1. © 1998 Addison Wesley Longman, Inc. TM-74 The Internal Environment Approaches to Organizational Analysis 1. Can use resource-based approach 2. Can use value chain analysis 3. We use functional resource analysis

2. © 1998 Addison Wesley Longman, Inc. TM-75 Resources: VRIO Framework 1. Values (Does it provide competitive edge?) 2. Rareness (Do other competitors posses it?) 3. Imitability (Is it costly for others to imitate?) 4. Organization (Is the Firm organized to support?) If answers are “YES”, you have a distinctive competence. 4.1Resources: VRIO Frameworkp. 82

3. © 1998 Addison Wesley Longman, Inc. TM-76 Core Competencies and Distinctive Competencies Core Competencies Things a corporation can do exceedingly wellThings a corporation can do exceedingly well Distinctive Competencies Core competencies that are superior to those of competitorsCore competencies that are superior to those of competitors 4.2Core Competencies and Distinctive Competenciesp. 83

4. © 1998 Addison Wesley Longman, Inc. TM-77 Factors Determining Sustainability of a Distinctive Competency Durability (Rate competencies depreciate or become obsolete)Durability (Rate competencies depreciate or become obsolete) Imitability ( How easily resources can be duplicated)Imitability ( How easily resources can be duplicated) 4.3Sustainability of Distinctive Competencyp. 83

5. © 1998 Addison Wesley Longman, Inc. TM-78 Imitability Transparency (How easily firms understand resources organization)Transparency (How easily firms understand resources organization) Transferability (The ability of competitors to get right resources)Transferability (The ability of competitors to get right resources) Replicability (How easily ability of a firm with the above resources can duplicate your company’s successReplicability (How easily ability of a firm with the above resources can duplicate your company’s success

6. © 1998 Addison Wesley Longman, Inc. TM-79 Continuum of Resources Sustainability 4.4 Continuum of Resources Sustainability (Fig. 4.1)p. 84 High (Hard to Imitate) Low (Easy to Imitate) Level of Resource Sustainability Slow-Cycle Resources Standard-Cycle Resources Fast-Cycle Resources Strongly shielded Patents, brand name Gillette: Sensor razor    Easily duplicated Idea driven Sony: Walkman    Standardized mass production Economies of scale Complicated processes Chrysler: Mini-van    Source: Suggested by J. R. Wiliams, “How Sustainable Is Your Competitive Advantage?” California Management Review (Spring 1992), p. 33.

7. © 1998 Addison Wesley Longman, Inc. TM-80 Typical Value Chain for a Manufactured Product 4.5Industry Value Chainp. 85 Product Producer FabricationDistributorRetailer Raw Materials Primary Manufacturing Source: Suggested by J. R. Galbraith, “Strategy and Organization Planning,” in The Strategy Process: Concepts, Contexts, Cases, 2nd ed., edited by H. Mintzberg and J. B. Quinn (Englewood Cliffs, N.J.: Prentice Hall, 1991), p. 316.

8. © 1998 Addison Wesley Longman, Inc. TM-81 Using Value Chain Analysis Examine your value chainExamine your value chain Determine how you reduce non-value workDetermine how you reduce non-value work Determine how to link work together (salesperson’s inspect)Determine how to link work together (salesperson’s inspect) Gain economies of scope by sharing functions between productsGain economies of scope by sharing functions between products

9. © 1998 Addison Wesley Longman, Inc. TM-82 Corporate Value Chain 4.6Corporation Value Chainp. 87 Source: Adapted/repri nted with the permission of the The Free Press, an imprint of Simon & Schuster, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter, p. 37. Copyright © 1985 by Michael E. Porter.

10. © 1998 Addison Wesley Longman, Inc. TM-83 We Use Functional Approach When Investigating Internal Environment A. Organizational Structure B. Organizational Culture C. Organizational Resources

11. © 1998 Addison Wesley Longman, Inc. TM-84 Basic Structures of Corporations: Simple and Functional 4.7aBasic Structures of Corporations: Simple and Functional (Fig. 4.4)p. 88 I. Simple StructureII. Functional Structure Owner-Manager Workers Top Management ManufacturingSalesFinancePersonnel

12. © 1998 Addison Wesley Longman, Inc. TM-85 Basic Structures of Corporations: Divisional 4.7b Basic Structures of Corporations: Divisional (Fig. 4.4)p. 88 III. Divisional Structure* ManufacturingFinanceManufacturingFinance Top Management Product Division AProduct Division B *Conglomerate structure is a variant of the division structure. SalesPersonnelSalesPersonnel

13. © 1998 Addison Wesley Longman, Inc. TM-86 A corporate conglomerate is an organizational structure made up of SBU’s

14. © 1998 Addison Wesley Longman, Inc. TM-87 Strategic Business Unit (SBU) Independent product-market unit with: 1. Unique mission 2. Identifiable competitors 3. External market focus 4. Control of its business functions 4.8Strategic Business Unitp. 89

15. © 1998 Addison Wesley Longman, Inc. TM-88 After We Evaluate Organizational Structure We Evaluate Organizational Culture: Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of workers to the next generation.Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of workers to the next generation.

16. © 1998 Addison Wesley Longman, Inc. TM-89 Attributes of Corporate Culture Intensity - degree member accept norms and valuesIntensity - degree member accept norms and values Integration - event to which members in various departments share organizational cultureIntegration - event to which members in various departments share organizational culture 4.9Attributes of Corporate Culturep. 89

17. © 1998 Addison Wesley Longman, Inc. TM-90 Functions of Corporate Culture 1. Conveys sense of identity 2. Generates employee commitment 3. Adds to organizational stability 4. Serves as a frame of reference 4.10 Functions of Corporate Culturep. 90

18. © 1998 Addison Wesley Longman, Inc. TM-91 Marketing Mix Variables 4.11 Marketing Mix Variables (Table 4.1)p. 93 ProductPlacePromotionPrice QualityChannelsAdvertisingList price FeaturesCoveragePersonal sellingDiscounts OptionsLocationsSales promotionAllowances StyleInventoryPublicityPayment periods Brand nameTransportCredit terms Packaging Sizes Services Warranties Returns Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 89. Copyright © 1980. Reprinted by permission of Prentice-Hall, Inc.

19. © 1998 Addison Wesley Longman, Inc. TM-92 The Product Life Cycle 4.12The Product Life Cycle (Fig. 4.5)p. 94 IntroductionGrowth*MaturityDecline Time Sales *The right end of the Growth stage is often called Competitive Turbulence because of price and distribution competition that shakes out the weaker competitors. For further information, see C. R. Wasson, Dynamic Competitive Strategy and Product Life Cycles, 3rd ed. (Austin, Tex.: Austin Press, 1978).

20. © 1998 Addison Wesley Longman, Inc. TM-93 R&D Mix Basic R&DBasic R&D Product R&DProduct R&D Process (Engineering) R&DProcess (Engineering) R&D 4.13R&D Mix p. 94-95

21. © 1998 Addison Wesley Longman, Inc. TM-94 Technological Discontinuity 4.14Technological Discontinuity (Fig. 4.6)p. 97 What the S-Curves Reveal Research Effort/Expenditure In the corporate planning process, it is generally assumed that incremental progress in technology will occur. But past developments in a given technology cannot be extrapolated into the future, because every technology has its limits. The key to competitiveness is to determine when to shift re- sources to a technology with more potential. Mature Technology New Technology Source: P. Pascarella, “Are You Investing in the Wrong Technology?” Industry Week (July 25, 1983), p. 38. Copyright © 1983 Penton/IPC. All rights reserved. Reprinted by permission. Product Performance

22. © 1998 Addison Wesley Longman, Inc. TM-95 Technological Competence - can develop and use new technology Technological Transfer - take technology form lab to market

23. © 1998 Addison Wesley Longman, Inc. TM-96 Finance (Resources) Do Appendix A - see Individual & Team Case OutlineDo Appendix A - see Individual & Team Case Outline

24. © 1998 Addison Wesley Longman, Inc. TM-97 Operations Intermittent SystemsIntermittent Systems Fixed Assembly LinesFixed Assembly Lines Product Process SystemsProduct Process Systems

25. © 1998 Addison Wesley Longman, Inc. TM-98 Information Systems

26. © 1998 Addison Wesley Longman, Inc. TM-99 Conclusion Internal Environment Organizational StructureOrganizational Structure Organizational CultureOrganizational Culture Resources - Marketing, R & D, Finance, Operations, Information SystemsResources - Marketing, R & D, Finance, Operations, Information Systems

27. © 1998 Addison Wesley Longman, Inc. TM-100 Economies of Scale versus Economies of Scope 4.15Economies of Scale versus Scopep. 98

28. © 1998 Addison Wesley Longman, Inc. TM-101 Internal Factor Analysis Summary (IFAS) 4.16Internal Factor Analysis Summary (IFAS): Blankp. 102 Internal Factors Weight Rating Weighted Score Comments 12345 1.00 Strengths Weaknesses Total Weighted Score Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment. Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates. Reprinted by permission.

29. © 1998 Addison Wesley Longman, Inc. TM-102 Internal Factor Analysis Summary (IFAS): Maytag as Example 4.17Internal Factor Analysis Summary (IFAS): Maytag as Example (Table 4.2)p. 102 Internal Factors Weight Rating Weighted Score Comments 12345 1.00 Strengths Quality Maytag culture Experienced top management Vertical integration Employee relations Hoover’s international orientation Weaknesses Process-oriented R&D Distribution channels Financial position Global positioning Manufacturing facilities Total Weighted Score Quality key to success Know appliances Dedicated factories Good, but deteriorating Hoover name in cleaners Slow on new products Superstores replacing small dealers High debt load Hoover weak outside the United Kingdom and Australia Investing now 3.05.15.05.10.05.15.05.15.20.05 54433222245443322224.75.20.40.15.45.10.30.40.20