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  • The internal environment of a business is that part over which you as a manager have control. You can influence the things that go on in the business. This presentation will give a number of tools that will help you think about the business.
  • Internal

    1. 1. What Tools Are Useful in Assessing Strengths and Weaknesses? Resources, Capabilities, and Core Competencies
    2. 2. Strengths and Weaknesses <ul><li>Goal: objective assessment of your strengths and weaknesses </li></ul><ul><ul><li>relative to competitors </li></ul></ul><ul><ul><li>important to customers </li></ul></ul><ul><li>Note: This is difficult to do well. </li></ul>
    3. 3. Challenge of Internal Analysis <ul><li>Identifying, developing, protecting, and deploying resources, capabilities, and core competencies </li></ul>
    4. 4. Resources <ul><li>Inputs into a firm’s production process such as capital equipment, skill of individual employees, patents, finance, and talented managers </li></ul><ul><ul><li>Tangible Resources – Assets that can be seen and quantified </li></ul></ul><ul><ul><li>Intangible Resources – Family commitment, networks, organizational culture, reputation, intellectual property rights, trademarks, copyrights </li></ul></ul><ul><li>By themselves, resources do not create a strategic advantage for the firm. </li></ul>
    5. 5. Capabilities <ul><li>Capacity to deploy resources that have been purposely integrated to achieve a desired end state. </li></ul><ul><li>Primary base for the firm’s capabilities is the skills and knowledge of its employees. </li></ul><ul><li>Just because the firm has a strong capacity for deploying resources does not mean it has a competitive advantage. </li></ul>
    6. 6. Core Competencies <ul><li>Resources and capabilities serve as a source of competitive advantage for a firm over its rival. </li></ul><ul><li>Not all resources and capabilities are core competencies. </li></ul><ul><li>Many suggest that firms should identify and concentrate on only 3 or 4 core competencies. </li></ul>
    7. 7. Identifying and Building Core Competencies <ul><li>Core competencies must be distinctive . </li></ul><ul><ul><li>Capabilities that are done better than competitors </li></ul></ul><ul><li>Identifying core competencies is key to development of sound strategy. </li></ul><ul><li>We use the value chain to help identify core competencies. </li></ul>
    8. 8. The Value Chain <ul><li>A framework for identifying core competencies </li></ul><ul><ul><li>Inside the firm </li></ul></ul><ul><ul><li>In the supply chain </li></ul></ul><ul><li>Can be used to </li></ul><ul><ul><li>Identify strengths and weaknesses </li></ul></ul><ul><ul><li>Identify sources of competitive advantage </li></ul></ul><ul><ul><li>Identify market opportunities </li></ul></ul>
    9. 9. The Value Chain Firm Infrastructure Human Resource Management Technological Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN MARGIN Supporting Activities Primary Activities Relationship with Suppliers Relationship with Buyers Elapsed Time - Value added time cost
    10. 10. Primary Activities in the Value Chain <ul><li>Inbound Logistics </li></ul><ul><ul><li>Materials handling, warehousing, inventory control used to receive, store and disseminate inputs to a product </li></ul></ul><ul><ul><li>Fertilizer and chemical storage, delivery of inputs, application of inputs </li></ul></ul><ul><li>Operations </li></ul><ul><ul><li>Take inputs from inbound logistics and convert to final products </li></ul></ul><ul><ul><li>Plowing, planting, spraying, harvesting, feeding, medicating, weighing,etc. </li></ul></ul><ul><li>Outbound Logistics </li></ul><ul><ul><li>Collecting, Storing, and physical distribution of the final product. </li></ul></ul><ul><ul><li>Crop storage, finished hog handling, Processing and determining delivery dates, delivery to the packer or elevator etc. </li></ul></ul>Inbound Logistics Marketing and Sales Outbound Logistics Operations Technology Human Resource management Procurement Firm Infrastructure Service
    11. 11. Primary Activities in the Value Chain <ul><li>Marketing and Sales </li></ul><ul><ul><li>Provide means through which customers can purchase products and to induce them to do so </li></ul></ul><ul><ul><li>Advertising, communicating with buyers, developing customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery scheduling </li></ul></ul><ul><li>Service </li></ul><ul><ul><li>Activities designed to enhance or maintain a product’s value </li></ul></ul><ul><ul><li>Timely delivery, identity preservation, ISO9000, certifying as organic, etc. </li></ul></ul>Inbound Logistics Marketing and Sales Outbound Logistics Operations Service Human Resource management Firm Infrastructure Human Resources Procurement
    12. 12. Supporting Activities in the Value Chain <ul><li>Procurement </li></ul><ul><ul><li>Activities to purchase the inputs needed to produce products </li></ul></ul><ul><ul><li>Negotiating with suppliers, standard timing of replenishing parts and tools, setting up buying groups, etc. </li></ul></ul><ul><li>Technological Development </li></ul><ul><ul><li>Activities that improve the firm’s products and/or processes </li></ul></ul><ul><ul><li>Volunteering for test plots, being a part of feeding trials, attending technology seminars/field days, designing equipment to make specific production tasks more efficient, etc. </li></ul></ul><ul><li>Human Resources </li></ul><ul><ul><li>Recruiting, hiring, training, developing, and compensating all personnel </li></ul></ul>Inbound Logistics Marketing and Sales Outbound Logistics Operations Human Resources Technological Development Procurement Service Firm Infrastructure
    13. 13. Supporting Activities in the Value Chain <ul><li>Firm Infrastructure </li></ul><ul><ul><li>General Management, planning, finance, accounting, legal support, governmental relations, etc. </li></ul></ul><ul><ul><li>Establishment of accounting practices, management information systems, compliance with environmental regulations, tracking and reporting for government programs, etc. </li></ul></ul><ul><ul><li>Where strategy development takes place identifying opportunities and threats, resources and capabilities, and support of core competencies </li></ul></ul>Inbound Logistics Marketing and Sales Outbound Logistics Operations Human Resource management Firm Infrastructure Service Technology Procurement
    14. 14. The Result of the Value Chain <ul><li>Margins </li></ul><ul><ul><li>Capture the value from performing value-creating activities as cheaply as possible </li></ul></ul><ul><ul><li>The basic idea is that the consumer is willing to pay a certain amount for the value you create. This is depicted as the size of the overall pentagon. </li></ul></ul><ul><ul><li>The size of the individual activity boxes represents the cost of performing those particular activities. </li></ul></ul><ul><ul><li>Thus, the smaller the size of the individual activity boxes relative to the value the consumer is willing to pay, the greater the MARGIN will be for the firm. </li></ul></ul>
    15. 15. The Value Chain – Grains Farm Firm Infrastructure Human Resource Management Technological Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN MARGIN Supporting Activities Primary Activities Relationship with Suppliers Relationship with Buyers Elapsed Time - Value added time cost
    16. 16. Primary Activities for a Grain Farm Inbound Logistics Fertilizer and chemical storage, custom application of inputs Operations Tillage Planning Fertilizing Spraying Cultivate Harvest Outbound Logistics Grain transport to elevator or buyer Grain transport to storage Marketing & Sales Fwd. contracts Futures Options IP grain Value added grain Service On-time del- ivery Forward contract IP Storage Tracing QA Relationship with Suppliers Relationship with Buyers
    17. 17. Supporting Activities for a Grain Farm Infrastructure: management, planning, finance, accounting, government compliance, quality control Human Resource: motivation tools, compensation, training, and directing farm employees, including family, management, and laborers Technological Development: research and adoption practices for things like GPS, VRT, GMO’s, No-Till, the Internet, IP storage facilities Procurement: Purchasing inputs: seed, fertilizer, chemicals, fuel, land, Machinery, storage equipment, office supplies, parts, tools, insurance etc. with focus on negotiating capabilities
    18. 18. Value Chain Analysis <ul><li>A firm’s value chain must be compared to competitors’ value chains to determine where competitive advantages exist. </li></ul><ul><li>To be a source of competitive advantage a resource or capability must allow a firm to: </li></ul><ul><ul><li>Perform an activity in a manner that is superior to competitor’s performances </li></ul></ul><ul><ul><li>Perform a value-creating activity that competitors cannot complete </li></ul></ul>
    19. 19. Linkages within the Value Chain <ul><li>Optimization and coordination of activities in the value chain </li></ul><ul><li>Linkages exist between support activities and primary activities and between separate primary activities </li></ul><ul><li>Generic causes for linkages </li></ul><ul><ul><li>Same function can be performed in different ways </li></ul></ul><ul><ul><li>Efforts in indirect activities </li></ul></ul><ul><ul><li>Activities performed inside the firm reduce the need for activities in the field </li></ul></ul><ul><ul><li>Quality Assurance can be performed in different ways </li></ul></ul>
    20. 20. Value Chain Linkages in the Supply Chain Supplier Chain Firm Chain Buyer Chain Supplier Chain Buyer Chain Buyer Chain
    21. 21. Linkages with Supplier Value Chain <ul><li>Linkages between suppliers’ value chains and a firms chain provide opportunities for the firm to enhance competitive advantage. </li></ul><ul><li>Division of benefits between firm and its suppliers is a function of supplier’s bargaining power and reflecting in supplier’s margins. </li></ul><ul><li>Both coordination with suppliers and hard bargaining are important to competitive advantage. </li></ul>
    22. 22. The Buyer’s Value Chain <ul><li>A firm’s differentiation stems from how its value chain relates to its buyer’s chain. </li></ul><ul><li>Differentiation derives fundamentally from creating value for the buyer through a firm’s impact on the buyer’s value chain. </li></ul><ul><li>Value is created when a firm creates a competitive advantage for its buyer. </li></ul><ul><li>The buyer must perceive the value to pay a premium price. </li></ul>
    23. 23. Internal Factor Analysis Summary (IFAS) <ul><li>Assesses strengths and weaknesses </li></ul><ul><li>Provides one overall number for the strength of your firm’s internal position </li></ul>
    24. 24. Exercise: Identifying Strengths and Weaknesses <ul><li>Internal Factor Analysis Summary (IFAS) Table </li></ul><ul><ul><li>List up to 6 to 10 factors (strengths and weaknesses) in your farm’s internal environment </li></ul></ul><ul><ul><li>Give each item a relative ranking in terms of the importance to your farm business’ competitive advantage </li></ul></ul><ul><ul><ul><li>0 is not important to 1 being most important </li></ul></ul></ul><ul><ul><ul><li>must sum to 1 </li></ul></ul></ul><ul><ul><li>Assess your firm’s current actions to take advantage of this strength or improve on this weakness </li></ul></ul><ul><ul><ul><li>5 is well positioned to 1 being poorly positioned </li></ul></ul></ul><ul><ul><li>Multiply the two together and sum </li></ul></ul>Source: Wheelen and Hunger
    25. 25. IFAS Table – grains production Weaknesses 3.00 1.0 Total Trying to improve by using marketing consultant. 0.40 4 0.10 Commodity pricing Out dated and in constant need of repair. 0.20 2 0.10 Hay and silage equipment Craig seems to have too many things to do. 0.50 2 0.25 Spread too thin, several different crops Well maintained crop production data by field. Record system, capacity, etc. well designed. 0.30 3 0.15 Information management Profitable, low debt, too many assets. 0.30 3 0.10 Financial position Generally in good shape but aging. 0.15 3 0.05 Equipment Key to productivity. Manure from dairy helps keep fertilizer costs low. 0.40 4 0.10 Soil fertility Use Craig and Mike’s abilities very well. 0.75 5 0.15 Good management Strengths Comments Weighted Score Rating Weight Internal Factors
    26. 26. Strategic Business Planning for Commercial Producers

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