BUSINESS STATEGY VI

Organisational Appraisal Methods & Techniques

INTERNAL ANALYSIS
VRIO Framework Value Chain Analysis Quantitative Analysis- financial & non-

financial Qualitative Analysis

INTERNAL ANALYSIS (CONTD)

VRIO Framework- this consists of classifying the capabilities of an organisation in terms of: valuable, rare, inimitable, organised for usage Valuable- are those capabilities which help an organisation in generating revenues by capitalising on opportunities and /or to reduce costs by neutralising the threats- examples: amicable relationship with government, quality after sales service

INTERNAL ANALYSIS (CONTD)

Rare- are those capabilities which the firm uniquely has or only a few other organisationsexamples: a highly satisfied and committed workforce, exclusive location, a specific technology Inimitable- capabilities which are very difficult, impossible or not worthwhile to duplicate/substitute-examples: a Favourable corporate image, ability to acquire and integrate new businesses

INTERNAL ANALYSIS (CONTD)

Organised for usage- those Capabilities

which are readily available for usage examples: a competent R&D team, a Market Research Group, business partners who are ready to integrate their IT systems with the firm in question

VALUE CHAIN ANALYSIS

Primary Activities: Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, Service Support Activities: Firm Infrastructure which comprises accounting, finance, planning, general management, management of government relations, HRM, Technology Development, Procurement Net result is the MARGIN

QUANTITATIVE ANALYSIS

Financial: classical ratio analyses, modern tools like the EVA (computed by finding the difference between the after-sales profit and the cost of capital), Activity-based Costing ( Computed through the costs incurred in the major activities in the value chain and keeping tab on them) Non-financial: employee turnover, absenteeism, market ranking, rate of advertising recall, total production cycle time, inventory per period, service call rate, number of patents registered per period

QUALITATIVE ANALYSIS
Quantification has limitations May strengths and weaknesses of an

organisation cannot be quantified like the culture of the place, ability to absorb and assimilate knowledge- so is the case of environmental factors Quantitative and qualitative have to complement each other

COMPARATIVE ANALYSIS

Historical Analysis- both a long view into the past and a comparison with similar periods a year or two ago. The former sums up how the organisation has faced the challenges in the past and the latter the incremental improvemen or its absence Industry Norms- the Industry to which the business belongs provide the right context for comparison unlike comparing oranges and bicycles, these norms need to be excelled

BENCHMARKING
Performance Benchmarking Process Benchmarking about methods &

practices Strategic Benchmarking- how long term significant decisions and actions are taken Internal Benchmarking between units and branches of the same organisation Competitive Benchmarking- direct comparison with ones best rivals

BENCHMARKING (CONTD)
Functional Benchmarking-is the

comparison of processes and functions of non-competitive organisations in the sae sector or technological group Generic Benchmarking- comparison with the best processes and practices anywhere in any industry

COMPREHENSIVE ANALYSIS

Key Factor Rating- many systems have been evolved by consultants to assess organisational strengths and weaknesses- through searching questions in each capability area In Finance Capability are questions like what the capital structure of the company like, its ability to raise capital in the market, who the effective controllers are, its debt: equity ratio, reserves and surplus position etc.

KEY FACTOR RATING (CONTD)

Finance Capability- investment

opportunities dividend policy in comparison, Marketing Capability-range and variety of products, its reflection or lack of it of the market requirements, the BCG Matrix, pricing policy and prices, promotional tools and methodologies, market standing and image

KEY FACTOR RATING (CONTD)

Operations Capability-

advantages/disadvantages of the plant location, the layout, plant capacity, the degree of IT enabling, responsivenes to short term demands, supply of materials, the supply chain management, R&D facilities and resources including the level of expertise, access to the latest technologies

FEY FACTOR RATING (CONTD)

HR Capability- various personnel systems

or their absence, the status of the HR Department, its image as Employer, uniqueness of ts manpower at all levels, the IR scenario

KEY FACTOR RATING (CONTD)

IT Capability- quality, amount and

timeliness of information, sources, security of its information systems, processing and integration of information received, retrieval, usage and dissemination of information,

KEY FACTOR RATING (CONTD)

General Management Capability- vision,

mission, goals, strategies- their status, the processes of strategy formulation, the strategic orientation of the top management, relationship with financial institutions, government etc.organisational climate