements and therefore to continue to exist
Retailer requires the supplier to posses a powerful IT infrastructure to meet retailing requirements.
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11. Threshold Competences
Activities and processes needed to meet customer’s minimum requirements and therefore to continue to exist
Supplier should be able to use IT systems effectively
Threshold level changes over time as CSF’s change;
Traditional banking versus online internet banking (branchless)
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12. Redundancy & Complementarily
Get away with redundent Resources & Competencies
Competitive rivalry may make cost efficency threshold comeptnece
Complementarity of resources and competencies essentail
Brand name as resource but no marketing processes
Lack of understanding – out of the game
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13. Unique Resources & Core Competences
Unique resources can not be easily imitated and critically underpin competitive advantage
Powerful Brand
Kallogs
Core competences are the activities and processes through which an organziation deploys the resources effectively to achieve competitive advatnage in ways non imitable by competitors.
Unique ways of providing service or relationship building with retailers/distributors/suppliers
McKinsey & Co. recommends identifying three to four competencies to use in framing strategic actions.
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14. Cost Efficiency Economies of Scale Supply costs Experience
Product/process design
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15. Robustness of Strategic Capabilities
Rarity
Collection of unique books in a library
Intellectual capital-particularly talented individuals
Relationships with key customers
Harmoniuos functioning of the firms
Capabilities around resources may not be rare as IC may move – competences may be rare and non transferable
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16. Robustness of Strategic Capabilities
Non-imitability
Causal ambiguity
Competences get embedded in organizational culture
Tacit knowledge on organizational processes built in one culture – may not be readily idetifiable; counter cultural for comeptitor
logical path can not be explicilty defined; taken for granted
Formal and informal ways
Linkage ambiguity
Whcih activities or processes dependent on which other. What is the chain of linkages?
The way customers are dealt on phone, return policies on goods, flexibility in deliveries
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17. Robustness of Strategic Capabilities
Valuable
Unique capabilities may not lead comepttive advantage
Customer value
Non substitutable
Competencies may also be situtation dependent – MNC’s have different competences accross the globe
Competences can be created within organziation and outside with suppliers and distributors
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18. Dynamic Capabilities
Danger of redundancy of strategic capability – strategic drift
M&S kept inventing value based on past success; faced losses in 1990’s
Dynamic capabilities refers to an organization’s abilities to develop and change competencies to meet the needs of rapidly changing environments
Stable environment, competitive advatange more durable and vice versa
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19. Core Competencies—Cautions and Reminders
Never take for granted that core competencies will continue to provide a source of competitive advantage
All core competencies have the potential to become Core Rigidities
Core Rigidities are former core competencies that sow the seeds of organizational inertia and prevent the firm from responding appropriately to changes in the external environment
Strategic myopia and inflexibility can strangle the firm’s ability to grow and adapt to environmental change or competitive threats 78

20. Case Examples (1)
Caterpiller; construction manufacturing company dealing with a range of diversified products such as construction and mining equipment, gas engines attributes success to the technology it uses and resources it spends to update its internal environment
Spends $ 4 million per day to mainintain competitive advantage through technology
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21. Case Examples (2)
Enterprise Rent-A-Car – 5000 plus offices worldwide and continually expanding
CEO attributes success to employee’s efforts and the intellectual capital they represnt
Japneese Automobile reduced GM Motors dominence with narrow asset base
Lowered costs
Improved quality
Fast production processes
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22. Creating Value
Value is measured by product’s performance characteristics and by its attributes for which customers are willing to pay.
Increasing perceptions of higher value in global than local brands
Firms create value by bundling resources and capabilities in ways that create value
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23. The Value-Creating Potential of Primary Activities
Inbound Logistics
Activities used to receive, store, and disseminate inputs to a product
Operations
Activities necessary to convert the inputs provided by inbound logistics into final product form
Outbound Logistics
Activities involved with collecting, storing, and physically distributing the product to customers
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24. The Value-Creating Potential of Primary Activities (cont’d)
Marketing and Sales
Activities completed to provide the means through which customers can purchase products and to induce them to do so.
Service
Activities designed to enhance or maintain a product’s value
Each activity should be examined relative to competitor’s abilities and rated as superior, equivalent or inferior.
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25. The Value-Creating Potential of Primary Activities: Support
Procurement
Activities completed to purchase the inputs needed to produce a firm’s products.
Technological Development
Activities completed to improve a firm’s product and the processes used to manufacture it.
Human Resource Management
Activities involved with recruiting, hiring, training, developing, and compensating all personnel.
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26. The Value-Creating Potential of Primary Activities: Support (cont’d)
Firm Infrastructure
Activities that support the work of the entire value chain (general management, planning, finance, accounting, legal, government relations, etc.)
Each activity should be examined relative to competitor’s abilities and rated as superior, equivalent or inferior.
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© 2007 Thomson/South-Western. All rights reserved.
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27. FIGURE 3.3 The Basic Value Chain
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© 2007 Thomson/South-Western. All rights reserved.
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28. Benefits of Value Chain
Cost benefit analysis at various levels
Help identify comeptences of the firm
Outsourcing decisions
Identify profit pools
Value network – set of inter-organizational links and relationships necessary to create valuable product
Internal position vis a vis other parties
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29. Key Questions for Managers
in Internal Analysis
How do we assemble bundles of Resources, Capabilities and Core Competencies to create VALUE for customers?
And...
Will environmental changes make our core competencies obsolete?
Are substitutes available for our core competencies?
Are our core competencies easily imitated? 14

30. Organizational Knowledge
Collective and shared experience accumulated through systems, routines and activities of sharing accross the organization
Explicit Knowldge: Codified information system
Implicit Knowledge: Tacit, hald to formalize, personal and context specific
More likely to occur where functional boundaries are blurred; less demarcation of roles
Formal and systematic system of knowledge poses greater danger of imitation
Experience of groups of individuals may not be copied
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31. Outsourcing Firm Infrastructure Human Resource Management MARGIN
Strategic Choice to Purchase Some Activities From Outside Suppliers
Firm Infrastructure
Human Resource Management
Human Resource Management
Firms often purchase a portion of their value-creating activities from specialty external suppliers who can perform these functions more efficiently
Support
Activities
Technological Development
MARGIN
Technological Development
Procurement
Procurement
Service
Service
Inbound
Logistics
Outbound
Logistics
Marketing
& Sales
MARGIN
Operations
Outbound
Logistics
Marketing
& Sales
Inbound
Logistics
Operations
Primary Activities

32. Strategic Rationales for Outsourcing
Improve Business Focus
Lets company focus on broader business issues by having outside experts handle various operational details
Provide Access to World-Class Capabilities
The specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications
Accelerate Business Re-Engineering Benefits
Achieves re-engineering benefits more quickly by having outsiders--who have already achieved world-class standards--take over process
Share Risks
Reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities
Free Resources for Other Purposes
Permits firm to redirect efforts from non-core activities toward those that serve customers more effectively 67

33. Activity Maps
An activity map shows how the different activities of an organization are linked together
Help identify and preserve strategic capabilities
Different activties must be consistent to create value
Maybe reinforcing each other
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34. Activity Maps at Southwest
Frequent, reliable departures
Lean, highly productive ground and gate crews
High aircraft utliziation
Very low ticket prices
No meals
No seat assignments
No baggage transfers
Automatic ticketing maxchines
No connections with other airlines
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35. Internal Assessment Analyses
Qunatitative Analyses
Balanced Scorecard
Basic Financial Ratios
Qualitative Analyses
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36. The Balanced Scorecard
Broad based criteria to assess a firm from multiple perspectives
Financial
Ratios
Customer
Value in terms of differentiation, low costs, quick response
Operations
Which processes need to improve? How should they be changed?
Organizational
Adaptability to change? Workforce commitment towards goals?
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37. Qualitative Analyses
Qualitative information supplements quantitative informatoin
Information on employee morale, commitmnet, creativity, employee views and customer views etc
Motorolla invests $600m anually based on qualitative analyses.
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38. Discovering Core Competencies
Competitive
Advantage
Gained through
Core Competencies
Strategic
Competitiveness
Above-Average
Returns
Discovering
Core
Competencies
Sources of
Core
Competencies
Competitive
Advantage
Capabilities
Teams of
Resources
Criteria of
Sustainable
Advantages
Value
Chain
Analysis
Resources *
Tangible
Intangible
Valuable
Rare
Costly to Imitate
Nonsubstitutable *
* Outsource 85

39. Thankyou
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