(c) macmillan & tampoe 2001 1 the strategy formulation process chapter 10 strategic assessment...

(c) Macmillan & Tampoe 20011

The Strategy Formulation Process

Chapter 10 Strategic Assessment

Analysis of Resources, Capabilities and Competence


Figure 10.1 Some commonly used techniques for internal analysis

Single BusinessesResource Audit (10.2)Analysis of cost and profit (10.3)Benchmarking (10.4)Value Chain Analysis (10.5)Supply Chain Analysis(10.6)

Multiple Businesses Assessing Parenting Advantage (10.10)Portfolio Analysis (10.11)

Both Single and Multiple BusinessesCore Competencies (10.7)Shareholder Value Analysis (10.8)Distinctive Organisational Capabilities (10.9)


Resource Audit

Resources Physical Human Financial Other

Quality and Quantity Unique resources A good initial analysis


Analysis of Costs and Profit

Current sources of profits and trends Recast standard reporting to give new

insights Pragmatic approach to get value from time

and effort spent A good initial analysis


Benchmarking

Objective comparison with best in class Benchmarking clubs common Simple in theory - Hard in practice Observed differences in performance may

be due to differences in parameters Qualitative observations may be more

valuable than quantitative


Value Chain Analysis

Basic Value chain in Fig. 10.2 Elegant in theory Time-consuming in practice Revised value chain to reflect power of

people and knowledge


Figure 10.3 Revised Value Chain

PRIMARYACTIVITIES

INFORMATION SYSTEMS & KNOWLEDGE MANAGEMENT

HUMAN RESOURCE MANAGEMENT

basic skills,know-how,

technologiesstrategic assets

corecompetence

price,place,

promotionproductservice

technical,management,

marketing,sales,

production

revenue,profit,

market share,

customersatisfaction,

loyalty

Firm’s infrastructure

Technology trapping and commercialisation

Strategic Management

SUPPORTACTIVITIES

PROCUREMENT AND SUPPLIER MANAGEMENT

Source: adapted from Porter, M (1985), Martin (1995) to reflect recent developments


Figure 10.4 The Core Competence Perspective

Traditional Perspective Core CompetencePerspective

Market share of present markets Share of future opportunities

Strategic Business Unit Focus Corporate Competence

Stand-alone Pattern of alliances

Speed to Market Perseverance towards long-term vision

Adapted from Hamel, G & Prahalad, C.K. (1994) Competing for the Future


The Tests for Core Competence

Essential to corporate survival in short and long term Invisible to competitors Difficult to imitate Unique to the enterprise Result from a mix of skills, resources and processes A capability which the organization can sustain over time Greater than the competence of an individual Essential to the development of core products Essential to the implementation of strategic intent Essential to the strategic choices of the enterprise Marketable and commercially viable Few in number


Figure 10.5 The roots of core competence for a typical manufacturing business

(C) Mahen Tampoe February 6, 1996

Different products, parts, sub-assemblies

Knowledge based,person specific professional service

Rule or process based provision, of knowledge & functionality

CORE COMPETENCE

Basic technologies, bodies of knowledge, corporate or individual learning, relationship culture, strategic assets, parts, processes, raw materials, supply chain management

Product or Service (as chosen by the customer)


Figure 10.6 The roots of core competence for typical professional services firms

Staff Skills

Mindset

Inter-personal

Skills

Professionalknowledge

TaskSkills

Personality

Embodiedas Core

Competence

Products &

Services

Collectiveknowledge

of the organisation

(C) Mahen Tampoe February 6, 1996


Figure 10.7 Applying Shareholder Value Analysis

Adapted from Rappaport (1986)

ManagementDecisions

Creating ShareholderValue

Shareholder ReturnDividends

Capital Growth

Cash fromOperations

DiscountRate Debt

CorporateObjective

ValuationComponents

Duration ofValue growth

Sales GrowthOp. Profit Margin

Fixed & Working Capital

investment

Cost ofCapital

ValueDrivers

Operating Investment Financing


Assessing Parenting Advantage

Stand-alone influence Linkage influence Central functions and service Corporate development


Figure 10.9 Portfolio Analysis

Source: Originally Boston Consulting Group. In Widespread use

High Low

High

Low

Market Share

MarketGrowthRate

?


Choosing the right tools for internal analysis

Start with simple techniques Consider all tools and identify those likely to be useful Define the competitive capabilities the enterprise needs Identify the subsystems which support these capabilities Identify core competence relative to competitive

capabilities Determine changes to enhance/improve core

competence Take a systemic view Adjust the methods of analysis in the light of what is

found

(c) macmillan & tampoe 2001 1 the strategy formulation process chapter 10 strategic assessment...

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