Internal appraisal of the firm

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Internal appraisal of the firm

  1. 1. HYDERALI CHEVIDIKKUNNAN<br />ROLL NO 100604<br />internal appraisal<br />1<br />Internal appraisal of the firm<br />
  2. 2. internal appraisal<br />2<br />Three parts of internal appraisal<br />Assessment of strength & weakness<br />Appraisal of the status/health <br />Identify & asses competitive advantages & corecompetence<br />
  3. 3. Purpose, role and importance<br />internal appraisal<br />3<br />Stands in capabilities and strength & weakness<br />Opportunity to be tapped in line with its capability<br />Match the Objective in line with its capability<br />Asses the capability gap<br />Select the specific lines in which it can grow<br />
  4. 4. internal appraisal<br />4<br />It is the starting point for developing the competitive advantages & core competencies<br />
  5. 5. 1.Assessing strength & weakness<br />internal appraisal<br />5<br />S-W appraisal : (Tata IBM limited)<br />Strengths<br /> -excellent workstations<br /> -high brand equity<br /> -IBM itself largest buyers of software<br />Weaknesses<br /> -late entry into the market<br /> -limit marketing reach<br /> -omission of IBM name in the company name<br />
  6. 6. internal appraisal<br />6<br />S-W appraisal :AT&T<br />Strength<br /> -manufacturing facility<br /> -strong financial muscle<br /> -top-class research facilities<br />Weaknesses<br /> -slow in decision-making<br /> -minor player in home market<br /> -slow in recognizing Asian boom<br /> -top management only have North Americans<br />
  7. 7. Aspects to be covered & techniques commonly used in S-W analysis <br />internal appraisal<br />7<br />1.aspects relating to the market growth<br /> -market growth<br /> -market share<br /> -PLC stage of the product<br /> -customer perception about the product<br /> -synergy in the product-mix<br /> -prices, margins, marketing spends<br /> -overall capability in marketing <br />
  8. 8. Techniques for analyzing strength & weakness in marketing <br />internal appraisal<br />8<br />Marketing audit<br />Market share analysis<br />Analysis of price-volume relationship<br />Marketing cost analysis<br />Product line profit analysis<br />Sales force productivity analysis<br />Consumer satisfaction index<br />Dealer & consumer panels<br />Brand monitoring surveys<br />
  9. 9. Aspects relating to finance<br />internal appraisal<br />9<br />Return on investment<br />Liquidity <br />Leverage<br />Gearing <br />Cash flow<br />Quality of the financial management <br />
  10. 10. Techniques (financial)<br />internal appraisal<br />10<br />Financial Ratios (liquidity, profitability etc)<br />Cash flow analysis<br />Payback & IRR<br />Break-even analysis<br />Earning ratios (eg;earning to sale )<br />Earning per share<br />
  11. 11. Aspects relating to the manufacturing<br />internal appraisal<br />11<br />Process, facilities & skills<br />Quality management<br />Operating efficiency<br />Industrial engineering capability <br />
  12. 12. Techniques (manufacturing)<br />internal appraisal<br />12<br />Capacity utilization analysis<br />Inventory analysis<br />Cost of production analysis<br />
  13. 13. Aspects relating to R & D<br />internal appraisal<br />13<br />Commitment, status <br />expertise, experience of the personals<br />Patent generation<br />schedules <br />
  14. 14. Techniques (R & D)<br />internal appraisal<br />14<br />Analysis of patent<br />New product commercialization record<br />Comparison of R & D investment against successful new product launch<br />
  15. 15. Aspects relating to HRD<br />internal appraisal<br />15<br />Commitment<br />Financial resources<br />Personnel knowledge,expertise & experience<br />Techniques<br />HRD audit<br />Personnel turnover ananlysis<br />Employee morale survey<br />
  16. 16. Corporate factors and overall resources<br />internal appraisal<br />16<br />Company size<br />Corporate image<br />Corporate performance record<br />Innovation record<br />Adequacy of organization for current & future strategies<br />Use of information technology – extent of use and degree of sophistication<br />
  17. 17. APPRAISAL OF THE STATUS/HEALTH OF THE BUSINESS OF THE FIRM<br />internal appraisal<br />17<br />Healthy portfolio<br />Business with good growth & profit potential <br />Kind of industries (growth,mature,emerging<br /> decline)<br />Rate of growth<br />Helps to formulate strategy choice<br />
  18. 18. Competitive advantages (CA)and core competence(cc)<br />internal appraisal<br />18<br />Competitive advantages<br /> superiority of firm in function/factor/actvity<br />Marketing ,production,finanace,new product launch ,brand management,resourse ,capability ,technology<br />Big firm =strength of size<br />Small firm = flexibility<br />
  19. 19. Example <br />internal appraisal<br />19<br /> – flexible manufacturing system(FMS)<br /> – low cost in personnel stereo<br /> – service within 48 hours in any part of the world <br />
  20. 20. NATURE & SIGNIFICANCE OF ‘CA’<br />internal appraisal<br />20<br />Competitive advantage back-up for strategy<br />For strategy to work the firm must have the relevant ‘CA’<br />‘CA’ is distinct from strength<br /> -strength ie superior to competitor<br /> -result in cost advantage or a differentiation advantage<br /> -strength can’t form back-up for strategy<br /> -’CA’ needs SW analysis<br /> -strength can discerned by internal appraisal but‘CA’ need both internal & external appraisal <br />
  21. 21. Sources of ‘CA’<br />internal appraisal<br />21<br />In marketing<br /> -market share<br /> -customer satisfaction level<br /> -customer service level<br /> -price leadership<br /> -Advertising effectiveness<br /> -marketing cost<br /> -market research capability<br /> -product-wise position in<br /> -profitability<br /> -stage of product in the life cycle<br /> -brand power<br />
  22. 22. Cont…<br />internal appraisal<br />22<br />In finance<br /> -Assets<br /> -Liquidity<br /> -Leverage<br /> -Cash flow<br /> -Quality of financial management<br /> -knowledge & dynamism in tax planning<br />
  23. 23. Cont…<br />internal appraisal<br />23<br />In manufacturing/operation<br /> -capacity of production<br /> -location advantages<br /> -raw material – cost, quality & delivery<br /> -cost of production<br /> -Break-even position<br /> -productivity<br /> -inventory management<br /> -flexibility <br /> -Automation <br />
  24. 24. Cont…<br />internal appraisal<br />24<br />In R&D<br /> -Nature ,depth & quality of R&D<br /> -Resource allocation to R&D<br /> -Quality , expertise and experience of personnel<br /> -speed of R & D<br /> -Record of patent generated<br /> -Comparison of R & D investment Vs new product launched<br />
  25. 25. Cont……….<br />internal appraisal<br />25<br />In Human Resources<br /> -Quality ,knowledge ,expertise & experience of personnel<br /> -Morale and motivation of personnel<br /> -personnel turnover<br /> -Labour cost <br /> -industrial relations<br />
  26. 26. Cont…….<br />internal appraisal<br />26<br />In corporate factors and overall resources<br />-company size<br /> -corporate image<br /> -The CEO<br /> -Board of Directors<br /> -corporate performance record<br /> -innovation record<br /> -Use of IT<br />
  27. 27. Cont……<br />internal appraisal<br />27<br />Any ‘CA’ finally manifests as either a cost advantage or a differentiation advantage<br />‘CA’ appraisal<br />Identifying the ‘CA’ factors of the firm<br /> -Hindustan Lever in distribution<br /> -ModiXerox’s ‘Service within 24 hours’<br /> -Reliance Textiles’s distribution & promotion<br />
  28. 28. internal appraisal<br />28<br />Drawing up the ‘CA’ profile (CAP) of the firm<br /> CAP of Bajaj Auto Limited<br /> ‘CA’ factorCompany’s position in the factor<br /> Marketing product line,capacity,productupgradation,large sales turnover,consumerloyality,brandimage,strongdistribution,high market share <br />
  29. 29. Cont…<br />internal appraisal<br />29<br />CA factorCompany’s position in the factor<br />Finance strong position in profit<br /> surplus working capital<br />Manufacturing strong in engg<br /> strong quality assurance<br />Technology strong in-house<br /> & High budget <br />R&D <br />
  30. 30. cont…....<br />internal appraisal<br />30<br />Corporate & Third largest two- wheeler<br /> overall resource created entry barrier<br /> factor global player of India<br />
  31. 31. HOW DO COMPANIES ACQUIRE ‘CA’<br />internal appraisal<br />31<br />Building ‘CA’ is task of corporate strategy<br /> -Strategy uses and creates ‘CA’<br />Internal appraisal and industry-competition analysis help identify ‘CA’<br />Benchmarking an effective tool in ‘CA’ building <br />
  32. 32. Cont…….<br />internal appraisal<br />32<br />-Types of benchmarking<br /> -internal<br /> -functional<br /> -competitive<br /> -generic<br />
  33. 33. Cont…….<br />internal appraisal<br />33<br /> -Benchmarking of ‘Taurus’ car project<br /> -Benchmarking of Indian firms<br /> -Example of coromondel Fertilisers<br />‘Value chain’ approach will be of use in identifying and building ‘CA’<br /> -’CA’ stem from ‘customer value created by the firm <br /> -Analyzing competitor’s value chain gives useful clues <br />
  34. 34. STRATEGIC COST MANAGEMENT - BA122B – Spring 2009<br />4-34<br />Value Chain Modelfrom Michael E. Porter’s Competitive Advantage<br />SUPPORT ACTIVITIES<br /> Firm Infrastructure (General Management)<br />Human Resource Management<br />Customer Value<br />Margin<br />Technology Development<br />Procurement<br />Inbound Logistics<br />Outbound Logistics<br />Sales & Marketing<br />Service and Support<br />Ops.<br />Margin<br />Customer Value<br />PRIMARY ACTIVITIES<br />
  35. 35. Cont…….<br />internal appraisal<br />35<br />Corporate clout confers ‘CA’ on SBUs & SBU contribute to ‘CA’ at corporate level<br />Core skills of the corporation serve as anchor for ‘CA’ building<br />Firms build ‘CA’ using different strategic routes<br /> -innovation <br /> -integration<br /> -R&D<br /> -mergers & acquisition<br /> -strategic alliances with other firms<br />
  36. 36. Cont…….<br />internal appraisal<br />36<br />Videocon acquire ‘CA’ through integration<br />IDM acquire ‘CA’ through R&D<br />Nestle ‘CA’ through brand power<br />‘CA’ trough alliances<br /> -kotak Mahindra’s alliance with Bank of Madhura<br /> -Tata’s alliance with AT&T in switching system <br />
  37. 37. Cont……<br />internal appraisal<br />37<br />Creating entry barriers will also confer ‘CA’<br /> -MarutiUdyog & Bajaj Auto<br />Building ‘CA’ –a conscious and long term process<br />
  38. 38. THE CONCEPT OF CORE COMPETENCE<br />internal appraisal<br />38<br />fundamental , durable , unique ,higher order ‘CA’ <br />An enduring competency cannot be imitated<br />A competency lies at the root of the product<br />
  39. 39. Examples of core competence<br />internal appraisal<br />39<br />= miniaturization<br /> = optical media<br /> = engine<br />= imaging<br />
  40. 40. internal appraisal<br />40<br />Attributes of core competence<br /> - the firm the access to a variety of product<br /> -contributes significantly to the customer benefits in the end product<br /> -exclusive to the firm<br /> largely it is technological competence<br />
  41. 41. Distinction b/w ‘CA’ & core competencies<br />internal appraisal<br />41<br />The touchstone of core competency provides lasting superiority<br />‘CA’ does not sure success<br />‘CA’ accrues from the functional strength, but core competency core strength like excellence in technology/processes<br />‘CA’ helps in limited way ,but ‘cc’ in far-reaching & multifaceted manner<br />‘CA’ = strength to a product/business,but ‘cc’ helps to play in variety of businesses/products<br />‘CA’ can be imitated easily<br />‘cc’ is fundamental and unique<br />
  42. 42. internal appraisal<br />42<br />The ‘cc’ competency concept does not restrict no of businesses a firm can be<br />For <br /> -by using ‘sticky tape’=60000 product<br />
  43. 43. One ‘cc’ lead to many product lead to many end product/businesses<br />internal appraisal<br />43<br />
  44. 44. ‘competing for the future’s author prahlad<br />internal appraisal<br />44<br /> “We have to look at the organization as a portfolio of competencies , of underlying strength ,and not just as a portfolio of business units ..We must also identify those core competencies which make us successful in existing business. We must also identify those core competencies that would allow us to create new products; and we must ask ourselves what we can leverage as we move into the future, and what we can do that other companies might find difficult <br />
  45. 45. internal appraisal<br />45<br />How companies acquire ‘cc’=invest in technology & R&D<br />In-house manufacture of core products ,facilitates acquiring ‘cc’<br />‘cc’ of Honda<br /> -design & manufacturing of engines<br /> -unmatched performance<br />
  46. 46. Cont….<br />internal appraisal<br />46<br />Focus ,another requirement in building ‘cc’<br />Building ‘cc’,aconcious & long term process<br />For Indian firms,this task will become the prime challenge <br />
  47. 47. referece<br />internal appraisal<br />47<br />Strategic planning formulation of strategy<br /> V S RAMASWAMY<br /> S NAMAKUMARI<br />www.wikipedia.org<br />
  48. 48. internal appraisal<br />48<br /> THANK YOU<br />

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