Added: 2015-06-23 T 09:23:17 UTC

DOI: 10.13140/RG.2.1.3222.0323

Chapter 4
Internal Analysis
Contemporary Corporate Story
Learning Objectives
Organization Analysis, concept of
Resource-Based View
Function Approach
Value Chain Approach
Internal Environmental Analysis
Internal Factor Analysis
Key internal forces
SWOT Analysis
Critical Success Factor Analysis
Internal Factor Evaluation Matrix
Best Practices: A Company’s Experience
Summary and Key Ideas
Mind-Pricking Questions
Multiple Choice Questions
Students’ Short Projects
Key Terms
A Case for Analysis
Notes

Learning Objectives

 The purpose and meaning of Internal Analysis

 The Concept of Resource-Based View and its connection to Internal Analysis

 The process of and approaches to internal analysis

 Function Approach and Value Chain Approach to Internal Analysis

 Process of Internal Environmental Analysis

 The components of internal environment

 Evaluation of Internal Factor Analysis

 Identification of Strengths and Weaknesses

 Critical Factor Analysis

 The Technique of Internal Factor Evaluation Matrix (IFEM)

Contemporary Corporate Story

Rasna’s Organizational Analysis That Preceded Its Decision to Be a Multinational

The brand, which tasted the success in domestic market, and international market as well
through moderate exports, now wants to become a multinational company; for this to
happen, it is pursuing a new strategy - market expansion.

Rasna, a well-known fruit drink concentrate (SDC) brand, owned by Ahmedabad-based

Pioma Industries, is scouting for joint venture partners to expand its trade to former
Soviet (CIS) and African countries. It collaboration options include licensing, technology
transfer, joint venture, and marketing partnership.

Its vision is to be a global leader in processed foods. Its mission is to bring to the global
market high quality processed foods, beverages and confectionaries through superior
technology. Its current focus is to give the global consumers the true flavor of the Indian
foods through its ethnic recipes.

At present, with an annual turnover of Rs.291 crores (April, 2008), Rasna holds a market
share of close to 97 % of soft-drink concentrate market in India. It currently exports its
concentrate-11 products- to more than 40 countries in Europe, Asia and Africa. Before
1979, it was known as ‘Jaffe’ and marketed with the help of Voltas. It has now eight
manufacturing units in India.

Besides expansion to CIS and African countries, its significant strategic initiatives
include consolidation of mass market segment for soft drink concentrates in sachets in
India and expansion of its fast food chain, Devil’s Work Shop. They want to expand them
from the present 4 outlets to 100 by 2010.

Its products include Rasna Instant Drink, GoFrut Instant Drink, Fruto Instant Drink, Body
Fuel Health Drink, Rasna Shake-Up, Rasna Juc Up, Rasna Soft Drink Concentrate, Rasna
Fruit Jams, Rasna Fruit Cordial, Rasna 1/3 Sugar, and Rasna Flavors. Rasna has recently
( March 2008) launched Rasna FruitPlus, a fat-free health drink concentrate containing
fruit powder, vitamins and calcium; it will be sold in both bottled packs and pouches.
This drink concentrate, a rare soft drink of fruit-based concentrate and nutrients for the
Indian consumers will compete with juice brands like Tropicana as well as the soft drinks
like Frooti and Maaza.

With the kind of background given in the foregoing, Rasna is all set to embark on an
expansion into foreign turf.
Rasna’s internal analysis presumably preceded its strategy formulation involving
expansion into foreign markets. The factors which must have emerged from such exercise
are as follows. (The information given on its website reveals Rasna’s internal factors.)1

(1) flexibility in developing SKUs as required by the market, (2) sourcing quality raw
material at competitive prices, (3) quality assurance systems, (4) state- of- art technology
in manufacturing and packing, (5) strong and active R&D function, (6) knowledge of
markets, (7) sharing of knowledge among the personnel, (8) good cost control systems,
(9) right interface with the consumers, (10) a system to deliver natural, fresh products all
through the year, (11) highly motivated and committed managers, and (12) pursuit of a
plan for phased and focused expansion into new products and markets,

The foregoing factors which have emerged out of an internal analysis exercise drive and
support its strategic move involving expansion into foreign countries. In the absence of
such an exercise, any wishful moves will most likely confront a firm with unpleasant and
expensive surprises.

Internal Analysis

No plan- big or small, strategic or tactical- can succeed if it is made without reference to
the context in which it is going to operate. Context reveals the need to plan, the factors
that help or harm a plan, the factors that need manipulation, and the wherewithal required
to operate it. The context which is specific to a firm, and on which it has some amount of
control can be called ‘internal context’. This internal context has to be first understood
before one goes about understanding the external context as shown in Figure 4.1. When
internal context is understood, the points that emerge include its strengths, weaknesses,
resources needed and competencies that have to be built. Understanding internal context
is ‘internal analysis’, which is defined as follows.

Internal Analysis is an exercise to list a firm’s resources, strengths, and weaknesses.

Figure-4.1
Internal Analysis
What is outside a firm-
External Analysis

Internal Analysis is an exercise to list a firm’s resources, strengths, and weaknesses. An

understanding of a firm’s resources is a prerequisite to formulation of strategy; this
prescription is an offshoot of a theory called ‘Resource-Based View’.
What is inside a
firm-Internal
The view of Hitt, Hoskisson and Ireland, the Resource-Based Model of above-average
returns gives some idea Analysis
of ‘Resource-Based View’. According to them, it involves
‘identification of firm’s resources and unique capabilities, and determination of the
potential of such resources and capabilities in terms of competitive edge; this is done
before an attractive industry is chosen and a strategy is formulated to utilize its resources
and capabilities vis-à-vis the opportunities presented by the external environment’.
Essentially, it is about determining the unique capabilities of a firm and pitting the same
against the opportunities.

Resource-Based View

Resource-based view (RBV), which is the opposite of Industrial Organization View, lays
emphasis on a company’s resources and competitive capability for organizational success.
Jay Barney has proposed this view. Industrial Organization view lays stress on a firm’s fit
with the external environment.
Concerning which factors are critical to a company’s success in terms of
profitability, stability, growth and survival, scholars are divided into two groups. The two
groups are: 1. Industrial Organization View proponents and 2.Resource-based View
proponents. These schools are two sides of the same coin in that each view complements
the other. Simply stated, an analysis on one view is a standard to cross- check the
outcome of the other analysis. Industrial Organization view, which stresses on a firm’s fit
with the external environment, has been discussed in detail in the previous chapter.
Resource-based view (RBV), which is the opposite of the former, lays emphasis on
company’s resources and competitive capability for organizational success. Jay Barney
has proposed this view. Resource-based view theory primarily divides the firm’s
resources into three categories: (a) physical resources consisting of plant, land,
equipment, technology, and the like, (b) human resources consisting of the manpower,
their skills, their work culture, their training, experience, intelligence, abilities and so on,
and (c) organizational resources consisting of softer aspects of an organization
encompassing structure, systems, processes, patents, trademarks, brand value and so on.
Please see Figure 4.2

Figure 4.2

The Components of Resource-Based View

 Physical Human Organizational
Resources Resources Resources

Include: Include: Include:

Plant Skills Structure
Land Work culture Systems
Equipment Training Processes
Experience Patients
Brand Value

Protagonists of resource-based view pursue organizational analysis devoutly. They

conduct organizational analysis to understand the pattern, nature and size of the
resources. The unique combination of resources, their magnitude and nature, not
possessed by any other firm, constitute the competitive advantage of a firm. For this
unique position to be obtained, a firm has to thoughtfully develop and maintain the
resources that no other firm has, at least in the combination it does. For example, Infosys,
the Indian software giant, developed the best mix of highly motivated manpower, client
servicing apparatus, brand image and an effective selling and execution mechanism.

RBV theory prescribes that since the objective of the strategic management limb of
a firm is sustainable growth with the help of a sustainable competitive advantage,
unstinting focus on developing and keeping unmatched and valuable resources is
essential; such resources which bestow competitive edge are rare, hard to imitate, and
hard to substitute. Please see Figure 4.3. They are hard to obtain, though most coveted
and worthwhile. These characteristics, also called ‘empirical indicators’ are the inspiring
goals of any assiduously- run firm; they equip it with efficiency, effectiveness, and thus,
a sustainable competitive advantage.

Figure-4.3

Characteristics of Resources That Have Potential For Competitive Advantage

Characteristic It implies
1 Valuable They help a firm capitalize the opportunities and neutralize
threats.
2 Rare They are possessed by very few competitors.
3 Costly to They can not be reproduced since they are either available in
imitate combination or its owners built them over a long period.
4 Non- They have no equivalents and their power can not be usurped.
substitutable

Continuing the example of Infosys, one may easily figure out its three empirical
indicators: (1) its committed manpower, their training systems and effective execution
can be considered as rare, since very few firms possess this combination, (2) the
committed and efficient manpower of Infosys is hard to imitate or duplicate, and (3) there
is no substitute for its committed and efficient manpower in the imaginable near future.

According to other analysts, added to the foregoing indicators, the fourth and the
most important, is being ‘valuable’. It implies that it is a source of value in that it has the
potential to fulfill the needs of an organization. (A detailed discussion on these
parameters is presented in the next chapter.) In other words, Infosys enjoys a competitive
advantage due to these rare, inimitable, non-substitutable, and valuable human resources;
this shows that Infosys has adopted Resource-based View to build a competitive
advantage.

It is important to note here that since resources are liable to get obsolete, the useful
and currently relevant resources have to be acquired, built and maintained. The relevance
of the candidate resources is judged to a large extent by the external factors such as
change in individuals’ aspirations, emerging technologies and so on. It means that the
relevant resources that make for competitive advantage are identified after understanding
external factors. In other words, the relationship between external factors and internal
factors is as crucial as the resources themselves and a proper match between them has to
be struck; this conclusion takes us to the other view- Industrial Organization View, which
says that an organization has to match its resources to the environment in which it
operates. Let us now understand internal analysis, the sequel to subscription to RBV,
which is the primary objective of this chapter.

A purposeful attempt to list the strengths that facilitate organizational success or the
factors that inhibit growth precedes any potentially successful business initiatives. It
requires a deliberate mental exercise, the output of which will be subsequently
documented in most of the cases, if not all. This exercise might take place at the level of a
core group or the leader enjoined to put a firm on its track. Essentially, an analysis, in
general, implies an identification of the reasons or factors that underlie the current or
future status with regard to a particular phenomenon. Strategic analysis, of which internal
analysis is a part and parcel, seeks to ferret out the reasons that facilitate or hinder long-
term growth or survival of an organization.

The process of identifying and evaluating the organizational factors that underlie
sustainable performance and long-term growth of an organization or those that hinder its
growth is referred as internal analysis. This analysis is variously known as internal
analysis, internal situation analysis, organizational analysis, internal environmental
analysis, internal appraisal of firm, internal assessment, and company analysis.

The quintessence of strategy-making, it should be noted, is that the success of an

organization as reflected in its survival and long-term growth is not fortuitous nor is it
guaranteed by a big-bang launch of it by its promoters; there are certain organizational
factors- factors within the organization- that facilitate the organizational success;
likewise, there are certain factors that either slow an organization’s performance or have
the potential to finally kill it. The process of identifying and evaluating the organizational
factors that underlie sustainable performance and long-term growth of an organization or
those that hinder its growth is referred as internal analysis. Please Figure 4.4. This
analysis is variously known as internal analysis, internal situation analysis, organizational
analysis, internal environmental analysis, internal appraisal of firm, internal assessment,
and company analysis. Internal audit, which profiles component activities of each
function and evaluates their efficiency, also does the same function.

This analysis or audit ‘cuts open’ the contours and the taproots of an organization to help
understand the essential links that have the potential to determine its success. It bears
repetition here that the entire gamut of strategic thought processes and strategic actions is
concerned with operationalizing a grand plan to survive and grow amid competition,
threats and weaknesses by thoughtfully utilizing the opportunities and its strengths. In the
previous two chapters wherein external analysis has been dealt with and which is also a
part of strategic analysis, the strategic factors that lie outside the boundaries of an
organization have been identified. It is needless to say that strategic analysis comprises
both external and internal analyses. This chapter covers the methods and approaches to
analyze and find out the strategic factors that lie inside an organization.

Process of Internal Analysis

Organization Analysis implies developing a profile of an organization along its lines

of its activities-either along its functions or around the component operations in the
manufacturing of a product or producing service. These functions or activities, when
identified and strung together, give a broad picture about which activities of an
organization are contributing to either better sale of its products and services or their
production or improvement in the firm’s profits, or reduction in its costs, or boosting the
firm’s goodwill. For example, design department contributes to production and sale,
manufacturing department or its wings produce goods, distribution system facilitates
marketing, advertising department pushes the sales, marketing department organizes
outflow of goods and services. After identifying these activities or departments or
functions, those which are best contributing to the goals of the firm are evaluated and
ranked. The outcome of such an evaluation is an identification of the most critical
functions of the organization. Internal Analysis can broadly be done under five
approaches: (1) Function Approach (2) Value Chain Approach (3) Internal Factor
Analysis (4) Critical Success Factor Analysis, and (5) SWOT analysis. An overview of
them is presented in Table 4.1.This chapter discusses them in detail one after the other.
Table-4.1
Approaches to Internal Analysis

Functions Approach
Resources
Strengths
Competencies
Capabilities
Weaknesses
Gaps

Value Chain Approach

Resources
Strengths
Competencies
Capabilities
Weaknesses
Gaps

Internal Factor Analysis

Support and Resistance from
Internal Setting
Suppliers
Competitors
Intermediaries
Customers
Interest Groups

Critical Success Factor Analysis

Resources
Capabilities
Operations

SWOT Analysis
Strengths in Operations & Resources
Weaknesses in Operations & Resources

Further, these activities are studied to understand what factors have contributed to
their current level of output; for example, while higher sales are analyzed for a particular
year or in a particular department, they may be attributed to particular sales persons, or
particular outlets or particular models of distribution or particular campaigns. Similarly,
for a perceptible rise in the production, certain factors may be clearly found to be
responsible-new production incentive system or adding a new factory or expansion of
production capacity. All such analyses lead to the identification of strengths and
weaknesses of the factors engaged to contribute to the goals of an organization. Simply
stated, organizational analysis is the identification of factors responsible for achievement
of organizational goals besides establishing the strengths and weaknesses of the factors so
identified. It is worthy of note here that analysis in strategic management revolves around
strengths and weaknesses of the organizational factors. Further, the distinct competencies
or critical strengths are also referred to as ‘key internal forces’. It is the function of
internal analyst or organizational analyst or internal auditor to identify them.

Internal Analysis Vs Organizational Analysis

Organizational Analysis embodies ‘organizational appraisal’ too, in that the importance
(criticality) of the factors- how strong those factors are in terms of contribution to
organizational goals- is determined.
Organizational Analysis embodies ‘organizational appraisal’ too, as already explained in
the foregoing, in that the importance (criticality) of the factors- how strong those factors
are in terms of contribution to organizational goals- is determined. This is necessary
because mere listing of factors either serves very little purpose or leaves everything to the
intuition or judgment of a reader. A complete internal analysis or internal audit consists of
profiling of strengths and weaknesses as well as determination of potency of a strength
and gravity of a weakness. In internal analysis or internal audit, comparison of a factor’s
contribution with the target set or with that of the other similar department or an industry
standard is made to facilitate determination of value of each factor or activity.

Figure-4.4

Internal Analysis Activity Chain

Identify Evaluate Determin

e

Challenges of Internal Analysis

The caveat here is that certain factors which were traditionally of strategic
importance cannot remain so in this globalized scenario, at least to some degree if not
absolutely. For example, availability of raw material or cheap labor or governmental
protection against competitors is no longer a strategic internal factor; this is so because
once the borders between nations are erased, resources and skills freely flow to reach
where they are most needed from where they are abundantly available. This is a new
challenge to strategic analysts operating in this globalized economic order.

A few of the challenges in internal analysis include industry variation and company
variation. To clarify the preceding comment, it has to be stated that what is considered as
a strength in a particular industry may not be so in another industry. For example,
availability of good cotton may be critical to the success of a firm in textile industry but
in electronics industry, raw material is not as critical as that in textile industry. Even in
the same industry, what is critical to one firm may not be so in another firm; for one
hotel, lower costs may be important, but for another hotel, costs don’t matter as much as
service does. It implies that criticality varies by company also. Another example would
be that location may be critical to a book retailer selling through a showroom located
downtown, but for a book retailer of mail-order business format, location is not as
important.

Internal Analysis Approaches

Internal audit or internal analysis is usually done on traditional functions: production,
marketing, finance, human resources, technology and so on. This is referred to as
‘Function Approach’
Internal audit or internal analysis is usually done around traditional functions:
production, marketing, finance, human resources, technology and so on. This is referred
to as ‘Function Approach’. Each of these functions is further broken down to identify
critical sub-functions, and their strength is also determined in terms of their contribution
to organizational goals. A general checklist of functions or sub-functions is given in
Table 4.2 The types of functions vary by industry. For example, for a university,
curriculum development may be a function while in a hospital, patient care may be one.
For a consumer goods firm, manufacturing is a vital function while for a large retailing
firm, sourcing/procurement department represents a very critical function.

These functions are each rated in regards to their importance to the firm with the
help of a tool called ‘Internal Factor Evaluation Matrix’, the discussion of which is
presented a little later.

The other alternative approach to Function Approach is ‘Value Chain Approach’, in

which analysis and evaluation of the nine activities-five primary activities and four
subsidiary ones as identified by Michael Porter-is made to determine where the
organization has to improve further. These activities constitute a standard list of inbound
logistics, operations, outbound logistics, marketing, service, procurement, technology
development, human resources and firm infrastructure. Regardless of the type of
organization, value chain analysis goes solely along these activities in most of the cases if
not all; it is needless to say that in this analysis, the functions are fixed and standard. The
description of this analysis is presented after ‘the function approach to internal analysis’
is discussed.

Function Approach

Function Approach concerns itself with the identification and evaluation of strengths and
weaknesses of each function, commonly known as functional department. The functions
that are commonly found include production, marketing, finance, human resources,
R&D, and general management as shown in Figure 4.5.
 Figure 4.5
Function Approach

Production

General
Marketing
Manageme
-nt
Sales
Profit
Goodwill
Cost Reduction

Research&
Finance
Development

Human
Resources

Review of performance history of a firm on the lines of products, markets, departments,

regions, functionaries, key customers and so on lays bare who and which of them are
contributing or have contributed substantially or, conversely, underperforming noticeably;
this review reveals the key internal factors that have to be focused on and managed. This
is referred to as ‘function approach’. Performance of each of the factors is studied and
evaluated in terms of sales, profitability, goodwill, and reduction of costs as shown in
Figure 4.6.

Figure-4.6
The Performance Goal of a Function
 Sales Profits Goodwill Cost
Reduction

A checklist of functions and sub-functions (the strengths and weaknesses of which have
to be determined) is presented in the Table 4.2 A discussion on each of the key internal
factors- simply called ‘functions or departments’, is presented in the following.

Function Approach refers to analysis of each function of an organization so its

performance capabilities are understood.

Table-4.2
Functions and Sub-functions

Production

Factories that work up to full capacity with the least cost of production;
Smooth and abundant availability of raw material and their cost;
Suppliers who are reliable and committed;
Designing talent, and the pace and success of new product development function;
Inventory levels that provide continuity in production with low carriage costs;
Optimal utilization of facilities;
Information systems that facilitate optimization of inventory at factory and outlet levels,
optimal work assignment to machines and other facilities, and the like;
Layout of facilities and systems of material handling, and their efficiency;
Research and development activities and their productivity;
Production processes that give high productivity and low wastage at low cost;
The desirable scale of production that returns economies of scale;
The production systems that give economies of scope and the resultant benefit of mass
customization;
The desirability of sub-contracting and outsourcing;
The necessity of integration-backward and forward;
Quality control systems, their contribution to the customer acceptance of production, and
the like;
Technological abilities consisting of cutting-edge processes or plant or systems;

Marketing

Effectiveness of the segmentation, targeting and positioning;

The most profitable customer groups and markets;
Customer analysis that reveals to what extent the customers’ needs are met;
The product lines that sell well and those that yield high profits;
The distribution channels that perform well and to what extent they cover;
The advertisement media and campaigns that are effective;
The effectiveness of the sales organization;
The efficiency of marketing information systems;
The pricing policy and its reasonableness in terms of market share, growth and
profitability;
Brand loyalty, brand image, and the scope left to improve it further;
The level of post-sales service;

Human Resources

Skills, Knowledge and Abilities;

Commitment to the firm and the motivational level of the employees;
Selection practices;
Cultural composition of employees;
Pay parity relative to industry standards, incentive systems and compensation methods;
Attrition levels and absenteeism;
Aggregate Personnel Experience;
Employee productivity;
Recruitment sources and their effectiveness;
Selection practices that sifts through the best talent;
Training methods that keep its people ahead of competition;
Shared vision and attitude towards team work;
Human resource productivity metrics & Performance appraisal;
Career management that leads each employee to grow in his career;
Institutionalization of knowledge-sharing;
Industrial relations characterized by harmony and commitment;
Quality of work life;

Finance

Efficiency in the usage of funds as reflected in the sales as a ratio of funds in use;
Reputation with general public and small investors;
Access to financial markets for both long-term and short-term debt;
Use of debt in relation to equity;
Debt Servicing efficiency;
Efficiency in the use of assets;
Adequacy of working capital and avoidance of excess working capital;
Cash Management to strike a balance between unproductive excess and crippling
shortage;
Profitability in relation to sales, capital employed or equity;
Cost of capital relative to industry standard;
Cost control mechanisms;
Accounting and reporting systems;

General Management

Vision and mission

Organizational structure and its fit with the operations;
Lines of communication and distribution of power;
Appropriateness of span of control;
Planning systems and monitoring;
Organization of strategic management;
Culture and leadership;
Core values that were upheld through thick and thin;

Research and Development

Importance of research, and the management’s current level of focus on it;

Budget allotment on research and development as a percent of total sales;
Appropriate mode of research - in-house or contract;
Benchmarking of R&D function with the competitors;
Research and development goals for both short and long terms;
Ratio of new product launches to the total number of prototypes built;
Research on manufacturing process improvements;
Experience of persons in research and their training;
Benefit-Cost Analysis of research done or the projects in progress.

Production Function
The five basic functions of production management are: process, capacity, inventory,
workforce and quality management.
The specific ways in which a production function is organized and managed has a lot to
contribute to the competitive advantage of a firm. It is the most critical area where a
product that satisfies the customer’s needs at the most reasonable cost is made, and so it
offers a lot of scope to improve. The most critical factors in a typical production
department include: (a) the location, layout, size and design of the plant, which facilitate
reduction of production cost; (b) the process system which has the potential, on one hand,
to reduce the production lead time, inventory, defectives, raw material component, its
wastage, and total cost, and on the other, to bring out the best product, more output,
improved quality, quick or on-time output and so on; (c) quality control systems which
facilitate quality output; (d) productivity of workforce; and (e) raw material procurement
systems that are able to locate and work with the most effective suppliers in adequate
numbers just when the inputs are most needed. Schoeder listed five basic functions of
production management: process, capacity, inventory, workforce and quality as shown in
Figure 4.7.
Figure-4.7
Basic Production functions

Capacity Workforce
ItProcess
is common with most of Inventory
the sick industries Quality
that their capacity utilization is either low,
or irregular or little; a measure of capacity utilization is a handy tool to check the health
of a firm, and hence makes a critical factor. Another similar metric that reveals a
competitive strength is the one related to production lead time - how much time a plant
takes to roll out the production against a particular order. For example, Honda Motors
takes fifteen days to execute a production order while Toyota takes only five days, which
is just one- third as long. That is a clear indicator of Toyota Motors’ production
efficiency, and it is needless to say that production efficiency is defined absolutely in
terms of how quickly the order is completed.

The decisions taken in Production/Operations area have a strategic and long-term impact.
Dilworth listed the strategic consequences of these production decisions. A few of them
are cited in the following.

If a firm decides to compete as a low-cost producer, it leads to a complete revamping of

the production system - scale, process and the like, which, in turn, among other things,
discourages the competition and broadens the market. Alternatively, if it decides to
manufacture the best quality products, it leads to obtainment of profits from a smaller
quantity of sales which, in turn, requires employing highly skilled workers, careful
training of them, strict quality control and precise equipment. If a strategic decision is
taken to stress on service to customers, another new decision in production area, it
requires ensuring of employment of highly trained service personnel, precise and
expensive service equipment, high inventory, and a proper system for the flow of
information about changing customer needs. The foregoing are a few examples to show
how the production decisions are very strategic, and how they entail further changes. In
short, this analysis is an attempt to demonstrate how critical and far-reaching the
decisions in production area are.

Marketing Function
Marketing is the process of understanding customer’s needs, creating goods and services
to fulfill them, and delivering them where and when the customer wants.
Marketing is the process of understanding customer’s needs, creating goods and services
to fulfill them, and delivering them where and when the customer wants. To define it in
fewer terms, marketing is concerned with creating and delivering the best value to the
customers. The various functions in marketing either make for growing the organization
or lead to its loss of competitiveness; hence these functions have to be identified and
analyzed to judge how effectively each of them is managed.

Figure-4.8
Marketing Function
 Product
Lines &
Product
features

Marketing
Information Pricing
Systems

Marketing

Distribution Advertising

Marketing encompasses five principal functions as shown in Figure 4.8: (1) ascertaining
what customers want –marketing information system, (2) determining the product lines
and product features – product management, (3) pricing- determining the price in
accordance with who buys for what, (4) telling prospective customers how good the
product they make is, where it is available, and at what price – marketing
communications, and (5) making the products/services available where they are in
demand- distribution. These principal functions have several sub-functions, the important
of which are enumerated in the following. The effective conduct of these functions makes
for building of competitive advantages.

1. Consumer research and analysis to ascertain what they need, and at what price;
poor information results in wrong product offers and consequent rejection from
the customers; a system to get post-sale feedback from customers has also to be
put in place to correct what has gone wrong, and where to improve further;
2. Choosing the right customer group which the firm can best serve, and determining
how the offer of this firm is distinct from that of the competitors- a credible
reason why the customers should patronize this firm over others; choosing a
wrong customer group leads to rejection of the products and services offered;
 3. Determining what product lines should be offered and what particular features
each product should include; products have to be customized to different groups
and improved with the latest features; or else, it will be a mismatch and the
competitor who offers what customers exactly need will be patronized by the
customer groups; likewise, the level and timing of service that has to go with
product before and after sales has also to be put in place and monitored to see it is
given as needed; else, the patronage of the customers will be discontinued;
4. Determining price - how much markup for each consumer group, what kind of
discounts, and other terms of payment; unjustified pricing will drive away the
customers, and in the same vein, liberal discounts or low markups will deprive the
firm of the potential revenues; low markups will also give an impression to the
customers that the product has relatively low value; pricing can promote a product
or generate revenue; which approach one has to take in regards to pricing is very
critical;
5. Deciding on advertisement budgets, media, appeals, alternative communication
approaches, promotions and so on to get the sales-related message across and
ultimately to induce short-term and long-term sales response; this function tells
why customers should buy their product, at what price, and from where;
advertisement campaigns casually designed or poorly executed can not only be a
drain on the revenues but can also lower the brand image of the company;
6. Controlling all marketing sub-functions to see if everything happens as planned;
there may be expected and unexpected changes in the consumers’ needs,
technology, resource availability, and agreed and expected performance of the
organizational members; for an effective control, performance metrics like market
shares, product-wise sales ratios, market-wise sales ratios, individual-wise
productivity achievement measures and so on have to be devised, measured and
kept track of.

Companies like ITC and Hindustan Unilever are very successful, particularly due to their
marketing prowess. For example, in the recent past, ITC, the Indian hotels and tobacco
major, expanded its markets and diversified into a wide range of product lines
(chocolates, biscuits, incense sticks, matches and so on) primarily on account of its wide
outlet network. In short, marketing function has several activities that are strategic
inasmuch as their strength can take a firm to newer heights, on one hand, and their
infirmity, on the other, can be a source of fast downfall.

Human Resources Function

Human Resources have the potential to give their best to the firm if fostered well and led
in a proper direction, and thus constitute a competitive advantage. Human Resources
have to be planned, acquired, developed and retained.
Human resources are a distinct kind of asset that is very sensitive to feelings and
emotions but has the potential to give their best to the firm if fostered well and led in a
proper direction, and thus constitute a competitive advantage. Human resources have to
planned, acquired, developed and retained. A well-managed human resource function is
valuable, rare, inimitable and non-substitutable. A growing realization of the importance
of human resource management is noticed all around the world, as evidenced by the
ubiquity of this function and also its securing a slot in the boardroom and the strategy
management function. A long list of firms beginning with Microsoft, Infosys, and British
Airways owe their success to the human resources. A serious audit of this function may
reveal a host of flaws which, if corrected, can be sources of great competitive advantage.
A few of them are listed to give a broad idea of where this function can err.

1. Per employee productivity in comparison to the industry standard or that of a

best-managed company.
2. Different recruitment sources and the success of each of them.
3. Different selection methods used, and their effectiveness.
4. Employee turnover (attrition rate).
5. Morale and commitment among employees.
6. Remuneration packages.
7. Performance appraisal systems and training methods.
8. Quality of work life and employees’ ratings of it.
9. Human resources planning, including the succession of senior level personnel.

Finance Function
The main concerns of finance function center around three areas: (1) where it gets money
from and at what cost, (2) where a company invests and how much, and (3) how it uses or
distributes the profits it earns.

Function-
Figure-4.9
Finance Function

Sourc Where How

e& and profits
Cost How are
The of of
health afirmmuch
is roundly utilized
reflected
in its financial position- profit and loss account
funds invested
and balance sheet. Profit and Loss account is a statement of income and expenses for a
particular year; it helps one figure out by how much the total income exceeds the total
expenditure, or vice versa. In other words, it reflects the net positive (or negative)
outcome of the operations of a firm for a period, usually a year. A simple, cursory way of
financial analysis is comparison of figures in the profit and loss account with those of the
previous years; each of the amounts shown under different heads like interest, insurance,
traveling expenses, sales commission is compared with corresponding figures of the
previous years. This simple analysis reveals how effectively the firm has been run for a
given period- year, in comparison to the years that have passed before.

Balance Sheet is a statement of assets and the liabilities as shown in Figure 4.10 (share
capital is also a liability since the firm is viewed as an entity separate from individuals
who contribute share capital) shown against each other as on a particular day, usually the
end of a year. Assets represent the items where the funds are invested- plant, buildings,
working capital and so on, and how much on each; liabilities represent where the funds
have come from (sources)- equity share capital or debt in their different forms, and how
much from each. For an analyst, balance sheet lays bare, on the one hand, how and to
what extent valuable resources are committed in productive and unproductive assets, and
to what extent expensive or less expensive funds are pooled up, on the other. Further, the
liabilities side of balance sheet shows how much of the undistributed profits is available
as a reserve, which can absorb future shocks of losses or which can be distributed to the
shareholders as bonus shares. Each figure in the balance sheet is an index which can
explain the effective and ineffective functioning of firm.

Figure 4.10

Balance Sheet

LIABILITIES
ASSETS
Share Capital
Short- Term Loans Fixed Assets
Long-Term Loans Working Capital
Reserves = Loss
Profits

Simply stated, an analysis of the financial position as shown in profit and loss account
and balance sheet will reveal if it can grow and survive, and if it can, how fast it can
grow; if it can not, how soon it is likely to go out of business.

The main concerns of finance function center around three areas as shown Figure 4.9.
They are: (1) where it gets money from and at what cost, (2) where a company invests
and how much, and (3) how it uses or distributes the profits it earns. These are referred to
as (1) financing, (2) investment or capital budgeting and (3) dividend decisions
respectively. Financing involving pooling up of funds primarily through four ways:
equity, undistributed profits, long-term debt, and short-term debt. A proper mix of these
sources of financing differentiates an effective finance function from an ineffective one.
Simply put, that which can be financed by a less expensive debt should not be financed
through equity. Conversely, it is also not considered wise to finance the operations
through debt when the returns are less than the cost of debt. The debt – equity mix and
profitability have to be analyzed to understand the efficiency of a firm in this aspect.
Debt-equity ratios and profitability ratios can be calculated, and the same can be
compared with the industry ratios or the firm’s ratios of the previous years during which
the has firm performed well. See Table 4.3 for a detailed explanation on the ratios used
for financial analysis.
A firm invests its pooled-up funds- capital and debt, in a variety of ways, broadly
consisting of projects, products, long-term assets like plant and buildings, short-term
assets like working capital and cash, and debtors (arising from credit sales). Each
investment is rated according to the return that comes from such an investment; if the rate
of return from an investment exceeds its cost of acquisition, or, at least, is on par with the
industry standard, such an item of investments is rated favorably. An effective use of
assets or their profitability can also be found out by looking at the relationship between
the assets or capital employed, and the sales or profits generated with the help of the
former. Different profitability ratios explain the firm’s current position or its efficiency in
the effective use of assets. Another related point with regard to investment is that cash
and working capital have to be kept at their optimal levels, and a fine balance has to be
struck. In other words, keeping working capital and cash at a level more than the required
will result in unnecessary expenditure on carrying it- interest, storage and safeguarding,
and reducing them to a level below the required will entail stock-outs, customer
dissatisfaction, machine idle time and so on. Keeping optimal working capital level calls
for the establishment of effective information systems, and identification of effective
sources of supply. Ideally, a firm should be able to work with the lowest level of working
capital, which, in turn, requires cutting-edge management information systems, state-of-
art technology, good planning systems, and effective sales organization. Financial
analysis has to check these aspects with the help of ratios, and other measures like cost of
capital, rate of return, liquidity, and so on. See the Table 4.3 to understand some
important ratios for the aforementioned kinds of financial analysis.

Payment of dividends is a clear sign of the effective running of an enterprise. Market

value of a firm is determined by the earnings per share and the dividend given per share.
Certain investors come forward to invest only in dividend-paying companies. On the
other hand, distributing profits fully as dividends leaves a company in a state of
unprepared- ness for the future uncertainty. Besides, in the difficult finance market
conditions like high demand for funds but low availability of them, it is not advisable to
substitute undistributed profits with those from the market. Dividend decisions reveal
how the firm is run and where it is headed; besides, dividends represent a firm’s
reputation among the investing public.

------------------------------------------------------------------------------------------------------------
Table 4.3

Liquidity

A firm’s ability to meet demands from its creditors for quick payment is referred to as
liquidity. Highly liquid firms make payments on demand, which helps the firm keep its
payment reputation. This reputation makes it easy for a firm to develop sources of supply
and buy the required inputs on credit. Regardless of this, the outer limit for the liquidity
has to be figured out and maintained to avoid loss of interest on idle funds. Liquid assets
keep the reputation but earn very negligible income if they do at all. The following ratios
help the analyst find out if the firm is liquid.
1. Current ratio = Current assets
--------------------
Current liabilities

2. Acid-test ratio = Liquid assets

-------------------
Current liabilities

Operational efficiency

Does the firm invest the funds of the owners and creditors in the operations that generate
sales and profits? The quest to find answers to this question unearth the profitability or
otherwise of the activities of the firm- the ability to produce commercial results. Hence
the ratios used to find out this are called ‘activity ratios’. The following are some
important ratios capable of ferreting out the firm’s ability to effectively use the assets to
produce sales and profits.

3. Inventory turnover = Cost of goods sold

-----------------------------
Average inventory

4. Inventory turnover = Sales

--------------
Inventory

5. Debtors turnover = Credit sales

--------------------
Average debtors

6. Fixed assets turnover = Sales

-----------------
Net fixed assets

7. Total assets turnover = Sales

----------------------
Total assets
8. Capital employed turnover = Sales
-----------------
Capital employed

Leverage Ratios

Leverage refers to the extent to which a company utilizes the borrowed capital to finance
its operations rather than equity capital. The recourse to borrowed capital is advisable
when the rate of return is high, and the access to it is easy. A firm depending heavily on
equity has generally less than optimal level of earnings per share. Interestingly, earning
per share can be maximized with the help of borrowed capital. Besides, shying away
from borrowed capital leads to an unwarranted pressure on the equity shareholders to
bring more for the firm’s projects. Simply put, leverage is a must. Leverage ratios reveal
the importance given to borrowed capital to increase the earnings per share, and to what
extent earning fluctuations can impact the firm.

9. Debt-to-Total Assets Ratio = Total debt

-------------------------
Total assets

10. Debt-to-Equity Ratio = Total debt

-----------------------------
Total stakeholders’ equity

11. Long-term Debt-to-Equity Ratio = Long-term debt

----------------------------
Total stakeholders’ equity

12. Times-Interest-Earned Ratio = Profits before interests and taxes

-----------------------------------------------------
Total interest charges

Profitability Ratios

The primary goal of a firm and indicator of its effectiveness is either profits or sales.
Profits result from an effective use of assets, or capital. Profits, in their different forms-
gross profit, net profit, profit before interest and tax, profit available to the shareholders-
have to be seen in their relation to assets or capital employed or equity. Such relationships
explain the profit-generating efficiency of firm with reference to the resources invested.
Besides, to check profitability, different forms of profits are seen in relation to the sales
too. The following are most commonly used profitability ratios.

13. Gross Profit-to-Turnover Ratio Sales minus cost of goods sold (Gross profit)
(Gross Profit Margin) = -------------------------------------------------------
Sales (Total Turnover)

Earning before interest and taxes

14. Operating Profit Margin = ---------------------------------------------------------
Sales (Total Turnover)

Net income
15. Net Profit Margin ---------------------------------------
Sales (Total Turnover)

Net Income (After-tax profits)

16. Return on Equity ------------------------------
Total stockholders’ equity

Net Income (After-tax profits)

17. Return on Total Assets ---------------------------------------
Total assets

Net income available to shareholders

18. Earnings per share ----------------------------------------------
Number of equity shares outstanding

Market price per share

19. Price-earnings ratio -------------------------------
Earnings per share

------------------------------------------------------------------------------------------------------------

Besides the ratios, a firm’s year-on-year growth ( in percentage terms) in terms of sales,
net income, earnings per share and dividend per share reveals which direction a firm is
headed. Finance function analysis is usually made before making strategic decisions such
as merger, buyout or sale, debt or equity routes and so on.
Similar analysis has to be done on Research and Development function which can feed a
business that is always hungry of new products and processes necessitated by the
changing consumer tastes, new technologies, competition from across the borders and so
on. Certain businesses like footwear, electronics, chemicals and the like quickly drown
into losses or go out of business if the stream of new products is too thin or too slack.
However, in many cases, whatever is invested in R&D is not giving the results of
expected level either due to ineffective leadership or inadequate funding or something
else. Another problematic side of the R&D which always calls for resolution is whether
to go in for internal R&D or contract R&D, each having its set of advantages and
disadvantages. The analysis can reveal the strengths and weaknesses of this function,
giving clues as to how to revamp it.

It is also very apt here to mention about an analysis required to learn if a highly effective
information system, which can facilitate effective managerial decisions, is in place or not.
The flow of information from operations, warehouses, suppliers, outlets, sales personnel,
and so on has to be harnessed and used to facilitate effective decisions on production,
sales, finance, human resource and so on. In many industries such as banking,
information system is an essential part, which is proved by the success of Citibank which
has installed and maintains a robust information system to serve customers better than its
competitors. An analysis of managerial information systems will reveal the necessity for
a strategic decision or otherwise regarding the information system.

Value Chain Approach

A firm has to concentrate on nine activities that make for the maximization of value to the
consumer. Porter has divided the nine value activities into two groups: five primary and
four support activities.
In the previous approach, functions are the basis to understand a firm’s strengths and
weaknesses. But, usually, functions are not common to all industries, and also not
common to all firms in an industry. They vary. But Michael Porter, a Harvard professor,
has proposed in his book Competitive Advantage, another framework wherein the
activities to be analyzed are fixed; they are nine. The standpoint that Porter has taken is
value which can be generated by doing a particular activity. Value refers to a single
benefit or a bundle of benefits to the consumer, encompassing many aspects like the best
features of the product, best design, easy availability, easy to use and reorder, economical,
best service and anything that a customer needs. A firm has to concentrate on those nine
activities that make for maximization of value to the consumer. Porter has divided the
nine value activities into two groups: five primary activities and four support
activities. See the Figure 4.11.

Figure-4.11
Value Chain
 Inbound Operations Outbound Sales & Customer
Logistics Logistics Marketing Service

Support Activities Support Activities Support Activities Support Activities Support Activities

1.Procurment 1.Procurment 1.Procurment 1.Procurment 1.Procurment

2.HRM 2.HRM 2.HRM 2.HRM 2.HRM
3.Technology 3.Technology 3.Technology 3.Technology 3.Technology
Development Development Development Development Development
4.Infrastructure 4.Infrastructure 4.Infrastructure 4.Infrastructure 4.Infrastructure

The five primary activities are (1) Inbound logistics, (2) Operations, (3) Outbound
logistics, (4) Sales and Marketing, and (5) Service. These primary activities directly
contribute to the creation of product or service and its delivery and after-sales service to
the customer. Each primary activity again consists of a number of activities; for example,
in-bound logistics consists of activities like transport, material handling, warehousing,
material entry and so on.

The four support activities are (1) Procurement, (2) Technology Development, (3) Human
Resource Management, and (4) Firm Infrastructure. Each of these support activities helps
in the effective execution of each of the primary activities. For example, effective human
resource management helps in ensuring effective inbound supplies, effective production
operations, effective distribution, an efficient sales organization, and customer-gratifying
after-sales service. The following is a discussion on each of the nine value chain
activities, beginning with the primary activities.

Inbound Logistics: The supplies that are coming into a production facility of a firm,
called ‘inbound logistics’, have to be correctly timed, properly received, correctly stored
in a warehouse, and correctly entered into data base. Any wastage or delay or laxity in
any of these activities will either add to the cost or lower the value of product or service.
Incorrect data entry management, for example, may result in denial of a request for
transfer of the same to an indenting department, though it is already there (because it is
not properly entered). This entails wastage, cost, idle time and poor service. Each of the
numerous activities in inbound logistics has the potential to make or break the value of
product and service. An analyst has to focus on these activities to examine how
effectively they are carried out.

Operations: Operations are the manufacturing activities that turn raw material into
products; they are, on the one hand, doubtlessly the sources of wastage, avoidable
expenditure, low productivity, fatigue to the workers, and delay in the completion of the
orders, and have the widest scope to create value, on the other hand. The activities that
encompass facility layout and design, process flow, raw material used, production
planning, production technology used, machine scheduling and so on fall under the
purview of ‘Operations’. The operations are there in service firms too; for example,
hospitals convert manpower, infrastructure and technology into patient care service. The
scheduling of doctors and equipments are part of operations of a hospital.

Outbound Logistics: The activities involved in arranging timely transportation of the

manufactured products to the points where they are consumed are referred to as
‘Outbound logistics’. Outbound logistics are rated as effective to the extent the required
merchandize is available on time with the lowest possible transportation expenditure and
transport damages. It means that avoiding unnecessary expenditure and ensuring safe
transportation in just as much quantity as required is considered a value worth pursuance.
It is needless to say that excessive inventory at consumption points is a cost, and thus
reduces value that can have been delivered if correctly managed.

Sales and Marketing: All the activities that aid in the ultimate sale of merchandize are
marketing, and the ultimate transactions that mark the transfer of merchandize to the
buyer and the receipt of sales proceeds are sales. The consumer should be aided by a
firm’s sales and marketing activities in such a way that the merchandize he needs is
available at the points where he can reach conveniently, at the cost he considers to be fair,
and at the time which is convenient to him. Effective marketing activities and efficient
sales organization differentiate the successful firms from the failures. In India, the efforts
of private banks to make cash available any time through ATMs had been considered to
be a marketing activity that could give a competitive edge much before other banks
realized it, and proved so; it is now plain truth that ATMs are a source of great value.

Service: Service keeps or enhances the value of the product. Products require its
manufacturers to give its buyers the required level of service before and after sales,
particularly in respect of technical products like software or high-tech plant and
machinery. Installation, repair, training, supply of parts and the like fall under service
activities. Service is now an important criterion that attracts the customers to the product
and helps in the retention of them. Of late, what with the expectations from the customers
and pursuing the goal of achieving a competitive advantage, a noticeable trend is that
more service is increasingly given. For example, Citibank answers and acts on every
query or request sooner than any other firm could. Another example would be that the
secret of Infosys’ growth is its incomparable service to its buyers.

Support activities

Each of the activities discussed in the foregoing are further facilitated by four support
activities; these are often overlooked, though they are sources of great value. Each of
these support activities permeates all the five primary activities of value chain. They exert
a decisive influence on each of first five but not in an apparent manner; it requires a
careful analysis to figure out their influence.
Procurement

The activities involved in the procurement of inputs for the operations are referred to as
procurement. The inputs encompass raw materials, supplies, buildings, machinery and the
like. An effective system of procurement makes for quality output. For example, material
procured from suppliers selected purely on the basis of best criteria – purely on merit-
can supply quality material on time, which, in turn, aids in the quality output at a
reasonable price. Similarly, procurement of machinery or buildings at fictitious,
exorbitant prices will only add to fixed costs, which will, in turn, find their place in the
price of every unit of output. This is a missed opportunity to add value.

Technology Development

The activities involved in improving the technology and the process used in the
manufacture of products and their improvement, and the service procedures constitute
Technology Development. Redesigning of processes, basic research, new product
development process, use of information technology in service and distribution and the
like are the different forms of technology development. Technology, a source of value,
affords the competitive edge; a constant and successful pursuit of acquiring or developing
technology differentiates a star performer from the also-rans.

Human Resource Management

The human resources- with their and skills and motivation - are very crucial to the growth
and survival of a firm. Each of the entire gamut of activities involved in the acquisition,
training, motivating, and compensating of the personnel has its absolute influence on how
products are made and distributed, and how customers are given the expected service; so,
these activities require the best attention of the managers and present the highest potential
to create value. For example, a good recruitment practice or an effective performance
appraisal system helps in development, retention and motivation of a talented employee,
and a group of such employees are an inimitable and distinct value for a firm.

Firm Infrastructure

The activities involved in how a firm is managed in all its managerial functions -
planning, accounting, finance, and general management and so on- that do not fall into
any of the primary or supporting activities make the general infrastructure. For example,
a flawed accounting system may ruin the firm as it happened in the case of Worldcom or
Enron; a good accounting system not only facilitates good management but also adds to
the reputation of a firm. So these activities are not to be overlooked when a firm is
serious about creating value.

Simply stated, value chain analysis is an approach that directly zeroes in on where a firm
has to concentrate to create value that leads to sustainable competitive edge. But care has
to be taken to see that the factors that require more focus vary from industry to industry
and firm to firm, though all the nine activity groups have the potential for generating
value.

Internal Environmental Analysis

Internal Environmental analysis essentially identifies the actors - individuals and
institutions - that have some influence on a firm’s functioning; these can be shaped to a
firm’s advantage.
The internal environmental analysis gives an understanding of the factors responsible for
the potential success or failure of a firm. This analysis essentially identifies the actors-
individuals and institutions- that have some influence on a firm’s functioning; these can
be shaped to a firm’s advantage. This is the layer next to the outer layer: a company’s
external environment - political, economic, social and technological forces; external
environment; it is, contrarily, not subject to a firm’s control, and presents opportunities
and threats.

The internal environment, which is close to the firm, and on which a firm has relatively a
higher degree of control (unlike in the case of forces in the external environment on
which a firm has absolutely no control) consists of (1) company’s internal setting-
organizational structure, its mission, relationship among its functions and the prevalent
work culture, (2) suppliers, (3) intermediaries, (4) customers, (5) competitors, and (6)
interest groups like general public and employee groups as shown in Figure 4.12. The
following is a brief discussion on each of them.

Figure-4.12

Internal Environmental Analysis

 Internal
setting

Interest
Groups Suppliers

Competit Intermed
ors iaries

Custome
rs

Internal setting

The organizational structure, the relationships within functionaries and departments, the
prevalent culture, and the company’s vision, mission and plans which the company is
currently pursuing make the internal setting, which is nothing but the company itself.
Such a setting has the potential to determine its destiny- success or ruin. Conflicts among
a firm’s functions and functionaries as well, short term pursuits, conflicting goals, culture
that does not advance the organizational goals, and the like send clear signals about its
current and future health. A firm bestowed with highly motivated staff, workforce with
shared vision and mission, well-laid systems and the like exhibits the signals of sure
success.

Suppliers

Suppliers who provide the inputs- raw materials and other inputs-can determine firm’s
success since suppliers’ inputs and their timely or delayed delivery can either decrease or
increase the quality and price of a firm’s products, besides meeting or failing to meet the
service standards promised to the customers. Simply put, suppliers’ operations can either
promote or lower the efficiency, reputation and the chances of commercial success of a
firm. India’s personal cars major, Maruthi’s success is attributed to its suppliers’
efficiency.

Intermediaries

The other commercial intermediaries, besides suppliers, such as banks, design

consultancy firms, advertisement firms, human resource consultancy firms, training
specialists, marketing infrastructure providers like distributors and retailers, and so on
facilitate the job of a firm. While effective intermediaries are highly essential to a firm’s
success, in certain economies of less developed countries, for example, the intermediaries
may not be available at all. It is interesting to note that developed countries encourage
adequate availability of intermediaries, and these adequately available intermediaries are
one of factors that have helped the developed countries reach the current level of their
development.

Customers

Dependence on a few large customers leaves a firm in a risky, precarious position,

although it is easy and economical to coordinate with the fewer; such customers can hold
a firm to ransom; they can force a firm to cut prices; they can also scare it with a
reduction of ordered quantities so that it toes their line; in the worst cases, customers can
force a firm to go out of business. This has been discussed while explaining five
competitive forces. Conversely, a broad base of customers in large numbers can give a
firm stable performance since each of them can impact on the firm’s fortune very
marginally; but collectively, such a large base of customers can keep a firm in a good
state.

Competitors

The number of competitors as well as the intensity of competition presents challenges to

a firm’s stability and survival. The capabilities of the current competitors determine if a
firm can stay in the business, and if it does, what kind of resources and efforts are
required to stay afloat. Besides, competition is not only from the same products but from
substitute products also, requiring the firm to be vigilant to both the obvious dangers and
the latent ones too. Conversely, fewer competitors and less severe competition afford
enviable opportunities of growth to a firm There was a detailed discussion on this in the
chapter dealing with competitor analysis.

Interest groups and employees

General public is interested in what a firm does, and so keeps track of its activities
primarily to see if it benefits the community at large. Public expects a firm, among other
things, to provide employment opportunities, contribute to social causes, and cause no
damage to the natural resources and environment. Highly aware public groups keep their
watchful eyes on a firm and may react to its business initiatives if they consider them to
be a potential hazard to their general interests. The people in Kerala, for example, were
highly aware of and vigilant to what multinational beverages companies would do to their
water resources and environment, and brought them to courts of law.

The employee groups have interests, some of which are in line with the purpose of a firm
while some conflict. It is a challenge to make the employees toe the line of a firm; unruly
and highly unionized employee groups bring a firm’s activities to a halt as a form of their
strong reaction. It is the discipline, ethos and work ethic of the employees which more
than decides on where a firm is headed.

The internal environmental analysis as presented in the foregoing reveals who the actors
and forces which are close to a firm are, and which are partly amenable to a firm’s
attempts to turn them to its advantage.

Internal Factor Analysis

The identification of internal factors- resources and capabilities, and particularly those
which are critical to strategic success of a firm is referred to as ‘Internal Factor Analysis’.
What we discussed under Functions Approach and Value Chain Analysis- for that matter,
even SWOT Analysis- is nothing but internal factor analysis. But this analysis can be
considered to be complete only when all the identified critical strengths are evaluated,
and the most critical of them are named. Since we dealt enough with the identification of
factors, what comes next to it is the evaluation of internal factors. It is needless to say that
the job of evaluation facilitates the next task, i.e. the naming of the most critical factors.

Evaluation of Internal Factors

Evaluation of internal factors is concerned with weighing the factors and handpicking
only those which are rare, non-substitutable, inimitable and valuable factors- distinct
competencies or competitive edge.
Internal analysis is done with the intention of using its outcome as an input to build into
strategy formulation. Internal analysis furnishes a list of all the strengths and weaknesses.
But a strategist typically narrows his search for a few strengths on which strategy can
rest. Those few strengths that a strategist looks for are the rare, non-substitutable,
inimitable and valuable factors- distinct competencies or competitive edge. It implies that
the absence of these constitute a weakness of a firm if its competitors have them at the
same time. These distinct competencies have to be sifted through the long list of
resources and capabilities. For this, the identified factors-resources and capabilities- have
to be evaluated.

There are four basic approaches (others call them basic perspectives) that can be used for
evaluation. They are (1) comparison with the firm’s past capabilities and performance, (2)
stage of product /market in their life cycle, (3) comparison with competitors, and (4)
comparison with the industry’s key success factors. Essentially, all these approaches aid
in finding out which factors existing in a firm are strategically more important than
others. A brief explanation on these four perspectives is as follows.

Analysis of past performance leads to identifications of its causative factors- the specific
strengths. The managers of a firm who have sufficiently long experience can easily
identify the strengths of a firm. They might intuitively analyze and judge that the firm’s
impressive performance in certain years in the past was due to certain strengths like, for
example, strong financial systems or highly motivated sales personnel.

The life cycle stage at which a product or a market currently stands indicates what
specific strengths are needed. Life cycle consists of (1) introduction, (2) growth, (3)
maturity, and (4) decline. Each stage requires a different strength for the growth or
survival of a firm. For example, in the introductory (nascent) stage, strong R&D function
is essential, while in the growth stage, financial resources to spend on marketing are a
must. In third stage, maturity stage, efficient production capability is important. In the
fourth stage, decline stage, relationships and service to the customers make the
difference. Simply stated, all strengths are not equally important, and the critical success
factors vary from stage to stage in their life cycle.

Benchmarking against the few successful rivals will reveal what is critical to the success
of a firm. It implies an analysis of the competitors’ performance, followed by a
comparison of the same with that of the firm so as to identify the strategic strengths that
are either existing or lacking in the firm under analysis. A strong sales organization, for
example, may be a strength in a particular firm. Going a little further, it may be
discovered that such a firm lacks good financial management; this relative weakness
should be driven out and a strength in this aspect has to be built in the firm that is making
this analysis and preparing to formulate a strategy.

The standards that have been established or identified for the industry as a whole are
useful to compare with those existing in a firm. Industry, as a whole, might determine
certain strengths as strategically critical. Generic drug industry may have arrived at a
prescription that effective production system and research for patentable drugs are
indispensable. This will stand as a benchmark or a goal worth pursuit. The industry
prescribes threshold strengths, and anything over and above them becomes a basis of
competitive edge.

SWOT
Another popular tool of internal analysis is SWOT analysis. SWOT is an acronym for
Strengths, Weaknesses, Opportunities and Threats. This popular tool is used in the
context of understanding or addressing several issues such as identification of internal
factors, identification of opportunities and threats, matching of internal factors with the
external ones to formulate at a grand strategy, understanding of an organization to help
their managers make far-reaching decisions like mergers and sell-outs ( of course, these
are strategic decisions) and so on. For internal analysis, the SWOT analysis in its full
form is not necessary; identification of strengths (S) and weaknesses (W)-only half of
what SWOT is capable of accomplishing- is enough for internal analysis.
Strengths

A ‘strength’ is a resource, or a competency of the organizational members, or other

advantage which helps firm better serve the customer relative to its competitors. There
may be many competencies which fall within the threshold limits, meaning that they are
just basic to the survival of a firm; but a strategist looks for those which can give a firm
an edge over others. It goes without saying that the lack of the basic competencies in a
competing firm keeps a strategist’s firm at a disadvantage advantage, and thus such basic
competencies can be referred to as strengths. Motivated workforce, for example, is a
minimum requirement but most organizations lack it; that is the reason why motivated
workforce of Infosys gives it a competitive edge.

In the ‘Functions Approach’ an attempt was made to list all strengths and weaknesses. It
may be noted that ‘Function Approach’ serves as an analytical framework for the
identification of strengths and weaknesses.

Strengths enable a firm’s survival and growth while weaknesses either slow or hinder the
growth, and threaten its survival. Strong infrastructure, good sales organization, good IT
systems, carefully selected suppliers, loyal customers, high reputation among investors
and general public, good organization for customer service and so on are some examples
of strengths. The lack of them in full or in part is a weakness.

Critical Success Factor Analysis

Critical Success Factor (CSF) Analysis is another tool to identify the factors that are very
critical to the success of a firm; this is usually done at business unit level. This analysis
helps an analyst understand either (1) what specific factors are responsible for the current
success, or (2) what specific factors have to be focused on in managing a firm to become
successful. These factors vary from industry to industry, and from firm to firm. For
example, plant and technology are very critical for steel-making but committed
workforce is very crucial for a software development. Similarly, for a brick-mortar book-
seller, shop location and physical facilities are more critical than for an online book seller
whose critical success factor might be user-friendly website.

To cite a specific case, the critical success factors of ONGC, among others, are (1) highly
qualified and well-trained manpower, (2) best drilling technology, (3) entrepreneurial
leadership, (4) availability of rich natural resources, and (5) sufficient autonomy.

This analysis serves the same purpose as do others such as value chain analysis, function
analysis, internal audit and so on. Simply put, it helps an analyst or a strategist know
what was very important to the firm, and focus on what is important at the present.
Internal Factor Evaluation (IFE) Matrix
Internal Evaluation Factor Matrix is constructed to determine which strength is more
critical than others. This tool furnishes both an enumeration of strengths and, and the
value (in numerical) of each of them so an aggregate score of strengths and weaknesses is
calculated
To evaluate the worth of each identified strength (to determine which strength is more
critical than others), Internal Evaluation Factor Matrix is constructed. This tool furnishes
both an enumeration of strengths and weaknesses in the functional areas of a firm, and
the value (in numerical) of each of them so an aggregate score (a vector sum) of strengths
and weaknesses is calculated; this can be compared with those of the rival firms or
industry standard. This tool also facilitates the understanding of the relationship among
their functional areas, and the degree of such relationship. But the caveat is that
numerical value should not be taken to mean that the tool is absolutely scientific so there
is no chance for intuitive judgment. Intuition is also needed. More specifically, a
thorough understanding of the factors included in the matrix is highly important since
incorrect weights given on certain factors may distort the picture.

A five-step process to construct Internal Factor Evaluation Matrix is described in the

following.

The Procedure to Construct an IFE Matrix

1. List all the key internal factors- the strengths and weaknesses, usually a total of 10
to 20 factors- as found out from the internal audit process. If a particular factor is
both a strength and weakness, include it in both in strengths and weaknesses.

2. Weight should be given to each of the strengths and weaknesses but the total of all
weights should be equal to 1.0; so the weights should range from 0.0 to 1.00
representing the least and highest importance of factors respectively as found out
from the internal audit. Simply put, each of these weights represents the
importance of it to the success of the firm. Note that it is a valuation of the factors
but not how a firm fared on these factors.

3. Assign a rating to each factor depending on how the firm fares on it; the rating
scale is usually 4-to-1 with 4 indicating a major strength, 3 a minor strength, 2 a
minor weakness and 1 a major weakness. To put it another way, strengths are
given the ratings 4 and 3 while weaknesses are given 2 and 1.

4. Multiply each of the scores arrived at by Step 3 with the corresponding weight
assigned in Step 2, which gives a weighted score.

5. Add up all the weighted scores calculated in step 4 to arrive at the total score for
the organization; such final score usually works out between 1 (at its low) and 4
 (at its highest). A score of less than 2.5 indicates a weak internal organization
whereas that above 2.5 represents a stronger one.

An example of the construction of IFE Matrix for ZSOFT, an imaginary firm, is furnished
in the Table 4.4

Table 4.4
A Sample Internal Factor Evaluation Matrix for ZSOFT Limited

Key Internal Factors Weight Rating Weighted Score

Internal Strengths
1. Strong customer base 0.10 3.0 0.3
2. Highly motivated workforce 0.10 3.0 0.3
3. World-class infrastructure 0.05 4.0 0.2
4. Strong sales organization 0.05 4.0 0.2
5. Strong R& D 0.05 4.0 0.2
6. Robust execution system 0.05 3.0 0.15
7. High reputation among investors 0.15 3.0 0.45
8. Leadership 0.10 3.0 0.3
9. Organization for customer service 0.10 2.0 0.2
10.Training systems 0.05 3.0 0.15

Internal Weaknesses
1. Sales expenditure 0.03 2.0 0.06
2. Huge expenditure on land & Buildings 0.02 1.0 0.02
3. Lack of control over operations 0.10 2.0 0.02
4. Training expenditure 0.03 1.0 0.03
5. Lack of collaborations 0.02 2.0 0.04
Total 1.00 2.62

The sum of the weighted scores of ZSOFT Limited works out to 2.62 which is above the
average of 2.5; so it can be inferred that its internal factors are strong enough.

In a Nutshell

Internal analysis is a preparatory exercise for strategy formulation. Internal analysis is

variously known as internal analysis, internal situation analysis, organizational analysis,
internal environmental analysis, internal appraisal of firm, internal assessment, internal
audit and company analysis. It is an exercise to understand where a firm stands in terms
of capabilities and resources. Resource-based view (RBV), which is the opposite of
Industrial Organization View, lays emphasis on a company’s resources and competitive
capability for organizational success. Capabilities are understood by understanding its
functions. This understanding process is internal analysis.
Activities done to create value signal a firm’s capabilities and scope for improving its
performance further. A firm has to understand and concentrate on nine activities that
make for the maximization of value to the consumer. Porter has divided the nine value
activities into two groups: five primary and four support activities.

Internal Environmental analysis essentially identifies the actors - individuals and

institutions - that have some influence on a firm’s functioning; these can be shaped to a
firm’s advantage. Internal Evaluation Factor Matrix, a numerical tool, is constructed to
determine which strength is more critical than others.

A strategy formulated without considering its abilities and resources have the least
chances of success. The techniques presented in this chapter help the reader understand
the importance and the process of internal analysis.

Points to Remember

 Internal Analysis is an exercise to list a firm’s resources, strengths, and

weaknesses.

 Resource-based view (RBV), which is the opposite of Industrial Organization

View, lays emphasis on a company’s resources and competitive capability for
organizational success. Jay Barney has proposed this view.

 Industrial Organization view lays stress on a firm’s fit with the external
environment.

 The process of identifying and evaluating the organizational factors that underlie
sustainable performance and long-term growth of an organization or those that
hinder its growth is referred as internal analysis.

 Internal analysis is variously known as internal analysis, internal situation

analysis, organizational analysis, internal environmental analysis, internal
appraisal of firm, internal assessment, and company analysis.

 Organizational Analysis embodies ‘organizational appraisal’ too, in that the

importance (criticality) of the factors- how strong those factors are in terms of
contribution to organizational goals- is determined.
  Internal audit or internal analysis is usually done on traditional functions:
production, marketing, finance, human resources, technology and so on. This is
referred to as ‘Function Approach’

 The five basic functions of production management are: process, capacity,

inventory, work force and quality management.

 Marketing is the process of understanding customer’s needs, creating goods and

services to fulfill them, and delivering them where and when the customer wants.

 Human Resources have the potential to give their best to the firm if fostered well
and led in a proper direction, and thus constitute a competitive advantage. Human
Resources have to be planned, acquired, developed and retained.

 The main concerns of finance function center around three areas: (1) where it gets
money from and at what cost, (2) where a company invests and how much, and
(3) how it uses or distributes the profits it earns.

 A firm has to concentrate on nine activities that make for the maximization of
value to the consumer. Porter has divided the nine value activities into two
groups: five primary and four support activities.

 Internal Environmental analysis essentially identifies the actors - individuals and

institutions - that have some influence on a firm’s functioning; these can be
shaped to a firm’s advantage.

 Evaluation of internal factors is concerned with weighing the factors and

handpicking only those which are rare, non-substitutable, inimitable and valuable
factors- distinct competencies or competitive edge.

 Internal Evaluation Factor Matrix is constructed to determine which strength is

more critical than others. This tool furnishes both an enumeration of strengths
and, and the value (in numerical) of each of them so an aggregate score of
strengths and weaknesses is calculated

Mind Pricking Questions

Description Answers:
1. “Resource-Based View is one-sided since it ignores external forces.” Argue on
this plank to substantiate it?
2. What are the objectives of Organizational Appraisal, and in which contexts is it
made?
3. Resource-Based View and Industrial Organization View are the two sides of the
same coin from a strategist’s standpoint? Can you substantiate this statement?
 4. List at least 20 internal factors of an institution you are employed or may be
employed in by Functions Approach.
5. Identify the most critical areas where the new governing body of a Municipal
Corporation should focus on, by adopting the Value Chain Approach.
6. Construct an Internal Factor Evaluation Matrix for both Ranbaxy of India and
Daiichi Sankyo of Japan which recently entered into a buy-out arrangement.

Short Answers:

7. What are the goals of Internal Analysis for a strategist?

8. Key Internal Forces are the Key Success Factors. What is your view on this and
support your view with a proper logic?
9. SWOT analysis is not an internal analysis? Do you agree this view? If not, why?
10. How do you distinguish Internal Environmental Analysis from Internal Analysis?

Multiple Choice Questions

1) Internal Analysis is a sequel to and necessitated by:

(a)Adoption of Industrial Organization View (b) Adoption of Resource-Based
View (c)A new managers wish to understand a firm, (d) mandate from the
government.

2) Resource-Based View does not embody this concern:

(a)Resources & Capabilities; (b) Vision and Mission; (c) Competitive Advantage;
(d) Resource Match to opportunities.

3) A resource in order to qualify for a competitive advantage need not be

characterized by:
(a)Inimitability, (b) Non-substitutability, (c) Long-lasting quality, (d) Valuable.

4) Internal Audit is done along the lines of :

(a)Value Chain activities; (b) Parties that impact on the functioning of a firm;
(c)Opportunities and threats (d) Traditional functions.

5) Functions Approach examines:

(a)Each of the value chain activities; (b) each of the strengths and weaknesses (c)
factors of internal environment, (d) each functional department of a firm.

6) Critical Success Factor is a:

(a)Resource (b) An activity (c)Department (d) Environment.

7) Physical Resources, Human Resources and Organizational Resources are

mentioned in:
 (a)Value Chain Analysis; (b) Critical Success Factor Analysis; (c) SWOT
analysis; (d) Resource-Based View.
8) Internal Factor Evaluation Matrix helps in the quantification of:
(a) Strengths (b) Strengths and Weaknesses (c) Opportunities (d) Critical Factors
9) In Value Chain, Human Resource function is:
(a) Primary activity (b)Support activity (c)Internal factor (d)Success factor.
10) Internal analysis does not refer to:
(a ) Weaknesses (b) Strengths (c) Opportunities (d)Capabilities

Students’ Short Projects

1. Look up in the newspapers for the items of news that were carried during the
last six months on expansion, acquisition and merger of Indian companies,
and figure out the capabilities and resources that underlie such strategic
exercises.
2. Construct an imaginary Internal Factor Evaluation Matrix for at least two
Indian companies which have recently either expanded their business or
acquired other companies.

Best Practices: A Company’s Experience

Internal Analysis in Bharti Enterprises

Bharti Enterprises’ strategic intention is to lead, build & grow in businesses that make a
positive difference to the lives of people - telecom, retail and wholesale,
communication and media devices, insurance and financial services, agricultural
product-based business, and BPO/software. Bharti Enterprises is the apex strategy-
making body for the entire group which will provide overall direction and umbrella
strategy for the group as a whole.

Bharti may acquire Big Apple, a Delhi based supermarket chain having 65 stores and
expanding itself by opening 100 more stores in NCR, Karnataka and Gujarat. Its usual
approach is to acquire small companies and become a leader. To become a big player in
mobile phones, it earlier acquired JTM, Hexacom and Skycell. In retail business too, it
appears to pursue the same strategy. Such acquisitions took place in retail sector too-Birla
Retail and Trinethra, Spinach and Sabka Bazar, and Reliance and Adani Retail. Big Apple
has a well-established supply chain in Delhi and Panjab.

Bharti has recently entered into retail business as Bharti Retail Pvt. Ltd. under an MoU
with Wal-Mart for the cash & carry business. It has successfully launched an international
venture with EL Rothschild Group to export fresh agricultural products exclusively to
markets in Europe and USA.
According to its website, Bharti Airtel Limited is “the India’s largest integrated and the
first private telecom services provider with a footprint in all the 23 telecom circles. Bharti
Airtel since its inception has been at the forefront of technology and has steered the
course of the telecom sector in the country with its world class products and services.” It
has over 35,016 kilometers of optic fiber on its national long distance network.

Bharti has opened its first convenience store, Easy Day, at Ludhiana in Panjab in April
2008. To ward off the wrath of local communities, it is employing the local people,
women, physically challenged persons, rural peoples, housewives and retirees. For
manpower training, it started Bharti Academy of Retail. Bharti, which contemplates on
investing US$ 2.5 billion, or around Rs. 10,000 crore in the next five years, has plans to
eventually occupy 10 million sq ft of retail space and offer employment to 60,000 people.

Bharti Airtel wanted to leverage its brand value which is strong enough by virtue of its
robust customer service support system. Retailing success depends on reputation of the
group. Second, its financial performance assures easy mobilization of financial resources
or sourcing of supplies on profitable credit terms. Third, it has the financial prowess to
acquire the necessary real estate to start malls. Fourth, its experience in retail business
and customer service coupled with the required talent pool makes its retailing venture
easier. Bharti Airtel is one of top 10 mobile service providers in the world with the credit
of serving 40 million customers from a single-country.

The foregoing paragraph reveals the internal analysis that has been made by Bharti to
diversify into retail business.

Questions for Discussion

1. What factors can lead Bharti to success in retailing?

2. What other verticals do you recommend for Bharti to venture into?
3. What strengths of Bharti does Wal-Mart want to leverage? Guess.

Case Analysis
Expansion of Emami Group: An Audacious Response to Opportunities!

Emami group seems to be on a roll pursuing plans of expansion in its current

businesses and diversification into many new areas. Let me throw some light on some of
its expansion projects.

Emami is a Rs.1500-crore personal and healthcare major and has now production
units spread in West Bengal, Assam, Orissa, Pondicherry, Gujrath, Uttarkhand and
Himachal Pradesh. This company, started in 1974, was initially a manufacturer of beauty
products, cosmetics, and toiletries.

Emami group of companies now plans to expand into edible oils production by
investing Rs.250 crores in Haldia, West Bengal. It already invested Rs.150 crores on a
plant set up for the production of bio-diesel. With this and the proposed investment,
Emami will produce and market 800 tons of palm oil, 600 tons of soy oil, and 200 tons of
rice bran oil per day. They will initially sell this production in bulk to industries
manufacturing biscuits and chips. This move to expand is traced to their realization that
the bio-diesel plant is proving unviable. After seeing the response to its bulk-trading
move, it will start building the edible oil band.

Its other expansion moves

(1)This company is planning to invest Rs.2000 crores on cement and power plant
in Chattisgarh.

(2) It is also planning to foray into retailing sector by first opening 10 stores in
eastern region in the next two to three years.

(3) Besides, it is also engaged in expanding its market for baby care, health care
and men’s grooming products. Fair and Handsome fairness cream, Sona Chanda chyawan
prash, Navratna oil, Boroplus cream, Boroplus Prickly Heat, Menthoplus balm, Fast
Relief pain balm and Malai Kesar Cold Cream are the well-known brands owned by
Emami.

(4) It just completed a Rs.330-crore paper mills expansion in 2007 involving the
raising of its production capacity from 60000 tons to 145000 tons. Moreover, it plans to
add a fresh capacity of 155000 tons in two to three years to come. These plans are keyed
to the fact that there is a huge gap between demand and supply of newsprint. The demand
for it which is growing at 10 percent may touch 19.00 lakh tons by 2008 against the local
production of 8.50 lakh tons.

(5) Further, with an investment of about Rs.100 crores in pharmacy retailing in

the next two years, it wants to grow it to Rs.100 crores from the current turnover of
Rs.25.00 crores; to realize this plan, it will open 100 more pharmacy outlets either as
stand-alones or within hospitals.

(6) Emami has acquired 27.5% stake in the Zandu Pharmaceuticals. It wants to
further invest Rs.100 more on acquisition of regional, national and international FMCG
brands.
Financials of Emami Group
(Rs. in crores)

2006 2007 2008

Net sales 301.84 518.26 583.71
Other income 2.66
PBDIT 98.68
Net Profit 49.27 66.20 92.75

Balance Sheet Items

Total Share Capital 12.43
Net Worth 289.00
Total Debt 35.19
Net Block 77.82
Investments 102.97
Net Current Assets 129.94

Emami before implementing this high-voltage strategy of expansion, it must have

engaged itself in an internal analysis.

(1) Drawing on other sources of information besides what is given in this case,
identify and enumerate all the important factors that must have emerged out of
internal analysis?
(2) What might have gone wrong in the internal analysis, given that its bio-diesel
investment is not proving unviable?
(3) Think up all the issues that must have been left out of internal analysis while
formulating this massive expansion?

Key Words

Internal Analysis: The process of understand the resources, abilities and

inadequacies of a firm.
Internal Audit: The strength and weakness of each function or a department or
an activity of a firm is analyzed.
Organizational Analysis: It is a study of an organization to understand its strengths and
weaknesses.

Resource-based View: The theory as proposed by John Barney states that a firm’s
strategic planning and its success are keyed to the resources
available with it.

Function Approach: It is a way of doing internal analysis; each of the functions,

commonly known as departments, are studied to understand the
capability of a firm.
SWOT Analysis: A firm’s strengths and weaknesses are studied before they are
matched with the opportunities and threats presented to it.

Internal Factor: Each internal factor is either a strength or a weakness.

Value Chain: It is list of activities grouped under five primary activities and 4
support activities.

Critical Success Factors: The particular resources or abilities which are pivotal to the
success of a firm.
Notes

M.A.Hitt, R.E.Hoskisson, & R.D.Ireland, 2007, Management of Strategy: Concepts and

Cases, New Delhi: Thompson South-Western, 71-85.

M.Porter, 1985, Competitive Advantage: Creating and Sustaining Superior Performance,

New York: Free Press, 34-67.

J.A.Pearce II & R.B.Robinson, JR, 2003, Strategic Management: Strategy Formulation

and Management, Delhi:Richard D.Irwin, Inc.,202-240.

F.R.David, 2005, Strategic Management: Concepts and Cases, New Delhi: Pearson
Education, Inc., 144-179.

A.A.Thompson, Jr. & A.J. Strickland III, 2003, Strategic Management: Concepts and
Cases, New Delhi: Tata Mcgraw-Hill,114-143.

2008, The Financial Express, Rasna to Enter to ready-drink segment,

http://www.financialexpress.com/news/Rasna-to-enter-readytodrink-segment/297889/,
April 17, 2008.

2008, Abut Us & Future Plans, Pioma Industries,http://www.rasnainternational.com/,

2008.

2007, Digital Inspiration, Emami Group, dirversifying too much , too soon,
http://www.labnol.org/india/corporate/emami-group-diversifying-too-much-too-
soon/410/, June 13, 2007.

2008, About Emami & Investor Relations, http://www.emamigroup.com/, 2008.

2008, Bharti, Media Center, http://www.bharti.com/132.0.html?

&tx_ttnews[tt_news]=218&tx_ttnews[backPid]=131&cHash=2c3824ace2, 2008.

2007, About Bharti Airtel, http://www.bhartiairtel.in/index.php?id=14, 2007.

2008, The Hindu, Business, Top level changes at Bharti Enterprises,

http://www.hindu.com/2008/08/06/stories/2008080651901800.htm, August 06, 2008.