Dynamics of Internal Environment Organizational Capability Factors Consideration in Organizational Appraisal Methods and Techniques Structuring Organizational Appraisal

1. Organizational
appraisal
Pranab Kishor Choudhary

2. Content
Dynamics of Internal Environment
1
Consideration in Organizational Appraisal
2
Methods and Techniques
3
Structuring Organizational Appraisal
4

3. Dynamics of Internal Environment

4. What is internal environment
► The resources, behavior, strengths and weaknesses, synergistic effects and competencies determ
ines the nature of organization’s internal environment.

5. Organizational Resources Organizational Behavior
Strengths and Weaknesses
Synergistic Effect
Competencies
Organizational Capability
Strategic Advantage
Frame Work for the development of Strategic Advantage

6. Organizational Resources
► Tangible or Intangible Resources
► Physical Resources
► Technology, Plant and equipment, geographic location, access to raw material, etc.
► Human Resources
► Training, Experience, Judgement, Intelligence, Relationships, etc.
► Organizational Resources
► Formal and Informal System, Structure
► These resources leads to strategic advantage if they are
► Valuable
► Rare
► Costly to imitate
► Non-substitutable
Strategic Advantage
Sustainable Strategic Advantage

7. Organizational Behavior
► Manifestation of various forces and influences operating in the organization
► Quality of leadership
► Management philosophy
► Values and Culture
► Organizational Climate
► Politics
► Together these forces create the ability or become hurdle to the usage of resources

8. Strengths and Weaknesses
► Organizational resources and behavior does not exist in isolation
► Together they create strengths and weaknesses
► Strength is inherent capability which can be used to gain strategic advantage
► Weakness is inherent limitation which creates a strategic disadvantage
► Not absolute but relative

9. Synergistic Effect
► Strengths and weaknesses combine within or across functional area.
► Whole is greater than the sum of its part.
► Efficiency of one functional area support other functional area to grow.
► Inefficiency of one functional area pulls down the productivity of other functional areas
► Synergistic effects leads to development of competencies

10. Competencies
► Organizations ability to compete with the rivals
► Its net result of strategic advantages and disadvantages
► The capability of an organization to use it’s competencies exceedin
gly well turns the competencies into core competencies
► Apple’s core competencies includes innovation in mobile device te
chnology, high quality customer service, simplicity and strong bran
d reputation.
► When a specific ability is possessed exclusively by an organization
its Distinctive competencies.
► Apple’s distinctive competencies are well-designed, user-friendly p
roducts that are like no other in the market
Competencies
Competition

11. Organizational Capability
► Inherent quality of an organization to
► Use its strengths
► Over come its weaknesses.
► Exploit opportunities
► Face threats
► Without capability even valuable and rare resources are worthless.
► It is sum total of resources and behavior, strengths and weaknesses, synergistic effects occurring
in, and competencies of an organization.

12. Strategic Advantage
► Outcome of organizational capabilities
► Strategic advantage leads to profit, market value, market share, brand reputation etc.
► Strategic disadvantage leads to loss of market share, decline in profit etc.
► Strategic advantage can be measured using the parameter in which they are expressed in.
► Higher profitability = Better strategic advantage
► Strategic advantage can be tracked in performance trend of organization.

13. Consideration in Organizational Appraisal

14. Purpose of Organizational Appraisal
► Determine the organizational capabilities in term of Strengths and weaknesses that lie within differ
ent functional areas
► Strengths and weakness need to be matched with environmental opportunities and threats
► The outcome of appraisal will affect the strategy formulation

15. Factors affecting Organizational Appraisal
► Nature of Organization
► Nature of internal environment
► Complexity
► Diversity

16. Approaches to Organizational Appraisal
► May range from highly systematic to ad-hoc
► Systematic is pro-active measure
► To explore opportunities
► Ad-hoc is generally reactive
► To avert crisis

17. Employee Opinion
Company Files and Documents
Financial Statements
Management Information system
Company reports
Magazines and Journals
Sources of Information
Internal External

18. Methods and Techniques

19. 3 Types of methods and techniques
► Internal Analysis
► VRIO Framework
► Value Chain Analysis
► Quantitative Analysis
► Financial Analysis
► Non-financial Analysis
► Qualitative Analysis
► Comparative Analysis
► Historical Analysis
► Industry Norms
► Benchmarking
► Comprehensive Analysis
► Key Factor Rating
► Business Intelligence System
► Balanced Scorecard

20. Internal Analysis
Organization Centric

21. VRIO Framework
► Given by Jay Barney
► VRIO is an acronym for the four question framework asked about a resource or capability to deter
mine its competitive potential
► The question of Value
► The question of Rarity
► The question of Imitability (ease/difficulty to imitate)
► The question of Organization (ability to exploit the resources or capability)

22. VRIO Framework
Valuable? Rare?
Costly
to imitate?
Exploited by
the organization?
Competitive implication
No Competitive disadvantage
Yes No Competitive parity
Yes Yes No
Temporary
competitive advantage
Yes Yes Yes No
Unexploited
competitive advantage
Yes Yes Yes Yes
Sustained
competitive advantage

23. Value Chain
► Based on the series of activities an organization performs
► May start with procurement of raw material and go up to delivering the end product to consumer
► Value chain consists of primary activities and support activities

24. Value Chain Analysis
Value Chain Analysis Requires
► Recognizing the activities and classifying them into primary and support activities
► Identifying the steps in activities that add value for the customer
► Identifying scope for increasing value contribution
The Value Chain analysis provide clarity about strengths and weaknesses residing in the value chain.
Limitation of Value Chain Analysis
► Simple in concept but difficult to implement
► Designed for manufacturing organization and needs be adapted for service organization.
► Concept of value is hazy.

25. Quantitative Analysis
► Rely on numbers
► Financial and Non-financial both can be assessed.

26. Financial Analysis
► Financial Analysis
► Ratio Analysis
► Liquidity, profitability, leverage etc.
► Economic Value Added (EVA) Analysis
► Wealth of a company
► Devised by Stern Stewart & Company
► Activity Based Cost (ABC) Accounting
► Identifies major activities and their cost in the value chain
► Identifies cost drivers

27. Non-Finacial Analysis
► Employee Turn Over
► Absenteeism
► Market ranking
► Rate of advertising recall
► Total Cycle time of production
► Inventory units used per period
► Service call rate

28. Qualitative Analysis
► Based on informed opinion, judgment, intuition, or hunch
► Tenor of corporate culture, Ability to absorb and assimilate knowledge, or the level of morale among
employee.
► Qualitative and quantitative analysis can be used in combination

29. Comparative Analysis
Competition and Growth

30. Historical Analysis
► Analysis of performance of the organization over a period of time
► Standard part of annual report of company
► Good or bad performance is indicator of strengths or weaknesses respectively
► Does not discovers specific reason for change in performance.
► Longer period should be taken in to account.

31. Industry Norms
► Comparison of organization with competitors on wide range of parameters.
► Assumption is businesses operate in similar environment within an industry
► Concept of strategic group
► Obtaining information is the biggest hurdle.

32. Benchmarking
► Reference Point
► Process of finding the best practice within or outside the industry
► ‘The practice of being humble enough to admit that someone else is better at something, and being
wise enough to learn how to match and even surpass them at it’
- The American Productivity and quality center
► Time consuming and expensive
► Needs to be done on continues basis

33. Performance
Benchmarking
Process
Benchmarking
Strategic
Benchmarking
Generic
Benchmarking Functional
Benchmarking
Competitive
Benchmarking
Internal
Benchmarking
What is to be
compared
Against whom to
compare
Classification of Benchmarking

34. Structuring Organizational Appraisal

35. Strengths,
weaknesses
+
Opportunities,
threats
Organizational
Appraisal
Environmental
Appraisal
Strategic
Alternative 2
Strategic
Alternative 1
Strategic
Alternative n
Strategic
Choice
Structuring Organizational Appraisal

36. Organizational Capability Profile (OCP)

37. Strategic Advantage Profile
► Concise form of OCP
► Picture of critical areas in relation to strategic posture of firm in future
Capability Factors Nature of Impact Competitive strengths or weaknesses
Finance High cost of capital; reserve and surplus position unsatisfactory
Marketing Fierce competition in industry; company’s position secure
at present
Operations Plant and machinery in excellent condition
Personnel Quality of employees comparable with that of competitors
Information Management Advanced management information system in place
General Management High quality and experienced top management with proacti
ve stance

38. Bombardier
1960s
-70s
1959
1942
Commercial
snowmobile
company
Founded
Iconic
Snowmobile
vehicle
Ski-Doo
Become leader in
rail/
transportation
Acquisitions
Acquired
Canadair
Aerospace
industry
1986

39. Bombardier
Insert the title of your subtitle Here
2008
1995
1989
Most used aircraft
for regional flights
CRJ regional
aircraft
Learjet, de
Havilland
and
Acquisitions
Plans to take on
Boeing and
Airbus
C-Series Aircraft
Refused to offer
bulk discounts to
the major carriers
Missteps
2008
-2015

40. Pierre Beaudoin stepped down in 2015 as the company continued to spiral downward.
The C-Series has yet to make any real penetration in the market with orders of less
than 250 planes (and none in the past 1½ years) as of 12/31/15 compared to 3,072 orders
for Boeing’s 737 and 4,471 for Airbus’s 320. As the investment of billions in the program
was underway, the company decided to launch two new business jets further stretching
Resources
The company has invested over $5 billion in the C-Series alone and has had a net negative
cash burn for the past five years. The stock is now worth one-tenth of what it was in 2011
and the company is asking for a bailout from the Canadian government as they lay off nearly
10% of their workforce.
Sources : S. Deveau & F. Tomesco, “Why Bombardier Is Struggling to Build Bigger Planes,” Bloomberg Business, February 4, 2016
Bombardier

41. Thank You