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Internal Scanning:Organizational Analysis
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١
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Homework
• CASE 11: McAfee 2005: Anti-virus and
Anti-spyware
• questions:• questions:
1. Conduct SWOT analysis.
• Prepare EFA and IFA
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢
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A Comprehensive Strategic Management Model
Perform
external
audit
Feedback
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣
Develop
Mission
statement
Establish
long term
objectives
Generate,
Evaluate,
and select
strategies
Establish
policies
and
annual
objectives
Allocate
resources
Measure and
evaluate
performance
Perform
internal
audit Formulation Implementation Evaluation
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Situational Analysis
SWOT --
–Internal
Prentice Hall, Inc. © 20086-٤
–Internal•Strengths/Weaknesses
–External•Opportunities/Threats
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TOWS Matrix
Prentice Hall, Inc. © 20086-٥
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Resource-Based Approach
Internal strategic factors:
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٦
Critical strengths and weaknesses that are likely to determine if the firm will be able to take advantage of opportunities while avoiding threats.
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Resource-Based Approach
Resource:
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٧
An asset, competency, process, skill, or knowledge controlled by the corporation.
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Evaluating Key Resources VRIO Framework
• How to identify the key resources?
Base on four criteria:
1. Value: Does it provide competitive advantage?
2. Rareness: Do other competitors possess it?
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٨
2. Rareness: Do other competitors possess it?
3. Imitability: Is it costly for others to imitate?
4. Organization: Is the firm organized to exploit the resource?
• If the answer is use to all it is considered distinctive competence.
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Core and distinctive competencies
• Capabilities: organization ability to utilize its
resources. Its business process and routine.
• Competency: cross-functional integration and
coordination of capabilities. E.g., new product
development. development.
• Core-competency: collection of competencies that
crosses divisional boundaries. E.g., new product
development is a core-competency if it goes beyond
one division.
• Distinctive competencies: when core- competencies
are superior to those of the competitions. Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٩
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Keys of Strategic Outsourcing
Success1- Understand the bus core competencies.
‘What it gives competitive Differentiation’
Core comp. Is the integration of technologies, constituent skills and collective learning which
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٠
constituent skills and collective learning which makes healthy bus.
2- Mapping out the work of bus.
3- Requires trust between parties
4- Understand the type of work of bus.
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Competitive advantage analysis
• Analyzing competences and core competences:
The analysis here determines how resources are deployed
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١١
The analysis here determines how resources are deployed
Competitive advantage is built on the uniqueness of resources or on the core competences.
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Strategic Outsourcing for
Competitive Advantage• Used mainly for downsizing and cost
reductions at corporations.
• Usually corps outsourcing non-essential work, why?
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٢
• Usually corps outsourcing non-essential work, why?
To free valuable resources and focus on its areas of competitive advantage.
To do this org. must know its core competences.
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Why some nations are more
competitive than others?
• M. Porter in his diamond, suggests that
there are inherited reasons why some
nations are more competitive, and there
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٣
nations are more competitive, and there
organizations are as well, than others.
• Porter believes that national home base of
an organization influence the global
success of organization.
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Porter’s Determinants of
National Advantage
There are four forces:
1- The conditions of the nation, availability of
skills, infrastructure.
2- Home country’s demand for products.
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٤
2- Home country’s demand for products.
3- The presence or absence of supporting
industries.
4- The firm’s strategy, structure, rivalry,
establishment process..
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Four Nation’s Distinct
Strategies
• S-O, or maxi-maxi
• S-T, or maxi-mini
• W-O, or mini-maxi
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٥
• W-O, or mini-maxi
• W-T, or mini-mini
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Resource-Based Approach
5-Step approach to strategy analysis:
• 1- Identify & classify firm’s resources• Strengths & weaknesses
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٦
• Strengths & weaknesses
• 2- Combine firm’s strengths into capabilities• Core competencies
• Distinctive competencies
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Resource-Based Approach
5-Step approach to strategy analysis:
• 3- Appraise the Profit potential of resources• Sustainable competitive advantage
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٧
• 4- Select strategy• Exploits firm’s resources relative to external
opportunities
• 5- Identify resource gaps• Invest in upgrading weaknesses
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Determining the Sustainability
of an Advantage Durability:
Rate at which a firm’s underlying\basic resources and capabilities (core competencies)
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٨
capabilities (core competencies) depreciate or become obsolete. E.g., new technology can make the company core competency irrelevant.
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Sustainability of an Advantage
Imitability:
Rate at which a firm’s underlying
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ١٩
Rate at which a firm’s underlying resources and capabilities (core competencies) can be duplicated by others.
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Core Competencies
Imitability of core competencies determined by:
1. Transparency/clearly understood2. Transferability. Ability of competitors
to gather necessary resources and
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٠
to gather necessary resources and capabilities.
3. Replicability/ do it exactly by the competitors :imitate other firms’ success.
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Core Competencies
Is it easy to imitate another company’s core competency? Depends if it comes from:
Explicit Knowledge:– Knowledge that can be easily articulated and
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢١
– Knowledge that can be easily articulated and communicated.
Tacit/unexpressed Knowledge:– Knowledge that is not easily communicated
because it is deeply rooted in employee experience or in a corporation’s culture .
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Resource Sustainability
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٢
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Competitive advantage analysis
• Steps of analyzing competences:
1- Value chain analysis: describes the activities within and around the organization, and relates them to an
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٣
activities within and around the organization, and relates them to an analysis of the competitive strength of the organization.
2- the bases of core competences.
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Corporate Value Chain
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٤
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Corporate Value Chain Analysis steps:
• Examine each product line’s value chain• Core competencies & core deficiencies
• Examine the “linkages” within each product line’s value chain
• Connections between the way one value activity is
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٥
• Connections between the way one value activity is performed and the cost of performance of another activity
• Examine the synergies among the value chains of different product lines or business units
• Economies of scope
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Value Chain
.A@<?, <,=>; 4:ر78 +6 آ.,4) ا/3(2ة ا/.-,+*()•
• B>7آ) وD/د=?, اF8 6./ا (GDHIا (*JK ;)JL8 MJN م:P8.Q> @=@L8 B<3= ,?/RS,در ا/3(2ة ا/.-,+*() /7DJآ)
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٦
.Q> @=@L8 B<3= ,?/RS,در ا/3(2ة ا/.-,+*() /7DJآ)
•B)*+,-3/7 اTأآ V> (Hر,P3/ا MJN ;)JL./م +>7ة ا:P8و
•B).N:3W> M/إ (GDHI78:4 ا Y*A:
اGDHI) اIو/() - ١
اGDHI) ا/N,*3@ة - ٢
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Value Chain
:اGDHI) اIو/() - ١
()JSا[<@ادات ا/@ا- V)-Q./وا ;)^D./ت ا,)J3_/7`,ت -اa3/اا/a@<) - ا/.*:=b وا/T3(_,ت - <B ا/W.-3,ت
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٧
ا/a@<) - ا/.*:=b وا/T3(_,ت - <B ا/W.-3,ت
:اGDHI) ا/N,*3@ة - ٢
(TK,L> ;c> (7آDJ/ ()K,KIا ()-T/7=) -اDT/إدارة ا/3:ارد ا- 7f ()J3Nاء ا/RS@3ت - ا/.G:ر ا/.>-:/:`6 وا/LT:ث
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Competitive advantages
• When competitive advantage is
materialized?
When a firm earns persistently higher rate of
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٨
When a firm earns persistently higher rate of
profit over its rivals.
• Determinants of profit level
1- Value of company products in customers’
eyes.
2- Company production cost.
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Competitive advantage
• It can be created in certain industrial field,
through the adoption of low-cost-
differentiation strategy. .M. Porter
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٢٩
differentiation strategy. .M. Porter
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Bases of establishing competitive
advantages
Efficiency :output/inputا/>g,ءة - ١
.إن إH.,`() ا/ij:3 ه6 أهH:<> Y,ت ا/>g,ءة
ا/.A B> @=28 6(3) ا/l.-3 +6 اQuality B)N: ا/W:دة - ٢
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٠
ا/.A B> @=28 6(3) ا/l.-3 +6 اQuality B)N: ا/W:دة - ٢B)<J?.*3/ا.
٣ - @=@W./اInnovation : 4,دارة bJ_.= @=@` ءMf أي,?8,W.->7آ) وD/ا .
وهpا =.oJG ا/P@رة MJN : ا[L/ (4,W.K,`,ت ا/_3(; - ٤2)3.> ;<D4 ,?N,Tfت ا/_3(; وا,`,q (+7_>.
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What is the success strategy
• The strategy which enables organizations
developing new advantages, or maintaining
the existing advantages.
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣١
the existing advantages.
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Market segmentation analysis
• It aims to identify similarities and differences between groups of customers or users .
Not all customers are the same.
• Some criteria for market segmentation:
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٢
• Some criteria for market segmentation:
1. Characteristics of customers (e.g., income, gender),
2. Purchase situation (e.g., behavior, its size, importance),
3. Users needs and preferences for product characteristics (e.g., quality, price, brand).
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Assessing Effectiveness
Value addedCustomer requirements•Product attributes•Service expectations•Price sensitivity
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٣
Degree ofMatching
Value-added features•Product features
•Service performance•communication
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What is efficiency and effectiveness?
• Management (cont.)
• elements of definition
• Efficiency - getting the most output from the least amount of inputs
• “doing things right”
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٤
• concerned with means
• Effectiveness - completing activities so that organizational goals are attained
• “doing the right things”
• concerned with ends
11--٣٤٣٤
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Boston Consulting Group Matrix
• It portrays differences among divisions in
terms of relative market share position and
industry growth rate.
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٥
industry growth rate.
• The matrix allows multidivisional corp. to manage its portfolio of business
effectively.
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Boston Consulting Group Matrex :;<=>?@AB<C
Question mark (3W-/ا
Sٍtar
Relative market share ()A:*/ا (QL/اlowhigh
high
٢٠+
١١ ٠.٥ ٠.٠
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٦
?Sٍtar
Cash Trapا/yg ا/-P@ي
(=@P-/7ة اPT/اCash Cow
low
IndustrialGrowthRate
:3H ل@_> (N,-Q/ا%
٠
٢٠-
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Benchmarking
The process of comparing the organization
with the best rival in the market.
The objective of any org. should focus on how
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٧
The objective of any org. should focus on how
to be best org. in the world. It should not
focus on being org. better than previous
year.
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Goals & Objectives Defined
• Goals: The desired general ends towards
which efforts are directed e.g., expand firm
size.
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Wheelen/Hunger ٣٨
size.
• Objectives: are specific quantified, e.g.,
increase sales by 10% each year.
• “We may derive a number of objectives
from a goal”
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Long-Term Objectives
• Objectives: Specific results an organization
seeks to achieve in pursuing its basic mission.
• Long-term objective: More than 3 years.
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٣٩
• Long-term objective: More than 3 years.
Objectives should be: challenging, measurable,
consistent, reasonable and clear. Ex. Our
objective is to achieve 20% return on equity.
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Annual Objectives
• Short-term that the organization must achieve
to reach long-term objectives.
Objectives Characteristics:
Measurable, quantitative, challenging, realistic,
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٤٠
Measurable, quantitative, challenging, realistic,
consistent and prioritized.
Annual objectives are important for strategy
implementation, whereas, long-term
objectives are important for strategy
formulating.
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Objectives
• We must avoid generalities e.g.:
maximize profits
reduce costs
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٤١
reduce costs
become more efficient
increase sales
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Difference between Long term
planning and Strategic
planning• Long term planning: The goals and
objectives are based on the assumption of
org. stability.
Prentice Hall, 2004 Chapter 4
Wheelen/Hunger ٤٢
org. stability.
• Strategic planning: The role of the org. is
examined within the context of its
environment.