The document discusses how to conduct a functional analysis of an organization by identifying strengths and weaknesses across key functional areas like marketing, finance, operations, human resources, and technology. It provides examples of strengths in these areas for different companies. The document also discusses how to analyze an organization's value chain and resources using frameworks like the VRIO model to assess strategic importance.

1. Functional analysis
Unit -2

2. Identifying major strengths and weaknesses of an
corporate on the basis of major functional areas-

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. • Example: Coca-Cola’s strong market position in
the soft drinks sector.

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. 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. 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. Example: Toyota’s “lean” manufacturing process.

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. • 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. 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. Example: Virgin Atlantic airline cabin crew‟s high
degree of customer orientation and customer
service provision.

13. Functional analysis of organisation
1. 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. 2. Standards or criteria may be
a. The industry average for the factor being
evaluated
b. The best firm‟s values
c. The best value of any firm on each criterion
d. A previously set objective
e. A previous forecast

15. 3. Functional factors should be selected
from 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. FUNCTIONAL ANALYSIS OF
ORGANIZATION
FACTORS STRENGTHS/ STANDARDS RESULT
WEAKNESSE
S
a. Marketing
b.
Operations/Producti
on
c. Finance and
accounting
d. Human resources,
e. Information
systems
f. Quality of all
transactions,
relationships, and
outputs

18. Value Chain Analysis
A 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

19. Industry Value Chain Analysis
A PETROLEUM COMPANY

20. 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
:

21. Corporate value chain analysis
Different products --------- Different Value chains
Steps in corporate value chain analysis
1. Examine each product line‟s value chain to
identify strengths and weaknesses
2. Examine the linkages within each product line
3. Examine the potential synergies among the
value chain of different product lines or
business units.

23. Organizational Appraisal

24. Resource
A resource is an asset, competency, process,
skill, or knowledge controlled by an organization.

25. A resource is a strength
if It is superior ability to perform relative to their
competencies. A weakness if Perform poorly

26. VRIO Framework
Value – 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

27. If the answer is yes about any resource
then it is of strategic importance
Value Does it provide competitive advantage Yes No
over competitors?
Rarenes Do other competitors possess it? Yes No
s
Imitability Is it costly to imitate it ? Yes No
Organiza Is the firm organized to exploit the Yes No
tion resources

28. stages in organizational appraisal
1. 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.

29. 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.