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