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Factors Influencing Strategy: Internal

This document discusses factors that influence company strategy, including internal resources and capabilities as well as external evaluations. It describes evaluating a company's existing strategy, resources, strengths, and weaknesses. Key points of evaluation include market share, profitability, financial metrics, productivity, and perceptions. The document also covers assessing competitive advantages through areas like costs, capabilities, resources, and partnerships. It emphasizes analyzing a company's value chain activities to understand relative cost positions compared to competitors. The goal of such analyses is to understand competitive strengths and weaknesses to craft effective strategies.

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bafnajayesh
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Download as PPT, PDF, TXT or read online on Scribd
37 views

Factors Influencing Strategy: Internal

This document discusses factors that influence company strategy, including internal resources and capabilities as well as external evaluations. It describes evaluating a company's existing strategy, resources, strengths, and weaknesses. Key points of evaluation include market share, profitability, financial metrics, productivity, and perceptions. The document also covers assessing competitive advantages through areas like costs, capabilities, resources, and partnerships. It emphasizes analyzing a company's value chain activities to understand relative cost positions compared to competitors. The goal of such analyses is to understand competitive strengths and weaknesses to craft effective strategies.

Uploaded by

bafnajayesh
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Factors Influencing Strategy

 Internal:
 Company resources
 Technology
 Skill
 Finance
 Systems
 Personal ambitions, Corporate ethics and
Philosophy
 Shared values & Company culture
Evaluating Company Resources
 Evaluation of existing strategy:
 Market share position
 Retaining existing customers & adding new ones
 Profitability compared to Industry and competitors
 EVA, ROI compared to Industry
 Overall financial strength & credit rating
 Internal performance measures such as:
 *Unit costs *Defect rate *Scrap rate
 *Inventory turnover *Employee motivation
Evaluating Company Resources
 Evaluation of existing strategy:
 Shareholders’ view and stock appreciation
 Company image
 Leadership in technology, innovation,
quality, delivery, time to market
Company’s Strengths & Resource
Capabilities
 Skill or expertise:
 Low-cost manufacturing
 Promotional talents
 Know-how
 R&D
 Valuable physical assets
 “state of the art” plants
 Locations
 Owning valuable mineral deposits
 Cash & marketable securities
Company’s Strengths & Resource
Capabilities
 Valuable human assets
 Valuable organisational assets
 Quality control Systems
 Patents
 Loyal customers
 Intranets
 e-Commerce systems
 ERP
 Intangible assets:
 Brand image, Goodwill, Company reputation
Company’s Strengths & Resource
Capabilities
 Competitive capabilities:
 Time to market
 Strong partnerships with key suppliers
 Response to change
 Market advantage factors:
 Wider product range
 Distributed customer base across globe
 Alliances or Co-operative ventures with
suppliers, marketing allies & customers
Company Weaknesses & Resource
Deficiencies
 Internal weaknesses are shortcomings in a
company’s resources. Vulnerability depends
on importance of weakness in the market
place
 Lack of competitively important physical,
organisational or intangible assets
 Deficiencies in important skills or expertise
Strategic Equation
 Strengths are competitive assets
 Weaknesses are competitive liabilities
 Ideally:
 Competitive assets should outweigh
competitive liabilities
Some definitions on ‘Competence’
 Company Competence: Proficiency in performing
an internal activity (product of learning &
experience)
 Core Competence/ies: That activity/ies which the
company excels relative to all other activities
 Distinctive Competence/ies: That activity/ies which
company excels in relation to its competitors
 Competitive Capabilities: Collection of
competencies as acknowledged by customers and
differentiated from competitors
Competitive Value
 No two companies are alike in their
resources
 Competitive Value is that resource which
account for company’s performance in a
sustainable form
 Resource is hard to copy
 Resource is superior
 Resource lasts longer
SWOT Analysis
 Match strategy to resource strengths and
weaknesses
 Select competencies and capabilities to
strengthen and develop
 Build resource capability to capture market
opportunities
 Take precaution (de-risk) to counter
anticipated external threats
Cost Competitiveness
 Strategic cost analysis involves comparing a
company’s activity by activity costs to those of
competitors
 Identify sources of cost advantage and cost
disadvantage
 Identify ‘Value Chain’ of business process of
 Industry
 Company
 Competitors
 Determine relative ‘cost effective’ value addition
Value Chain

Primary Distribution &


Vendors &
Activities Company Outbound Sales & Profit/
Inbound Service
& costs Operations Logistics Marketing Margin
Logistics

Support
1. R & D, Technology, Systems
Activities
& costs 2. HR
3. General Administration
Cost Competitiveness
 Company’s cost competitiveness depends
on:
 Internally performed activities
 Costs of value chain suppliers
 Costs of value chain forward players/partners
 Buyers’ value chain
 Profit/Margin aspiration (short term and long
term)
Cost Competitiveness
 Convert traditional unit costs into Activity Based
Costing. Use data to Benchmark costs of key
activities to the best in Industry (lowest)
 Improve company’s cost competitiveness
 Attack high costs of activities in the value chain –
vendors, logistics, internal & forward portion
 Competitive Advantage: Performing value chain
activities in such a manner which gives company
capabilities to outmatch rivals
Competitive Analysis
 Assessing relative ‘Strength’ measure
against key influencing factors
 Use unweighted average method; or
 Weighted average method
 Identify strategic issues
 Strategy is developed to improve
competitive advantage by increasing
relative strength measure
Crafting Strategy

Industry Analysis Situation Analysis Pre-requisite


to
Internal Analysis Good Strategy
Competitive Analysis

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