Functional analysis

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Functional analysis

  1. 1. Functional analysis Unit -2
  2. 2. Identifying major strengths and weaknesses of an corporate on the basis of major functional areas-
  3. 3. Marketing function as a resource to organization• Variables may include • ; relative position on market position and product life cycle; market share; • new product• reputation in the development capability; community; • negotiating,• client or patient • sales and promotional perceptions; competence• status as market leader or follower;• mix and depth of product or service portfolio
  4. 4. • Example: Coca-Cola’s strong market position in the soft drinks sector.
  5. 5. Finance as a resource to organization• profitability • cash flow;• return on capital • relative efficiency of use employed (ROCE) of assets;• earnings per share (EPS) • margin of safety;• financial management financial structure skills and competences (ownership, mix of equity and loan capital);
  6. 6. Example: the potential financial performance of a well-established, well-located, and well-managed hotel whose popularity and positive reputation may generate a significant degree of both profitability and cash flow from its high occupancy rate.
  7. 7. Operational efficiency as an strength• type, location, age, and • requirements; productivity of • quality and reliability operational assets; of output;• operational flexibility; • relationship with• success rates in treating suppliers; patients; • cost-effectiveness;• capacity for rapid response or just-in-time (JIT)
  8. 8. Example: Toyota’s “lean” manufacturing process.
  9. 9. Technological area as a resource• type and complexity of • research and technology; development (R&D),• ability to manage • and new product changing technology development (NPD).• need for continuing investment in innovation,
  10. 10. • 3M‟s ability continuously to develop new technologies and new products; Boeing‟s development of the “7” range of aircraft (707, 727,737, 747, 757, 767, and 777); ongoing developments in surgical and drug treatments
  11. 11. Human Resources as a corporate strength• employee type, • staff education, training• competence, and experience;• quality and productivity; • staff attitude and culture; expectations;• ease of recruitment and retention; • employee relations history and attitude to• staff skill and flexibility; management;• capacity for response, • degree of customer change and creativity; service orientation; cost-effectiveness (etc).
  12. 12. Example: Virgin Atlantic airline cabin crew‟s high degree of customer orientation and customer service provision.
  13. 13. Functional analysis of organisation1. Establish a table with column headings: Factors,Strengths/Weaknesses, Standards and Comparison. For each factor to be evaluated, the question must be asked, “Compared to what?”
  14. 14. 2. Standards or criteria may bea. The industry average for the factor being evaluatedb. The best firm‟s valuesc. The best value of any firm on each criteriond. A previously set objectivee. A previous forecast
  15. 15. 3. Functional factors should be selectedfrom the following functional areas: a. Marketing b. Operations/Production c. Finance and accounting d. Human resources, especially management and organization e. Information systems f. Quality of all transactions, relationships, and outputs
  16. 16. FUNCTIONAL ANALYSIS OF ORGANIZATIONFACTORS STRENGTHS/ STANDARDS RESULT WEAKNESSE Sa. Marketingb.Operations/Productionc. Finance andaccountingd. Human resources,e. Informationsystemsf. Quality of alltransactions,relationships, andoutputs
  17. 17. Value Chain AnalysisA value chain is a linked set of value-creating activities beginning with basic raw material 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 customer
  18. 18. Industry Value Chain Analysis A PETROLEUM COMPANY
  19. 19. A firm has an area of expertise where its primary activity lies in industry. An company‟s „Centre of gravity‟ is that part of the chain,: which is most important to the company:where its greatest expertise and capabilities exists:
  20. 20. Corporate value chain analysisDifferent products --------- Different Value chainsSteps in corporate value chain analysis1. Examine each product line‟s value chain to identify strengths and weaknesses2. Examine the linkages within each product line3. Examine the potential synergies among the value chain of different product lines or business units.
  21. 21. Organizational Appraisal
  22. 22. ResourceA resource is an asset, competency, process, skill, or knowledge controlled by an organization.
  23. 23. A resource is a strengthif It is superior ability to perform relative to their competencies. A weakness if Perform poorly
  24. 24. VRIO FrameworkValue – Does it provide competitive advantage over competitors?Rareness- Do other competitors possess it?Imitability- Is it costly to imitate it ?Organization- Is the firm organized to exploit the resources
  25. 25. If the answer is yes about any resource then it is of strategic importanceValue Does it provide competitive advantage Yes No over competitors?Rarenes Do other competitors possess it? Yes NosImitability Is it costly to imitate it ? Yes NoOrganiza Is the firm organized to exploit the Yes Notion resources
  26. 26. stages in organizational appraisal1. Identify and classify the firms resources in terms of strenghts and weaknesses.2. Combine the firms strengths into specific capabilities. Corporate capabilities are the things that an organization does exceedingly well.3. Appraise the profit potential of these resources and capabilities in terms of their potential for sustainable competitive advantage.
  27. 27. 4. Select the best strategy that best exploits the firm‟s resources and capabilities relative to external opportunities.5. Identify resource gaps and invest in upgrading weaknesses.

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