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  • 1. Internal Analysis: Benchmarking MAN 4720 – Strategic Management Chapter 3B
  • 2.
    • Key Success Factors
    • Company Benchmarks
    • Actual vs. Plan vs. SPLY
    • Industry Ratings and Averages
    • Operational Metrics, Statistics, Indices
    • Key Performance Indicators (KPI)
    • Competitive Strength Assessment
    Chapter Checklist
  • 3. Key Success Factors
    • KSFs are those competitive factors most affecting every industry member’s ability to succeed in that industry
    • KSFs concern
      • Meeting customer expectations
      • Specific strategy elements
      • Product attributes
      • Resources
      • Competencies
      • Competitive capabilities
    • KSFs are attributes that spell the difference between
      • Profit and loss
      • Competitive success or failure
  • 4.
    • Pinpointing KSFs involves determining
      • On what basis do customers choose between competing brands of sellers?
      • What resources and competitive capabilities does a seller need to have to be competitively successful?
      • What are the defining characteristics of a particular industry
    • KSFs constitute the crucial elements for success in a particular industry
    Key Success Factors
  • 5.
    • Common Types of Industry Key Success Factors
      • Technology-related
      • Manufacturing-related
      • Distribution-related
      • Marketing-related
      • Skills and capability-related
      • Other types
        • Convenient locations
        • Patent protection
        • Etc.
    Key Success Factors
  • 6.
    • Example: KSFs for Fast Food Industry
      • Quick service
      • Consistent quality of food
      • Clean facilities
      • Reasonable prices
    • Example: KSFs for Fine Dining Industry
      • Leisurely, relaxed dining
      • An exquisite “Dining Experience”
      • Clean facilities
      • Ambience
    Key Success Factors
  • 7.
    • Benchmark Characteristics
      • Comparison of organization’s operational performance to:
        • Best in industry
        • Largest in industry
        • Closest rival
      • Comparison of organization’s financial performance to:
        • Best in industry
        • Largest in industry
        • Closest rival
    Company Benchmarks
  • 8. Company Benchmarks
    • Objectives of Benchmarking
      • Identify best and most efficient means of performing various value chain activities
      • Learn what is the “best” way to perform a particular activity from those companies who have demonstrated that they are “best-in-industry” or “best-in-world” at performing the activity
      • Learn what other firms do to perform an activity at lower cost
      • Figure out what actions to take to improve a company’s own cost competitiveness
  • 9.
    • Caveats for Benchmarking
      • Duplication of best practices may not always be possible or desirable
        • Situations differ for each firm
        • Imitators restricted to playing “catch-up” and may lose market share in economic downturns
      • Accounting practices may vary from firm to firm
      • Longitudinal considerations should accompany cross-sectional comparisons
    Company Benchmarks
  • 10. Company Benchmarks
    • The efficiency and activity costs should be examined for each factor in the value chain
      • Inbound logistics
      • Operations
      • Outbound logistics
      • Marketing and sales
      • Service
      • General administration
      • Human resource management
      • Technology development
      • Procurement
  • 11. Actual vs. Plan vs. SPLY
    • Benchmarks, indices, and ratios are expressed in two different forms
      • Cross-Sectional Data
        • Single Point in Time
      • Longitudinal Data
        • Over an extended period of time
  • 12. Actual vs. Plan vs. SPLY
    • Cross-Sectional Data
      • Reveals status for a unit of time
        • Daily
        • Weekly
        • Monthly
        • Quarterly
        • Annual
          • Specified Fiscal Year
      • Usually compared to non-historical data
        • Matched against financial or strategical objectives
        • Compared against industry average
        • Benchmarked to competitors
  • 13. Actual vs. Plan vs. SPLY
    • Longitudinal Data
      • Usually includes several years or more
        • Daily, Weekly, Monthly and Quarterly Data more subject to cyclical variations
      • Reveals significant trends over time
      • More dependable for extrapolating data
  • 14. Actual vs. Plan vs. SPLY
    • Many organizations use both cross-sectional and longitudinal data for monitoring and control
      • Cross Sectional
        • Actual vs. Plan
        • Industry and Competitor Benchmarks
        • Organizational Metrics, Statistics, and Indicators
      • Longitudinal
        • Actual vs. SPLY ( S ame P eriod L ast Y ear)
        • Ratio Streams
        • Trend Analysis
  • 15. Industry Ratings and Averages
    • Numerous organizations track, record, and rate performance of companies
      • Government regulatory agencies
      • Independent Credit Rating Agencies (Standard & Poor’s, Moody’s, Fitch Ratings)
      • Industry analysts
      • Industry Associations
      • Independent, non-governmental organizations, alliances and partnerships
        • Independent consumer groups, etc.
  • 16. Industry Ratings and Averages
    • Independent, non-governmental organizations, alliances and partnerships
      • The American Customer Satisfaction Index
        • Partnership of the University of Michigan Ross School of Business, the American Society for Quality, and the CFI Group consulting firm
        • Measures customer satisfaction with over 200 companies in 43 industries and sizable portion of federal government
  • 17.
    • Independent, non-governmental organizations, alliances and partnerships
      • International Organization for Standardization
        • Non-governmental organization that forms bridge between public and private sectors
        • 157 countries in network, including United States
        • Specific standards
          • Product
          • Material
          • Process
        • Generic Management Systems Standards
          • ISO 9001 – Quality Management System
          • ISO 14001 – Environmental Management System
    Industry Ratings and Averages
  • 18. Operational Metrics
    • Organization annual reports often contain performance indicators that measure overall company operational efficiency
      • Cross-sectional indicators compared against industry averages
      • Cross-sectional indicators compared against major competitors
      • Cross-sectional indicators compared against break-even calculations
      • Longitudinal indicators that describe overall trend over time
  • 19. Operational Metrics
    • Examples of Operational Metrics – Airline Industry
      • Cost per available seat mile
      • Revenue per available seat mile
      • Fuel cost per available seat mile
      • Average passenger trip length (in miles)
      • Passenger load factor (in %)
      • Passenger breakeven load factor (in %)
  • 20. Operational Metrics
    • Examples of Operational Metrics – Retail Industry
      • Revenue per full-time equivalent employees (FTE)
      • Revenue per employee hour
      • Sales per check-out line
      • Sales per square foot
      • Sales per store
  • 21. Key Performance Indicators (KPIs)
    • Key Performance Indicators are internal operational metrics designed to measure unit efficiency within a single organization
      • Division
      • Region
      • Installation
      • Function
      • Production/Service Unit
  • 22. Key Performance Indicators (KPI)
    • KPIs used in motivation, monitoring, and control
      • Measure unit efficiency for comparisons
      • Act as targets in Management by Objectives (MBO) and Goal Programming
      • Used to identify areas of concern that affect strategic and financial outcomes
      • Act as communications between management levels to emphasize areas of concern
  • 23. Key Performance Indicators (KPI)
    • Four Major KPIs used by Publix
      • Sales Growth %
      • Gross Profit %
      • Net Profit %
      • Items Per Labor Hour (IPLH)
  • 24.
    • Overall competitive position involves answering two questions
      • How does a company rank relative to competitors on each important factor that determines market success?
      • Does a company have a net competitive advantage or disadvantage vis-à-vis major competitors?
    Competitive Strength Assessment
  • 25.
    • Assessing a Company’s Competitive Strength vs. Key Rivals
      • 1. List industry key success factors and other relevant measures of competitive strength
      • 2. Rate firm and key rivals on each factor using rating scale of 1 to 10 (1 = very weak; 5 = average; 10 = very strong)
      • 3. Decide whether to use a weighted or unweighted rating system (a weighted system is superior because chosen strength measures are unlikely to be equally important)
      • 4. Sum individual ratings to get an overall measure of competitive strength for each rival
      • 5. Based on overall strength ratings, determine overall competitive position of firm
    Competitive Strength Assessment
  • 26. Competitive Strength Assessment Unweighted Competitive Strength Assessment Strength Rating (Scale: 1 = Very Weak; 10 = Very Strong) Factor Competitor 1 Competitor 2 Competitor 3 Acme Co. 35 42 55 45 Overall Rating 2 7 5 7 Service 6 4 5 5 Performance 6 3 7 5 Image 2 8 7 6 Distribution 3 5 10 4 Market Share 2 4 3 3 Features 7 5 9 7 Cost 7 6 9 8 Quality
  • 27. Competitive Strength Assessment Weighted Competitive Strength Assessment Strength Rating (Scale: 1 = Very Weak; 10 = Very Strong) Factor/Weight Competitor 1 Competitor 2 Competitor 3 Acme Co. Rating Score Rating Score Rating Score Rating Score 5.65 4.85 7.5 5.95 Overall Rating 1.00 2 0.25 7 0.35 5 0.25 7 0.35 Service .05 6 0.9 4 0.6 5 0.75 5 0.75 Performance .15 6 1.20 3 0.6 7 1.4 5 1.0 Image .20 2 0.10 8 0.4 7 0.35 6 0.3 Distribution .05 3 0.3 5 0.5 10 1.0 4 0.4 Market Share.10 2 0.1 4 0.2 3 0.15 3 0.15 Features .05 7 1.4 5 1.0 9 1.8 7 1.4 Cost .20 7 1.4 6 1.2 9 1.8 8 1.6 Quality .20