1. Team III M Isabel Castaneda Cal Wallace Patrick McGregor
A View from the Top Chapter 5 Analyzing an Organization’s Strategic Resource Base
Team III
M Isabel Castaneda
Cal Wallace
Patrick McGregor

2. Introduction
Assessing strategic resources and capabilities is important when determining a companies strategy.
Analyzing a company’s internal strategic environment has two principal components:
Cataloging and valuing current resources and core competencies for creating competitive advantages.
Identifying internal pressures for change and forces for resistance.

3. Strategic Resources
A company’s strategic resource base is composed of physical financial, human resource, and organizational assets.
To evaluate the relative worth of a company’s strategic resources four questions must be asked.

4. Physical Assets
A company’s physical assets can affect its competitiveness.
i.e. Airline companies, the average age of the fleet affects customer perceptions, routine flexibility, and operating and maintenance costs.

5. Analyzing a Company’s Financial Resource Base
For the corporate level, evaluations of the financial position involves thorough analysis of the company’s financial statements.
Financial ratio analysis can provide an overview of an organization’s current and past profitability, liquidity, leverage, and activity.

6. Profitability Ratios
Measure how well a company is allocating its resources.
Ratios
Gross Profit Margin
Net Profit Margin
Return on Assets
Return on Equity

7. Liquidity Ratios
Measure cash flow generation and ability of an organization to meet its current obligations.
Ratios
Current Ratio
Quick Ratio
Inventory to Net Working Capital

8. Leverage
Can indicate potential improvements in the financing of operations.
Ratios
Debt-to-assets ratio
Debt-to-equity ratio
Long-term debt-to-equity ratio

9. Activity Ratios Measure productivity and efficiency Ratios
Inventory Turnover
Fixed Asset Turnover
Average Collection

10. DuPont Formula
Used to analyze an organization’s return on assets directly links operating variables to financial performance.
Accounting-based measures have generally been found inadequate indicators of a business unit’s economic value.

11. Shareholder Value Analysis
Focuses on cash flow generation to determine economic value.
It is helpful to answer the following questions:
Does the current strategic plan create shareholder value.
How does the business unit’s performance compare with others in the corporation.
Would an alternative strategy increase shareholder value more than the current.

12. Economic Value Added
Economic value added and market value added have supplemented accounting based performance measures.
Advantages:
Help align employee and owner interest through employee compensation.
Can be the basis for a single competitive performance measure called MVA.
Indicates if returns lag the cost of capital

13. Analyzing a Company’s Financial Resource Base
Cost analysis deals with identification of strategic cost driver.
Cost benchmarking is useful in assessing a firm’s cost relative to those competing firms, or for comparing a company’s performance against best-in-class competitors.

14. Human Capital: A Company’s Most Valuable Strategic Resource
Firms are run by and for people.
More focus on attracting, developing, and retaining.
Continuous employee development is critical
Ex- Fed Ex has an 11 week training and “Leadership Institute”

15. Organizational Strategic Resources
Knowledge
Intellectual Capital Base
Reputation with customers, partners, and suppliers and financial community
Specific competencies, processes, and skill sets
Corporate Culture

16. Organizational Strategic Resources Continuation
Intellectual Capital- hard to measure
Patents- protect and preserve competitive advantage
Knowledge- better knowledge » better performance and enhanced learning

17. The Importance of Brands
Brands provide guarantee of reliability and quality
Customers must trust the brands
Ex- Ranking 100 Best Global Brands by dollar value.

18. The Importance of Brands Continuation
Ranking 100 Best Global Brands by dollar value
Identifiable Qualities:
Do not fear public flops
Face your weaknesses
Protect your culture

19. Core Competencies
Great capabilities that enable a company to build a competitive advantage.
Focus on creating a value, and change as customer’s requirements change
Hamel and Prahalad three tests for identifying core competencies

20. Internal Change Forces and the Capacity for Change
Four basic forms of resistance
Structural, Organizational rigidities
Closed mind-sets reflecting support for obsolete business beliefs and strategies
Entrenched cultures reflecting values, behaviors, and skills that are not conductive to change.
Counterproductive change momentum that isn’t in tune with current strategic requirements

21. The Company Life Cycle Growth Founding Requires Establishment of:
Organizational Learning
Delegation of Authority
Leadership challenges
Responding to external and internal change.
Working together as a cohesive unit
Founding
Establishment of:
Vision and Purpose
Direction
Allocation of Capital and Resources

22. Mckinsey 7-S Model Frameworks Particulars of the Model Strategy
Structure
Systems
Skills
Staff
Style
All link to Shared Values
Particulars of the Model 
Not hierarchical
Change in one force will occur a change in another
Fixing problems in one area without attention to others is counterproductive.
Align each factor accordingly for a desired direction of a particular goal.

23. Stakeholder Analysis What roles do they play? Internal or External
Rights and Interest
Returns
Competition
Laws and Regulations
Demands of the Stakeholders

24. SWOT 
SWOT- the sizing up of a company’s strengths, weaknesses, external opportunities, and threats.
Strengths and Weaknesses are internal
Opportunities and Threats are external
FIGURE 5-5 on page 69

25. Work Cited
Kluyer, C (2006). Strategy: A View from the Top. Upper Saddle River, New Jersey: Pearson Education.
Building Brands. Retrieved June 7, 2009, from Building Brands: Mckinseys 7-S Model Web site:
Oxford Analytical, (2009, May, 27). Emerging Economies Must Maintain Social Programs. Forbes, Retrieved June 7, 2009, from