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Chapter 3B
 

Chapter 3B

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    Chapter 3B Chapter 3B Presentation Transcript

    • Internal Analysis: Benchmarking MAN 4720 – Strategic Management Chapter 3B
      • 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
    • 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
      • 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
      • 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
      • 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
      • 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
    • 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
      • 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
    • 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
    • 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
    • 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
    • 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
    • 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
    • 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.
    • 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
      • 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
    • 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
    • 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 %)
    • 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
    • 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
    • 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
    • Key Performance Indicators (KPI)
      • Four Major KPIs used by Publix
        • Sales Growth %
        • Gross Profit %
        • Net Profit %
        • Items Per Labor Hour (IPLH)
      • 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
      • 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
    • 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
    • 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