Chapter 2(c): Organisational Analysis.

Presented By: Nisha Nair Megha Shah Sarika Shah Akruti Rajput

Contents:

Meaning & Concept of Organizational Analysis Role of Organizational analysis: Process: Approach to Organizational Analysis. Core competence Distinctive competence Competitive Advantage Benchmarking Balance Scorecard

Meaning:
Organisational analysis is the process through strategists and managers analyze the various factors of their organization to evaluate their relative strengths and weaknesses so as to meet the opportunities and threats of environment.

Concept:

Organisational analysis is also known as corporate appraisal, appraisal of internal factors, audit of organizational competence and resources, is the systematic evaluation of the organizations strengths and weaknesses. Managers take various organizational factors such production/operation, marketing, finance, human resources, management practices etc to identify its strengths and weaknesses vis--vis its competitors and to match environmental requirement.

Role of Organisational analysis:

(1) Organisational analysis can be considered as the beginning process. As organization tries to relate it self to its environment by emphasizing its strength and overcoming its weakness. Thus, the organizational strength may decide the business which it should undertake. For e.g.: If the organization is quite strong in marketing, it may concentrate on marketing activities rather than going for manufacturing and marketing both. There are several such companies which are following this practice.

Examples: (a) Being Indian sewing machines limited selling various sewing and knitting machines under its brand name but produced by others. (b) Voltas limited whose major revenues are from the marketing of the products from other companies.

Cont

Organisational analysis also enables the managers to overcome their weakness. Overcoming a weakness starts with the identification of the weaknesses, whether of persons or organizations. The analysis pinpoints the weak areas of the organization and the organization can take various actions to overcome it. It can adopt two methods. First: It can make its weakness as a strong point by rearranging and re allocating resources. Second: If the first approach is not possible, the organization can try the alternative methods in which it may withdraw itself from the areas which are its weak points.

Process:

Identification Of Key Factors For Analysis

Identification Of Importance Of Key Factors Assessing Strength & Weakness On Key Factors:

Preparing Organizational Capability Profile:

Relating Organizational Capability To Strategy:

Approach to Organizational Analysis.

There are two approaches

(A)Functional Approach

(B)Value Chain Approach

(A) Functional Approach

Functional approach of organizational analysis takes into account various functional areas and evaluates these for identifying strength and weaknesses. In functional approach of organizational analysis following factors are evaluated to identify strength and weaknesses. (1)Production/ operation (2)Marketing (3)Finance (4)Human Resources (5)General Management

(1)Production/ operation

Production/Operations process are the mediating raw material into finished products. There are other sub functions in production. Allocation and use of resources: Rationalization of resources: Locational Pattern: Production capacity and its use: Raw materials availability: Cost volume profit relationship: Operation procedure: Cost structure: Inventory control system: Research and development: Patent rights:

(2)Marketing
Marketing factors are of prime important for a business organization as it relates itself to its environment through marketing functions. Prominent marketing factors taken for evaluation are as follows.

Competitive competence Product mix Product life cycle Pricing Channel of distribution Sales Forces Marketing research Promotional effort

(3)Finance
Finance area deals primarily with raising, administrating and distributing finance resources to various activities so that a proper balance is maintained and the organization achieve its objective. The strength and weakness in the area of finance and accounting can be ascertained in the following ways:

Capital Cost Financial Planning Capital structure Tax Benefit Relationship with shareholder and financiers Accounting procedures

(4)Human Resources
In organizational analysis often human resources are not given adequate importance because of the preparation that these resources do not contribute to organizational sources. In analyzing human resources following factors are taken into consideration.

Quality of personnel Industrial Relations Personnel turnover and absenteeism

(5)General Management
Various factors discussed above are no doubt important but they cannot work well without the support of suitable leadership and various management practices. Following factors are relevant in this category.

Leadership Organizational image and prestige Top management constitution and philosophy Management Practices Organizational Climate

(B)Value Chain Approach:

Every organization perform a chain activities .These activities are interrelated and each activity creates a value important to the whole chain. Based on this, porter has proposed the value chain as a tool for identifying ways to create more customers value.Accordingly,every organization is a collection of activity that are performed to design,produce,market,deliver,and support its product. The value chain identifies nine strategically relevant activities that create value and reduces cost in a business. These nine value creating activities consist of five primary activities and four support activities as depicted in figure. FIRM INFRASTUCTURE
HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT PROCUREMENT

INBOUND LOGISTICS

OPERATIONS OUTBOUND LOGISTICS

MARETING AND SALES

SERVICE

(i) Primary Activities:

Primary activities are those that are involved in creation of product or service. Porter has classified these primary activities into five groups: Inbound logistics operations, outbound logistics, marketing and sales, and services management and control of these activities results in the to efficiency thereby saving cost and adding value. Inbound Logistics Operation Outbound Logistics Service Marketing And Sales

(ii) Support Activities

Support activities are those activities that provide support to effective performances of primary activities in value chain. These activities are firm infrastructure, human resources management, technology development and procurement Firm infrastructure Technology development Human resource management Procurement

Core competence
Core competencies are special qualities possessed by an organization that make them withstand the pressure of competition in the market place.

During the 1980s C.K. Prahalad and Gary Hamel started working on the features of organizational strengths and gave the concept of core competence. According to them, core competence is an permanent strength which has three characteristics as follows: It is a source of competitive advantages in that it makes a significant contribution to perceived customer benefits. It should be able to provide potential access to a wide variety of markets. It is difficult for competitors to imitate.

For example Honda motors of Japan have core competence in auto engines. Sony Corporation of Japan has core competence in miniaturization and can make any product tiny: DuPont of USA has core competence in chemical processing and so on. There are several such examples. Since technology of by these companies cannot be imitated by their competitors they enjoy long lasting advantages. Apart from generating competitors to imitate core competence of another. It has the potential of being applicable in a variety of markets. Many companies have demonstrated this. For example Honda motors having core competence in auto engines, has produced car, motorcycles, scooters, generators, etc of the world class. Similarity, Sony Corporation having core competence in miniaturization has produced miniature card calculators pocket TVs, digital watches, tape recorder and walkmans.

Distinctive competence
When a specific ability is possessed by a organization exclusively or relatively in large measure, it is called a distinctive competence.

Many organization achieve strategic success by building distinctive competencies around the critical success factors. A few example of disinvite commences are given below. 1.Superior product quality on a particular attribute, say ,a two wheeler, which is more fuel efficient than its competitor products. 2.Creation of a marketing niche by supplying highly specialized products to a particular market segment. 3.Differential advantages based o superior research h and development skills of an orgniation,not possessed y its competitor. 4.Access to a low-cost financial source, like equity shareholdes,not available to its competitor.

A distinctive competence is any advantages a company ha over is competitors because it can do something which they cannot or it can do something better than they can.

Competitive Advantage
When a firm sustains profits that exceed the average for its industry, the firm is said to possess a Competitive Advantage over its rivals.

The goal of much of business strategy is to achieve a sustainable Competitive Advantage. Michel Porter identified two basic types of Competitive Advantage (1) Cost Advantage (2) Differentiation Advantage A Competitive Advantage exists when the firm is able to deliver the same benefits as competitors but at lower cost(Cost advantage) or Deliver benefits that exceed those of competing products(Differentiation Advantage). Thus a competitive advantage enables a firm to create superior profits for itself. Cost and Differentiation Advantages are also known as positional advantages since they decribe the firms position in the industry as a leader in either cost or differentiation. A resource based view emphasizes that a firm utilize its resources and capabilities to create a Competitive Advantage that ultimately results in superior value creation.

Benchmarking
Benchmarking is a process of identifying,
understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve perform

Concept

Benchmarking is another method of comparative analysis of organizational strength and weaknesses. A benchmark is a reference point for the purpose of measurement. The purpose of benchmarking is to find the best performers in an area so that one could match one's own performance with them and even surpass them.
The basic theme of benchmarking is "see what other do and try to improve upon that

Types Of Benchmarking

Strategic Benchmarking Performance or Competitive Benchmarking Process Benchmarking Product benchmarking Global benchmarking

Advantages Of Benchmarking
1.Benchmarking is not considered as a onetime project but rather a continuous process throughout the life time of a company, it helps you to remain & stay alert and active.
2. The advantages of benchmarking is to understand and evaluate the current position of a business or organization in relation to "best practice" and to identify areas and means of performance improvement. 3.Benchmarking helps in strategic planning and refining those strategies periodically. It becomes a part of the problem solving technique thereby enriching you with ideas and constant learning

Limitation On Benchmarking
1.It is a tough process to use, it time consuming and expensive and require high level of commitment. 2.It needs to be done on a continuous basis for effective result. 3. Benchmarking helps in strategic planning and refining those strategies periodically. It becomes a part of the problem solving technique thereby enriching you with ideas and constant learning

Balanced Scorecard
According to Kaplan and Norton Balanced scorecard is a concept that measure an organization activities in terms of its vision and strategies to give managers a comprehensive view of performance of the organization

Concept

The balanced scorecard, coupled with business intelligence systems offers a way to measure an organisation,performances against its strategic objective while focusing on building capabilities to achieve these objectives. Balanced scorecard integrates financial, customer, internal business process, and learning and growth perspectives with vision and strategy.