Quản trị kinh doanh - Chapter three: Assessing the internal environment of the firm

Chapter ThreeAssessing the Internal Environment of the FirmAfter studying this chapter, you should have a good understanding of:The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.The primary and support activities of a firm's value chain.How value-chain analysis can help managers create value by investigating relationships among activities within the firm and among the firm and its customers and suppliers.The different types of tangible and intangible resources, as well as organizational capabilities.The four criteria that a firm's resources must possess to maintain a sustainable advantage.The usefulness of financial ratio analysis as well as its inherent limitations.How to make meaningful comparisons of performance across firms.The value of recognizing how the interests of a variety of stakeholders can be interrelated. Learning ObjectivesTRANSPARENCY-20The Value Chain: Primary and Support ActivitiesThe Value ChainGeneral administrationHuman resource managementTechnology developmentProcurementInboundlogisticsOperationsOutboundlogisticsMarketing and salesServiceMarginMarginSupport ActivitiesPrimary ActivitiesSource: Adapted with the permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1998 by Michael E. Porter.Exhibit 3.1TRANSPARENCY-21The Value Chain: Some Factors to Consider in Assessing a Firm’s Primary ActivitiesSource: Adapted with permission of The Free Press, a division of Simon & Schuster, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter.Location of distribution facilities to minimize shipping timesExcellent material and inventory control systemsSystems to reduce time to send “returns” to suppliersWarehouse layout and designs to increase efficiency of operations for incoming materialsEfficient plant operations to minimize costsAppropriate level of automation in manufacturingQuality production control systems to reduce costs and enhance qualityEfficient plant layout and workflow designEffective shipping processes to provide quick delivery and minimize damagesEfficient finished goods warehousing processesShipping of goods in large lot sizes to minimize transportation costsQuality material handling equipment to increase order pickingHighly motivated and competent sales forceInnovative approaches to promotion and advertisingSelection of most appropriate distribution channelsProper identification of customer segments and needsEffective pricing strategiesEffective use of procedures to solicit customer feedback and to act on informationQuick response to customer needs and emergenciesAbility to furnish replacement parts as requiredEffective management of parts and equipment inventoryQuality of service personnel and ongoing trainingAppropriate warranty and guarantee policiesInbound LogisticsOperationsOutbound LogisticsMarketing and SalesServicePROFIT MARGINExhibit 3.2TRANSPARENCY-22The Value Chain: Some Factors to Consider in Assessing Firm’s Support ActivitiesSource: Adapted with permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter.Exhibit 3.3Effective planning systems to attain overall goals and objectivesAbility of top management to anticipate and act on key environmental trends and eventsAbility to obtain low cost funds for capital expenditures and working capitalExcellent relationships with diverse stakeholder groupsAbility to coordinate and integrate activities across the “value system”Highly visible to inculcate organizational culture, reputation, and valuesEffective recruiting, development, and retention mechanisms for employeesQuality relations with trade unionsQuality work environment to maximize overall employee performance and minimize absenteeismReward and incentive programs to motivate all employeesEffective research and development activities for process and product initiativesPositive collaborative relationships between R&D and other departmentsState-of-the art facilities and equipmentCulture to enhance creativity and innovationExcellent professional qualifications of personnelAbility to meet critical deadlinesProcurement of raw material inputs to optimize quality, speed and minimize the associated costsDevelopment of collaborative “win-win” relationships with suppliersEffective procedures to purchase advertising and media servicesAnalysis and selection of alternate sources of inputs to minimize dependence on one supplierAbility to make proper lease versus buy decisionsPROFIT MARGINGeneral AdministrationHuman Resource ManagementTechnology DevelopmentProcurementTRANSPARENCY-23The Resource Based View of the Firm: Resources and CapabilitiesFinancialFirm’s cash account and cash equivalentsFirm’s capacity to raise equityFirm’s borrowing capacityPhysicalModern plant and facilitiesFavorable manufacturing locationsState-of-the-art machinery and equipmentTechnologicalTrade secretsInnovative production processesPatents, copyrights, trademarksOrganizationalEffective strategic planning processesExcellent evaluation and control systemsTangible ResourcesSource: Adapted from J.B. Barney, 1991, Firm resources and sustained competitive advantage, Journal of Management, 17: 101; R.M. Grant, 1991, Contemporary Strategy Analysis (Cambridge, U.K.: Blackwell Business), 100-102. Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. 2001. Strategic Management: Competitivenesss and Globalization. Fourth Edition. South-Western College Publishing: Cincinnati, Ohio.Exhibit 3.4HumanExperience and capabilities of employeesTrustManagerial skillsFirm-specific practices and proceduresInnovation and creativityTechnical and scientific skillsInnovation capacitiesReputationBrand nameReputation with customers for quality and reliabilityReputation with suppliers for fairness, non-zero sum relationshipsIntangible ResourcesOrganization CapabilitiesFirm competences or skills the firm employs to transfer inputs to outputsCapacity to combine tangible and intangible resources, using organizational processes to attain desired endOutstanding customer serviceExcellent product development capabilitiesInnovativeness of products and servicesAbility to hire, motivate, and retain human capitalExamples:TRANSPARENCY-24Marks & Spencer: How Resources and Capabilities Lead to AdvantagesLower costs and higher quality of goods soldFewer layers of hierarchyCapabilitiesCustomer recognition with minimal advertising No promotional salesLower labor turnover 8.7% labor costs versus 10%-20% industry average Intangible1% of revenues allocated to occupancy costs (versus 3% to 9% industry average)TangibleCompetitive Advantages in Great BritainResourceOwnership (vs. leasing) of propertyBrand reputationEmployee loyaltySupplier chainManagerial judgmentSource: Adapted from Collins, D. & Montgomery, C. 1995. Competing on resources: Strategy in the 1990s. Harvard Business Review, 73(4): 123.Exhibit 3.5TRANSPARENCY-25Assessing Sustainability of Resources and Capabilities: Four CriteriaNo equivalent strategic resources or capabilitiesDifficult to substitutePhysically uniquePath dependency (how accumulated over time)Causal ambiguity (difficult to disentangle what it is or how it could be recreated)Social complexity (trust, interpersonal relationships, culture, reputation)Difficult to imitateNot many firms possessRareNeutralize threats and exploit opportunitiesValuableImplicationsIs the resource or capability . . .Exhibit 3.6TRANSPARENCY-26Criteria for Sustainable Competitive Advantage and Strategic Implications Is a ResourceSource: Adapted from Barney 1991. Firm Resources a Sustained Competitive Advantage. Journal of Management, 17:99-120.ValuableRareDifficult to ImitateWithout SubstitutesImplications for CompetitivenessNoNoNoNo Competitive disadvantageYesNoNoNo Competitive parityYesYesNoNo Temporary competitive advantageYesYesYesYes Sustainable competitive advantageExhibit 3.7TRANSPARENCY-27Historical Trends: ROS for a Hypothetical Company20%10%1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Return n SalesYears 1, 2, 3Years 4, 5, 6Years 6, 7, 8Years 8, 9, 10Years 6, 7, 8, 9, 10YearExhibit 3.8TRANSPARENCY-28How Financial Ratios Differ Across IndustriesFinancial RatioSemi-conductorsGrocery StoresSkilled nursing facilitiesQuick ratio (times) 1.5 0.5 1.1Current ratio (times) 3.2 1.6 1.9Total liabilities to net worth (%)34.8114.0 93.0Collection period (days)54.8 2.9 40.2Assets to sales (%)98.1 21.2108.7Return on sales (%) 3.1 0.9 2.0Source: Dun & Bradstreet, Industry Norms and Key Business Ratios, 1999-2000. Desktop Edition. SIC # 0100-8999.Exhibit 3.9TRANSPARENCY-29Comparison of Procter & Gamble’s Drug Revenues and R&D Expenditures and Key CompetitorsCOMPANY (OR DIVISION)SALES*(billions)R&D BUDGET(billions)P&G DRUG DIVISION $0.8 $0.38BRISTOL-MYERS SQUIBB$20.2 $1.8PFIZER$27.4 $4.0MERCK$32.7 $2.1* Most recently completed fiscal year. Data: Lehman Brother Procter & Gamble Co.Exhibit 3.10Source: Berner, R. 2000. Procter & Gamble: Just say no to drugs. Business Week: October 9:128.TRANSPARENCY-30ECI’s Balanced Business ScorecardExhibit 3.11Financial PerspectiveGOALSMEASURES Survive Cash Flow Succeed Quarterly sales growth and operating income by division Prosper Increased market share and ROECustomer PerspectiveGOALSMEASURES New products Percent of sales from new products Responsive supply On-time delivery (defined by customer) Customer partnership Number of cooperative engineering effortsSource: Adapted from Kaplan, R.S. & Norton, D.P. 1992. The balanced scorecard: Measures that drive performance. Harvard Business Review, 69(1): 71-79.Internal Business PerspectiveGOALSMEASURES Manufacturing excellence Cycle time Unit cost Yield Design productivity Silicon efficiency Engineering efficiency New product introduction Actual introduction schedule  versus planInnovation and Learning PerspectiveGOALSMEASURES Technology leadership Time to develop next generation Manufacturing learning Process time to maturity Product focus Percent of products that equal  80% sales Time to market New product introduction versus competitionTRANSPARENCY-31