3.1 Dynamics of internal envt.ppt
- 2. Framework for the development of strategic management by an organization
- 3. Organizational resources Organizational Behavior Strengths & Weaknesses Synergetic Effects Competencies Organizational capabilities Strategic Advantage
- 4. Organization resources A firm is a bundle of resources – tangible, intangible- includes assets, capabilities, organizational processes, information, knowledge, etc - Physical Resources (technology, plant & equipment, geographic location, raw material) - Human Resources (training, experience, judgment, intelligence, relationships) - Organizational Resources (formal systems & structures, informal relations among the groups)
- 5. ORGANIZATIONAL BEHAVIOUR Identity & character of an organization Quality of leadership, Mgt. Philosophy, shared values, culture, Quality of work environment, Organization climate, organization politics etc. Resource Behavior Creation of Abilities Or Place Constraints on the usage of Resources. (Strengths and Weaknesses)
- 6. STRENGTHS & WEAKNESSES “OR & OB will exist with inherent capability or inherent limitation as to gain competitive advantage/disadvantage” Strengths : sources of finance, low cost of capital, efficient use of funds, etc Weaknesses: inappropriate plant location & layout, obsolete plant & machinery uneconomical operations. S & W exist in combination within a functional area to crate synergic effects.
- 7. Synergistic Effects “Synergy is an idea that the whole is greater or lesser than the sum of its parts” 2 + 2 = 5 or even 3 e.g. 4 P’s of Marketing Operating Synergy -- Quality & type of internal environment -- lead to the development of Competencies
- 8. Competencies “Competencies are special qualities possessed by an organization that make them withstand the pressures of competition in the marketplace” Competencies Core Competencies Distinctive Competencies Depends on uniqueness associated with the net synergistic effects occurring within an organization
- 9. Competencies vs. Core Competencies vs. Distinctive Competencies • A competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity • A core competence is a well-performed internal activity central (not peripheral or incidental) to a company’s competitiveness and profitability • A distinctive competence is a competitively valuable activity a company performs better than its rivals
- 10. Core Competencies – A Valuable Company Resource • A competence becomes a core competence when the well-performed activity is central to a company’s competitiveness and profitability • Often, a core competence is knowledge-based, residing in people, not in assets on a balance sheet • A core competence is typically the result of cross-department collaboration • A core competence gives a company a potentially valuable competitive capability and represents a definite competitive asset
- 11. Examples: Core Competencies • Expertise in integrating multiple technologies to create families of new products • Know-how in creating operating systems for cost efficient supply chain management • Speeding new/next-generation products to market • Better after-sale service capability • Skills in manufacturing a high quality product • Capability to fill customer orders accurately and swiftly
- 12. • A distinctive competence is a competitively valuable activity that a company performs better than its competitors • A distinctive competence is a competitively potent resource source because it – Gives a company a competitively valuable capability unmatched by rivals – Can underpin and add real punch to a company’s strategy – Is a basis for sustainable competitive advantage # 1 Distinctive Competence – A Competitively Superior Resource
- 13. Examples: Distinctive Competencies Toyota Low-cost, high-quality manufacturing of motor vehicles Starbucks Innovative coffee drinks and store ambience
- 14. Determining the Competitive Power of a Company Resource • To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a “resource” must pass 4 tests: 1. Is the resource hard to copy? 2. Is the resource durable – does it have staying power? 3. Is the resource really competitively superior? 4. Can the resource be outplayed by the different capabilities of rivals?
- 15. ORGANISATIONAL CAPABILITY “OC is the inherent capacity or potential of an organization to use its S & W in order to exploit the Opportunities and face the threats in its external environment.” Interest of Strategist -- what capacity exists in the organization to exploit opp or face threats in its Envt. -- what potential should be developed within the organisation so that opp could be exploited threats could be faced in future
- 16. Organizational Capability Factor Financial Capability: Factors related to sources of funds, usage of funds, management of funds Marketing Capability: 4 Ps Operations Capability: Factors related to production system, control system, R & D system Personnel Capability: Factors related to personnel system, employee characteristics, industrial relations General Management Capability: External relations & organizational climate
- 17. Strategic & competitive Advantage Results of the organisational activities leading to rewards in terms of financial parameters, such as - Profit - Shareholder value - Market share - Reputation - Could be measured in absolute terms (profitability, historical performance, current performance) - Relative rather than absolute - Purposefully done to realize strategic intent