Dickson K.W. Chiu

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COMP5331 Web Pub and Web Ad 7. Internal Analysis

• Dickson K.W. Chiu
• PhD, SMIEEE

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What is an Internal Analysis?

• Looks at the organizations
• Vision
• Mission
• Strategic objectives
• Identifies and evaluates resources, capabilities,
  and core competencies

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Company Vision

• Massively inspiring
• Overarching
• Long-term
• Driven by and evokes passion
• Fundamental statement of the organizations
• Values, Aspiration, Goals
• E.g., Disneyland To be the Happiest place on
  earth

Company vision
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Mission Statements

• Purpose of the company
• Basis of competition and competitive advantages
• More specific than vision
• Focused on the means by which the firm will
  compete
• E.g., FedEx To produce superior financial
  returns for our shareholders as we serve our
  customers with the highest quality
  transportation, logistics, and e-commerce.

Mission statements
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Strategic Objectives

• Operationalize the mission statement
• Provide guidance on how the organization can
  fulfill or move toward the higher goals
• More specific, a more well-defined time frame,
  measurable (yardstick for rewards and
  incentives), consistent with vision and mission,
  realistic (challenging but doable), timely
• E.g., PG Increase sales growth 6 to 8 in
  each of the next five years

Strategic objectives
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A Quick Review of Organizational Resources

• Organizational Resources (assets)
• Financial resources debt capacity, credit lines,
  etc.
• Physical assets buildings, equipment and
  fixtures
• Human resources experience, knowledge, etc. of
  employees
• Intangible resources brand names, patents
• Structural-cultural resources culture, work
  systems

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The Strategic Role of Organizational Resources
and Organizational Capabilities
Performance Results
Competitive Advantage
Distinctive Organizational Capabilities
Organizational Capabilities
Organizational Resources
Core Competencies
Financial assets Physical assets Human
resources Intangible assets Structural-cultural
assets
Organizational processes and routines Accumulated
knowledge Actual work activities
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From Resources to Organizational Capabilities

• Organizational capabilities
• Competencies or skills that a firm employs to
  transform inputs to outputs, and capacity to
  combine tangible and intangible resources to
  attain desired end
• Outstanding customer service
• Excellent product development capabilities
• Innovativeness of products and services
• Ability to hire, motivate, and retain human
  capital
• Organizational routines and processes
• Capabilities patterns of coordination
• Sustainable competitive advantage
• Dynamic capabilities

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Characteristics of Distinctive Organizational
Capabilities
Contributes to Superior Customer Value
Distinctive Organizational Capabilities
Can Be Used in a Variety of Ways
Is Difficult for Competitors to Imitate
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The Role of Strengths and Weaknesses
Strengths Resources that an organization
possesses and capabilities that an organization
has developed. Both can be exploited and
developed into a sustainable competitive advantage
Weaknesses Resources and capabilities that are
lacking or deficient. Prevent an organization
from developing a sustainable competitive
advantage
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How to do an internal analysis value chain

• Using a value-chain analysis
• The premise behind value chain analysis is that
  customers demand value from goods and services
  they obtain
• Customer value
• Product is unique and different
• Product is low priced
• Quick response to specific or distinctive
  customer needs
• A value chain is a systematic way of examining
  organizations functional activities

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Primary and Support Activities in the Value Chain

Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Operations
Service

MARGIN
Inbound Logistics
Marketing and Sales
Outbound Logistics
Primary Activities
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How to do an internal analysis internal audit

• Using an internal audit
• Thoroughly assesses an organization's various
  internal functional areas
• Are the necessary resources available so that the
  people in these functional areas can perform
  their assigned work activities and how well do
  they perform these assigned work activities?

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Using an internal audit

• Six Primary Functional Areas
• Productions-Operations
• Marketing
• Research and Development
• Financial and Accounting
• Management (including HRM)
• Information Systems

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How to do an internal analysis Capabilities
Assessment Profile

• Complex Analysis of Capabilities
• Not as easily identifiable as organizational
  functions
• Hard for competitors to imitate
• Two-phased Capability Assessment
• Phase I Identify distinctive capabilities
• Phase II Develop and leverage these distinctive
  capabilities

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Identifying Distinctive Organizational
Capabilities
Step 1
Prepare current product-market profile.
Identify sources of competitive advantage and
disadvantage in the main product-market segments.
Step 2
Describe all the organizational capabilities and
competencies.
Step 3
Sort the core capabilities and competencies
according to strategic importance.
Step 4
Identify and agree on the key capabilities and
competencies.
Step 5
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Criteria to Judge Organizational Strengths and
Weaknesses
Past Performance Trends
Comparison Against Competitors
Are organizational resources and
capabilities strengths or weaknesses?
Personal Opinions of Strategic Decision Makers or
Consultants
Specific Goals or Targets
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Why Do an Internal Analysis?

1. It is the only way to identify an organizations
   strengths and weaknesses
2. Its needed for making good strategic decisions