Wheelen Smbp13 Ppt 05 26k32

STRATEGIC MANAGEMENT & BUSINESS POLICY 13TH EDITION THOMAS L. WHEELEN

J. DAVID HUNGER

• Learning Objectives Understand a company’s business model and how it could be imitated Assess a company’s corporate culture and how it might affect a proposed strategy Scan functional resources to determine their fit with a firm’s strategy

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Scanning and analyzing the external environment is not enough to provide an organization a competitive advantage. Analysts must also look within the corporation itself to identify internal strategic factors (critical strengths and weaknesses) that are likely to determine whether a firm will be able to take advantage of opportunities while avoiding threats. This internal scanning, often referred to as organizational analysis.

Organizational analysis- Concerned with identifying and developing an organization’s resources and competencies 5-3

Obj1: Apply the resource view of the firm to determine core and distinctive competencies

Core and Distinctive Competencies 1. Resources are an organization’s assets – –

Tangible e.g. equipment Intangible e.g. culture, and reputation

2. Capabilities- a corporation’s ability to exploit

‫استغلل‬

its resources. They consist of business processes that manage the interaction among resources to turn inputs into outputs. A capability is functionally based and is resident in a particular function. Thus, there are marketing capabilities, manufacturing capabilities, and HR management capabilities. When these capabilities are constantly being changed and reconfigured to make them more adaptive to an uncertain environment, they are called dynamic capabilities.

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Core and Distinctive Competencies 3. Competency- a cross-functional integration and ‫الكفاءة‬

coordination of capabilities. For example, a competency in new product development may be the consequence of integrating information systems capabilities, marketing capabilities, R&D capabilities, and production capabilities.

Core competency- a collection of competencies that cross divisional boundaries, is wide-spread throughout the corporation and is something the corporation does exceedingly well Distinctive competency- core competencies that are superior to those of the competition 5-5

Core and Distinctive Competencies VRIO framework (Barney), four questions to •

evaluate a firm’s competencies: Value: Does it provide customer value and competitive advantage?

• Rare • Imitability •

Organization: Is the firm organized to exploit the resource?

Obj2: Use the VRIO framework and the value chain to assess an organization’s competitive advantage and how it can be sustained

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Core and Distinctive Competencies It is important to evaluate the importance of a company’s (1) resources, (2) capabilities, and (3) competencies to ascertain whether they are internal strategic factors. This can be done by comparing measures of these factors with measures of (1) the company’s past performance, (2) the company’s key competitors, and (3) the industry as a whole. Even though a distinctive competency is certainly considered to be a corporation’s key strength, a key strength may not always be a distinctive competency. As competitors attempt to imitate another company’s competency. Even though the competency may still be a core competency and thus a strength, it is no longer unique. For example, when Maytag Company alone made high-quality home appliances, this ability was a distinctive competency. As other appliance makers imitated Maytag’s quality control and design processes, this continued to be a key strength (that is, a core competency) of Maytag, but it was less and less a distinctive competency.

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Using Resources to Gain Competitive Advantage A five-step, resource-based approach to strategy analysis. 1. Identify and classify resources in of strengths and weaknesses. 2. Combine the firm’s strengths into specific capabilities and core competencies Appraise profit potential- Are there any distinctive competencies? 4. Select the strategy that best exploits the firm’s capabilities and competencies relative to external opportunities 5. Identify resource gaps and invest in upgrading weaknesses Where do these competencies come from. A corporation can gain access to a distinctive competency in four ways: 3.

Obj2: Use the VRIO framework and the value chain to assess an organization’s competitive advantage and how it can be sustained

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Access to a Distinctive Competency 1. Asset endowment‫هبات الصول‬,

such as a key patent coming from the founding ‫ تأسيس‬of the company. OR

2. Acquired from someone else. OR 3. Shared with another business 4. Built and accumulated within the company over time. There is some evidence that the best corporations prefer organic internal growth over acquisitions.

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Using Resources to Gain Competitive Advantage The desire to build a core competency is one reason entrepreneurial and other fast-growing firms often tend to locate close to their competitors. They form Clusters-

geographic concentrations of interconnected companies and industries (e.g. Silicon Valley) 1. Provide Access to: •

Employees, Suppliers, Information, and Complementary products 2. Being close to one’s competitors makes it easier to measure and compare performance against rivals. companies with core competencies have little to gain from locating in a cluster with other firms and therefore do not do so. In contrast, firms with the weakest technologies, human resources, training programs, suppliers, and distributors are strongly motivated to cluster

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Determining the Sustainability of an Advantage Two characteristics determine the sustainability ‫ المتانة‬of a firm’s distinctive competency(ies) Durability- the rate at which a firm’s underlying resources, capabilities, or core competencies depreciate or become obsolete . Imitability- the rate at which a firm’s underlying resources, capabilities, or core competencies can be duplicated by others

Obj2: Use the VRIO framework and the value chain to assess an organization’s competitive advantage and how it can be sustained

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A core competency can be easily imitated to the extent that it is (Imitability an Advantage)

Transparency- the speed at which other firms understand the relationship of resources and capabilities ing a successful strategy Transferability- the ability of competitors to gather the resources and capabilities necessary to a competitive challenge Replicability- the ability of competitors to use duplicated resources and capabilities to imitate the other firm’s success

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It is relatively easy to learn and imitate another company’s core competency or capability if it comes from Explicit knowledge- knowledge that can be easily articulated and communicated Tacit knowledge- knowledge that is not easily communicated because it is deeply rooted in employee experience or in the company’s culture 5-13

An organization’s resources and capabilities can be placed on a continuum to the extent they are durable and can’t be imitated (that is, aren’t transparent, transferable, or replicable) by another firm. This continuum of sustainability is depicted in Figure 5–1.

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•

‫أهمية‬

Q1: What is the relevance of the resource-based view of the firm to strategic management in a global environment?

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The resource-based view of the firm is an attempt to bring attention to the importance of a corporation's resources in strategic management. Porter's concepts of industry analysis and competitive strategy alone can’t determine a firm's profit potential. emphasis on the industry tended to ignore a firm's core skills and competencies. What good is the knowledge that a niche in the market exists that can be reached through a focused differentiation competitive strategy if a corporation doesn't have the resources to implement such a strategy? As noted in the text, experts on the resource-based view suggest that differences in performance among companies may be explained best, not through differences in industry structure identified by industry analysis, but through differences in corporate assets and resources and their application. The resource-based view of the firm is compatible with the traditional concepts of S.W.O.T. The only danger with the resource-based approach is that people may go overboard again and tend to put too much emphasis on internal factors and not enough on external factors. Nevertheless, the idea that the durability and imitability of corporate resources determine competitive advance is a very useful one. The movement toward a more global environment simply accentuates the need to assess and to build a firm’s competencies so that it can successfully compete world-wide. A competency may be distinctive in one’s home country, but only be a core competency (or less) in another location in the world. 5-15

When analyzing a company, it is helpful to learn what sort of business model it is following.

Business models- a company’s method for making money in the current business environment composed of five elements: • Who the company serves (customers) • What the company provides (product) • How the company makes money • How the company differentiates and sustains competitive advantage • How the company provides its product/service The simplest business model is to provide a good or service that can be sold so that revenues exceed costs. Other models can be much more complicated. Some of the many possible business models are: 5-16

Business models •

Customer solutions model:

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Profit pyramid model:

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not by selling products, but by selling expertise to improve its customers’ operations. This is a consulting model (e.g. IBM) . offers a full line of products in order to close out any niches where a competitor might find a position. The key is to get customers to buy in at the low-priced, low-margin entry point and move them up to high-priced, high-margin products where the company makes its money (e.g. auto manufac. Multi-component system/installed model: sell one product at break-even pricing in order to make money on higher-margin product (HP printers)

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Advertising model:

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Switchboard model:

offers its basic product free in order to make money on advertising (e.g. free newspapers) a firm acts as an intermediary to connect multiple sellers to

multiple buyers (ebuy).

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Business models (cont’d) •

Time model: be the first to the market

• Efficiency model: company waits until a product becomes standardized and then enters the market with a low-priced, lowmargin product that appeals to the mass market.

• Blockbuster model: focus is on high investment in a few products with high potential payoffs (e.g. medicine)

• Profit multiplier model Walt Disney • Entrepreneurial model (small innovations) •

De Facto industry standard model:

offers products free or at a very low price in order to saturate the market and become the industry standard. Once s are locked in, the company offers higher-margin products using this standard (e.g. MS IE)

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Business models (cont’d) In order to understand how some of these business models work, it is important to learn where on the value chain the company makes its money. Although a company might offer a large number of products and services, one product line might contribute most of the profits. For example, ink and toner supplies for Hewlett-Packard’s printers make up more than half of the company’s profits while ing for less than 25% of its sales.

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Value chain- a linked set of value creating activities that begin with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer. The focus of value-chain analysis is to examine the corporation in the context of the overall chain of value-creating activities, of which the firm may be only a small part. Very few corporations include a product’s entire value chain. Ford Motor Company at that time was completely vertically integrated, that is, it controlled (usually by ownership) every stage of the value chain, from the iron mines to the retailers. 5-20

Industry Value Chain Analysis The value chains can be split into two segments:

• •

Upstream Downstream

In the petroleum industry, for example, upstream refers to oil ‫مصفاة‬ exploration, drilling, and moving of the crude oil to the refinery, and downstream refers to refining the oil plus transporting and marketing gasoline and refined oil to distributors and gas station retailers. An industry can be analyzed in of the profit margin available at any point along the value chain. In auto industry’ From a revenue standpoint, auto manufacturers dominate the industry, ing for almost 60% of total industry revenues. Profits, however, are a different matter. Auto leasing has been the most profitable activity in the value chain, followed by insurance and auto loans. 5-21

Industry Value Chain Analysis Center of gravity- the part of the chain that is most important to the company and the point where its core competencies lie. center of gravity is usually the point at which the company started. After a firm successfully establishes itself at this point by obtaining a competitive advantage, one of its first strategic moves is to move forward or backward along the value chain in order to reduce costs, guarantee access to key raw materials, or to guarantee distribution. This process, called, – Vertical integration

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Q2: How can value chain analysis help identify a company’s strengths and weaknesses? •

Industry value-chain analysis can identify which firms are strongest (and weakest) in each stage of the industry’s value chain. Assuming the firm under consideration operates at various stages of the industry value chain, a comparison with other firms at each stage can help identify a firm’s strengths and weaknesses. The systematic examination of an individual firm’s value activities in corporate value-chain analysis can lead to a better understanding of a corporation’s strengths and weaknesses - thus identifying any core or distinctive competencies. 5-23

Corporate Value Chain Analysis Each corporation has its own internal value chain of activities. Manufacturing firm’s primary activities begin with

- Primary activities: 1. Inbound logistics: raw materials handling

2. Operations 3. Outbound logistics: distribution

activities:

ensure that the primary value chain activities operate effectively

• Procurement • Technology development • Human resource management • Firm infrastructure 5-24

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Corporate Value Chain Analysis Examination of individual value activities can lead to a better understanding of a corporation’s strengths and weaknesses. Corporate value chain analysis involves the following three steps:

1. Examine each product line’s value chain in of the various activities involved in producing the product or service: Which activities can be considered strengths (core 2.

competencies) or weaknesses (core deficiencies) Examine the linkages within each product line’s value chain: Linkages are the connections between the way one value activity (for example, marketing) is performed and the cost of performance of another activity (for example, quality control) In seeking ways for a corporation to gain competitive advantage in the marketplace, the same function can be performed in different ways with different results. For example, quality inspection of 100% of output by the workers themselves instead of the usual 10% by quality control inspectors might increase production costs,

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Corporate Value Chain Analysis 3. Examine the potential synergies among the value chains of different product lines or business units: Each value element, such as advertising or manufacturing, has an inherent economy of scale in which activities are conducted at their lowest possible cost per unit of output. If a particular product is not being produced at a high enough level to reach economies of scale in distribution, another product could be used to share the same distribution channel. This is an example of economies of scope, which result when the value chains of two separate products or services share activities, such as the same marketing channels or manufacturing facilities. The cost of t production of multiple products can be lower than the cost of separate production. 5-27

• A1. What is the difference between industry and corporate value chain analysis? What are their value in strategic planning? •

The focus of value-chain analysis is to examine the corporation in the context of the overall chain of value-creating activities, of which the firm may be only a small part. In industry value-chain analysis, the value chain is split into two segments, upstream and downstream parts with the corporation under examination being the focal point. In analyzing the complete value chain of a product, note that even if a firm operates up and down the entire industry chain, it usually has a center of gravity - an area of primary expertise where its primary activities (and core competencies) lie. One goal of industry value-chain analysis is to identify where on the chain is the activity providing the greatest return on investment. This might be an activity which a corporation might want to expand when doing strategic planning.

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In corporate value-chain analysis, each corporation has its own internal value chain of activities. Each of a company’s product lines has its own distinctive value chain. Because most corporations make several different products or services, an internal analysis of the firm involves analyzing a series of different value chains. The systematic examination of individual value activities can lead to a better understanding of a corporation’s strengths and weaknesses - thus ing strategic planning.

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The simplest way to begin an analysis of a corporation’s value chain is by carefully examining its traditional functional areas for potential strengths and weaknesses. Functional resources and capabilities include not only the financial, physical, and human assets in each area but also the ability of the people in each area to formulate and implement the necessary functional objectives, strategies, and policies. These resources and capabilities include the knowledge of analytical concepts and procedural techniques common to each area as well as the ability of the people in each area to use them effectively. If used properly, these resources and capabilities serve as strengths to carry out value-added activities and strategic decisions. In addition to the usual business functions of marketing, finance, R&D, operations, human resources, and information systems/technology, we also discuss structure and culture as key parts of a business corporation’s value chain. 5-29

1. Basic Organizational Structures • Simple: has no functional or product categories • Functional: appropriate for a medium-sized firm with several product lines in one industry.

• Divisional:

appropriate for a large corporation with many product lines in several related industries.

• Strategic Business Units: are a modification of the divisional structure. Strategic business units are divisions or groups of divisions composed of independent product market segments that are given primary responsibility and authority for the management of their own functional areas.

• Conglomerate ‫تكتل‬:

appropriate for a large corporation with many product lines in several unrelated industries. 5-30

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2. Corporate Culture: The Company Way “company way” of doing things is derived from the corporation’s culture. Corporate culture- the collection of beliefs, expectations and values learned and shared by a corporation’s and transmitted from one generation of employees to another. 5-32

Functions fulfilled by Corporate Culture • Conveys a sense of identity for employees • Generates employee commitment • Adds to the stability of the organization as a social system • Serves as a frame of reference for employees to understand organizational activities and as a guide for behavior 5-33

Functions fulfilled by Corporate Culture Corporate culture shapes the behavior of people in a corporation, thus affecting corporate performance. For example, corporate cultures that emphasize the socialization of new employees have less employee turnover, leading to lower costs. Because corporate cultures have a powerful influence on the behavior of people at all levels, they can strongly affect a corporation’s ability to shift its strategic direction. A strong culture should not only promote survival, but it should also create the basis for a superior competitive position by increasing motivation 5-34

Corporate Culture: The Company Way Cultural intensity- the degree of which of a unit accept the norms, values and other cultural content associated with the unit Shows the depth of the culture Cultural integration- the extent of which units throughout the organization share a common culture Shows the breadth of the culture 5-35

Q3. In what ways can a corporation’s structure and culture be internal strengths or weaknesses? •

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If a corporation's structure is compatible with present and potential strategies, it can be viewed as an internal corporate strength. If, however, the structure is not compatible, it is a definite weakness and will act to constrain strategy formulation. For example, if a corporation is structured on the basis of function, this may be a weakness if the firm wishes to grow by acquiring other profitable corporations. In order to implement such a strategy, the strategy formulators may have to reorganize on a divisional basis. Corporate culture, a collection of beliefs, expectations, and values shared by a corporation's , acts to shape the behavior of people in a corporation. Since corporate culture has a powerful influence on the behavior of managers as well as other employees, it may strongly affect a corporation's ability to shift its strategic direction. Acting in a manner similar to structure, to the extent that a corporation's culture is compatible with present and potential strategies, it can be viewed as an internal corporate strength. To the extent that it is not compatible, it may spell disaster for a strategic change in the implementation stage. A strategy with contradicts an entrenched culture may find itself being quietly (or not so quietly) sabotaged by the corporation's most loyal and competent employees.

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3. Strategic Marketing Issues Market position- deals with the question, Who are our customers? It refers to the selection of specific areas for marketing concentration and can be expressed in of market, product, and geographic locations.

Marketing Mix- the particular combination of key variables under a corporation’s control that can be used to affect demand and to gain competitive advantage. These variables are product, place, promotion, and price. Within each of these four variables are several sub-variables, listed in Table 5–1, 5-37

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3. Strategic Marketing Issues Product life cycle- product monetary‫ النقدية‬sales over time from introduction through growth and maturity to decline

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3. Strategic Marketing Issues Brand and Corporate Reputation: Brand- a name given to a company’s product which identifies that item in the mind of the consumer Corporate brand- a type of brand in which the company’s name serves as the brand 5-40

Brand and Corporate Reputation:

Corporate reputation- a widely held perception of a company by the general public It consists of two attributes: • Stakeholders’ perceptions of quality • Corporation’s prominence ‫ بروز‬in the minds of stakeholders.

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4. Strategic Financial Issues Financial leverage- ratio of total debt to total assets • Used to describe how debt is used to increase earnings available to common shareholders Capital budgeting- the analyzing and ranking of possible investments in fixed assets in of additional outlays and receipts that will result from each investment. A good finance department will be able to prepare such capital budgets and to rank them on the basis of some accepted criteria or • Hurdle point‫معدل العقبة‬ 5-42

5. Strategic Research and Development Issues R&D is responsible for suggesting and implementing a company’s technological strategy in light of its corporate objectives and policies

R & D intensity- spending on R & D as a percentage of sales revenue Technology competence- the development and use of innovative technology Technology transfer- the process of taking new technology from the laboratory to the marketplace 5-43

Strategic Research and Development Issues R & D Mix- the mix of: Basic R & D- focuses on theoretical problems Product R & D- concentrates on marketing and is concerned with product or product packaging improvements Engineering R & D is concerned with engineering, concentrating on quality control, and the development of design specifications and improved production equipment Prentice Hall, Inc. ©2012

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Strategic Research and Development Issues Technology discontinuity‫انقطاع‬- when a new technology cannot be used to enhance current technology, but substitutes for the technology to yield better performance • Moore’s Law 5-45

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Q5: How might a firm's management decide whether it should continue to invest in current known technology or in new, but untested, technology? What factors might encourage or discourage such a shift? •

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Although technological discontinuity is discussed in the chapter, the answer to this question is not provided. Igor Ansoff recommends that strategic managers deal with the issue of technology substitution by (1) continuously searching for sources from which new technologies are likely, (2) as the technology surfaces, making a timely commitment either to acquire the new technology or to prepare to leave the market, and (3) reallocating resources from improvements in the older process‑oriented technology to investments in the newer, typically product‑oriented, technology as the new technology approaches commercial realization. In his book, The Innovator’s Dilemma, Christensen explains how difficult it is for a firm to continue to build and market its current products to its current customers using current, well-understood technology when it is trying to create new products for new customers using new, untested technology. The cost and time requirements to stay up to date with new and

old technologies can bankrupt a company, especially given that a company’s culture, structure, and processes are primarily built around the old known technology. 5-47

6. Strategic Operations Issues Task of the operations (manufacturing or service) manager is to develop and operate a system that will produce the required products or services, with a certain quality, at a given cost, within an allotted time. In very general , manufacturing can be intermittent or continuous.

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Strategic Operations Issues Intermittent ‫متقطعة‬Systems- item is normally processed sequentially, but the work and sequence of the process vary Continuous systems- work is laid out in lines on which products can be continuously assembled or processed, An example is an automobile assembly line. A

firm using continuous systems invests heavily in fixed investments such as automated processes and highly sophisticated machinery. Its labor force, relatively small but highly skilled, earns salaries rather than piece-rate wages. Consequently, this firm has a high amount of fixed costs. It also has a relatively high break-even point, but its variable cost line rises slowly. This is an example of operating leverage,

Operating leverage- impact of a specific change in sales volume on net operation income 5-49

Strategic Operations Issues Experience curve A conceptual framework that many large corporations have used successfully. (originally called the learning curve)-

unit production costs decline by some fixed percentage each time the total accumulated volume of production units doubles 5-50

The actual percentage varies by industry and is based on many variables: e.g., the amount of time it takes a person to learn a new task, and many others. For example, in an industry with an 85% experience curve, a corporation might expect a 15% reduction in unit costs for every doubling of volume.. Achieving these results often means investing in R&D and fixed assets; higher fixed costs and less flexibility thus result. Nevertheless the manufacturing strategy is one of building capacity ahead of demand in order to achieve the lower unit costs that develop from the experience curve. On the basis of some future point on the experience curve, the corporation should price the product or service very low to preempt competition and increase market demand. Management commonly uses the experience curve in estimating the production costs of (1) a product never before made with the present techniques and processes or (2) current products produced by newly introduced techniques or processes. For example, a cleaning company can reduce its costs per employee by having its workers use the same equipment and techniques to clean many adjacent offices in one office building rather than just cleaning a few offices in multiple buildings. Although many firms have used experience curves extensively, an unquestioning acceptance of the industry norm (such as 80% for the airframe industry or 70% for integrated circuits) is very risky. The experience curve of the industry as a whole might not hold true for a particular company for a variety of reasons 5-51

Q4.What are the pros and cons of management's using the experience curve to determine strategy? •

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To popularized the experience (or learning) curve concept in strategic management. Based on the assumption underlying the BCG growth-share portfolio matrix, the key to profits lies in market share. Results from PIMS research s this notion. If a corporation is able to sell a very large number of new products by offering them at a very low price (actually below unit cost unless vast quantities are sold), it will gain a dominant market share and preempt competition by keeping the price too low for potential competitors to earn profits. This forms a formidable entry barrier. The corporation successfully using the experience curve will earn large profits either as a star or when it eventually becomes a cash cow. The experience curve is thus a basis for using financial and operating leverage to achieve a low cost business-level strategy.

•

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Q4.What are the pros and cons of management's using the experience curve to determine strategy? • •

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The experience curve concept does have its limitations, however. For one thing, it does not consider that a corporation can be very profitable with very low leverage by occupying a dependable niche in the marketplace based upon some differentiating strategy such as quality or snob appeal. Rolls Royce automobiles and Maytag washers are just two examples of firms ignoring the experience curve by pricing at a cost above the market price and still achieving solid profits. Differentiation and focus strategies can be very successful without using the experience curve. Another limitation of the experience curve is that much of its success is based upon economies of scale. The use of computers and robots, however, negates much of the experience curve advantages. The curve in a CAD/CAM plant might be so steep that all the experience advantages are learned in the production of two thousand instead of two million units. The implication is that a firm following Henderson's strategy of cost leadership based on an assumed experience curve might find it very difficult to reach the required high market share break-even point when its competitors using CAD/CAM can quickly meet its price in the marketplace by going quickly down their own experience curves. Although it is possible to have a number of successful niches in a given product/service market, only one star position is available in Henderson's growth-share matrix. The risk is therefore very high to a corporation contemplating a low cost strategy by using an assumed experience curve.

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Strategic Operations Issues Flexible Manufacturing for Mass Customization: The use of large, continuous, mass-production facilities to take advantage of experience-curve economies has recently been criticized.

• Computer Assisted Design • Computer Assisted Manufacturing • Economies of Scale 5-54

7. Strategic Human Resource Issues Teams Autonomous (self-managed)- a group of people working together without a supervisor to plan, coordinate and evaluate their work Cross-functional work teams- various disciplines are involved in a project from the beginning Concurrent engineering- specialists work sideby-side and compare notes constantly to design cost-effective products with features customers want Prentice Hall, Inc. ©2012

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Strategic Human Resource Issues Virtual Teams- groups of geographically or organizationally dispersed coworkers that are assembled using a combination of telecommunications and information technologies to accomplish organizational tasksdriven by 5 trends Prentice Hall, Inc. ©2012

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Strategic Human Resource Issues • • • • • •

Flatter organizational structures Turbulent environments Increased employee autonomy Higher knowledge requirements Increased globalization Increased employee decision making

Prentice Hall, Inc. ©2012

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Strategic Human Resource Issues Quality of work life- includes improvements in: • Introducing participative problem solving • Restructuring work • Introducing innovative reward systems • Improving the work environment Prentice Hall, Inc. ©2012

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Strategic Human Resource Issues Human diversity- the mix in the workplace of people from different races, cultures and backgrounds • Provides a sustainable competitive advantage

Prentice Hall, Inc. ©2012

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8. Strategic Information Systems/Technology Issues Information systems/technology contributions to performance: • Automation of back office processes • Automation of individual tasks • Enhancement of key business functions • Development of a competitive advantage Prentice Hall, Inc. ©2012

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Strategic Information Systems/Technology Issues Current trends in Information systems/technology Internet include: • Intranet • Extranet • Web 2.0 Prentice Hall, Inc. ©2012

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Strategic Information Systems/Technology Issues Supply chain management- networks for sourcing raw materials, manufacturing products or creating services, storing, and distributing goods, and delivering them to customers and consumers

Prentice Hall, Inc. ©2012

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5.5 The Strategic Audit: A Checklist for Organizational Analysis One way of conducting an organizational analysis to ascertain a company’s strengths and weakness is by using the Strategic Audit found in Appendix 1.A at the end of Chapter 1. The audit provides a checklist of questions by area of concern. For example, Part IV of the audit examines corporate structure, culture, and resources. It looks at organizational resources and apabilities in of the functional areas of marketing, finance, R&D, operations, human resources, and information systems, among others.

Prentice Hall, Inc. ©2012

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After strategists have scanned the internal organizational environment and identified factors for their particular corporation, they may want to summarize their analysis of these factors using a form such as that given in Table 5–2. This IFAS (Internal Factor Analysis Summary) Table is one way to organize the internal factors into the generally accepted categories of strengths and weaknesses as well as to analyze how well a particular company’s management is responding to these specific factors in light of the perceived importance of these factors to the company. Use the VRIO framework (Value, Rareness, Imitability, & Organization) to assess the importance of each of the factors that might be considered strengths. Except for its internal orientation, this IFAS Table is built the same way as the EFAS Table described in Chapter 4 (in Table 4–5).

5-64 Obj3: Construct an IFAS Table that summarizes internal factors

5-65 Obj3: Construct an IFAS Table that summarizes internal factors

1.What is the relevance of the resource-based view of the firm to strategic management in a global environment? 2.How can value chain analysis help indentify a company’s strengths and weaknesses? 3.In what ways can a corporation’s structure and culture be internal strengths and weaknesses? 4.What are the pros and cons of management using the experience curve to determine strategy? 5.How might a firm’s management decide whether 5-66