Organizational

Capability
Profile
 Strategic advantage

Organizational capability

Competencies

Synergistic effects

Strength and weaknesses

Organizational
Organization resources
behavior
 ORGANIZATIONAL APPRAISAL

•Internal Environment - strength & weakness in

different functional areas
Organization capability:
•Capacity & ability to use unique competencies to excel in a
particular field.
• Ability to use its ‘S’ & ‘W’ to exploit ‘O’ & face ‘T’ in its
external environment.

Organization resources

•Physical & human cost, availability - strength / weakness

Organization behavior:

•Identity & character of an organization leadership, Mgt.

Philosophy, values, culture, Quality of work
environment, Organization climate, organization politics
etc.

Resource Behavior

Distinctive competence
 Anyadvantage a company has over its
competitor - it can do something which
they cannot or can do better –

 Opportunity for an organization to

capitalize - low cost, Superior Quality, R&D
skills etc.
METHODS & TECHNIQUES

Inclusive, long term:

Financial Analysis - Ratio Analysis, EVA, ABC

Key factor rating - Rating of different factors through
different questions
Value chain analysis
VRIO framework
METHODS & TECHNIQUES

BCG, GE Matrix , PIMS, McKinsey7S

Balanced Scorecard
Competitive Advantage Profile
Strategic Advantage profile
Internal Factor Analysis Summary
SWOT ANALYSIS

• Identify & classify firm’s resources-S&W

• Combine firm’s strength into specific capabilities –
Corporate capability- may be distinctive competence
• Strategy that best exploits the firms resources
• Identify resource gaps & Invest in upgrading
 Organizational Capability Profile (OCP)

Financial Capability Profile

(a) Sources of funds

(b) Usage of funds
(c) Management of funds
Marketing Capability Profile

(a) Product related

(b) Price related
(c) Promotion related
(d) Integrative & Systematic
Operations Capability Factor

(a) Production system

(b) Operation & Control system
(c) R&D system
Personnel Capability Factor

(a) Personnel system

(b) Organization & employee characteristics
(c) Industrial Relations
General Management Capability
(a) General Management Systems
(b) External Relations
(c) Organization climate
 EXAMPLES OF ORGANIZATIONAL CAPABILITY PROFILE

Financial Capability
Bajaj - Cash Management
LIC - Centralized payment, decentralized collection
Reliance - high investor confidence
Escorts - Amicable relation with FIS (world's top-ranked technology
provider to the banking industry)

Marketing Capability
Hindustan Lever - Distribution Channel
IDBI/ICICI Bank - Wide variety of products
Tata - Company / Product Image
Operations Capability
Lakshmi machine works - absorb imported technology
Balmer & Lawrie - R&D - New specialty chemicals

Personnel Capability
Apollo tyres - Industrial relations problem
General management capability
Malayalam Manaroma - largest selling newspaper
Unchallenged leadership - Unified, stable Best edited & most
professionally produced
VRIO FRAMEWORK
Resource- asset, competency, skill, knowledge
e.g. patents, brand name,
• Value : Does it provide competitive advantage?
• Rarity: Do other competitors possess it?
• Imitability: Is it costly for others to reproduce?
• Organization : Is the firm organized to exploit the resource?

A resource is an asset, skill, competency or knowledge

controlled by the corporation.

A resource is a strength if it provides competitive

advantage e.g. patents, brand name, economies of scale,
idea-driven, standardized mass production
 VRIO - STEPS

• Identify: firms resources- S&W.

• Combine: firms strength into specific capabilities.
• Appraise- profit potential, sustainable competitive
advantage, ability to convert it to a profitable
proposition
• Select strategy - firm’s resources& capability
relative to external opportunity.
• Identify: resource gaps and invest in upgrading
weaknesses
BALANCED SCORECARD- KAPLAN & NORTON
 BALANCED SCORECARD- KAPLAN & NORTON

4 performance measures

• Customer perspective (View Point)

• Internal business perspective
• Innovation & learning perspective
• Financial perspective
Purpose of Balanced Scorecard:

A method of implementing a business strategy by

translating it into a set of performance.

Measures derived from strategic goals that allocate

rewards to executives and managers based on their
success at meeting or exceeding the performance
measures.
BSC: Causal Relationships

Strategy

Customer Financial

Internal
Process

Learning
 FINANCIAL ANALYSIS

• Ratio Analysis
• Economic value added
-NOPAT (Net Operating Profit After Tax)
-WACC (Weighted Average Cost Of Capital )

• Activity Based Costing

– activity in Value chain
_ specific activities
• COMPETITIVE ADVANTAGE PROFILE

• 50,00000 -India
• 66.05-USA
Competitive Advantage means

Something that places a company

or a person above the competition
 Cost advantage

Competitive
Advantage

Differentiation
Advantage
 A Model of Competitive advantage

Resources

Distinctive Cost advantage

Value
Competencies Or
Creation
Differentiation advantage

Capabilities
 COMPETITIVE ADVANTAGE PROFILE: A Case of Berger Paints

Marketing Factors

Market leader - 35% share in organized sector.

Closest competitor - less than half of AP’s market share
>20 yrs - leader
Widest product range - product shades, pack sizes
40 diff. decorative paints - 150 shades, 8 different sizes in
packing, no. of brands-all segments
Brands - quite powerful
90% accuracy in forecasting, 00 fastest moving Stock
Keeping Units, monitored daily

Countrywide distribution - 13000 dealers - large

network- regional offices, company
depots
Physical distribution - far superior to competitors

strong in inventory control - (28 days) of sales (industry avg.51

days, service level - high, credit o/s –
<25 days (comp 40 days)
Manufacturing/Operations factors

Size advantage in relation to competitors

Skill in production planning, scheduling, matching with

marketing requirements

In – house production - no outsourcing – high reliability suppliers

- superior quality assurance

Four production location - spread benefits Human Resources

High caliber HR

Professionals - MBAs more

Finance factors

Leader in profits & operating margins, ROI 40%, rest of

industry 22%, Networth 204 cr, 58 cr - Nerolac, 41 cr – Berger

Cash rich

Corporate factors
Awards

High profile corporate image

Enviable track record in breaking away the position of MNCs in

the Indian paint Industry
 PORTFOLIO ANALYSIS

 27% of fortune 500 companies use it in strategy formulation

 Top management views its product lines and business units as

a series of investment return

 Product lines/Business units - a portfolio of investment –

company constantly juggle - to get yield
BCG Matrix (Boston Consulting Group )
What is BCG
 Its portfolio planning model developed by Bruce
Henderson in 1970’s.
 Based on observation combination of market
growth and market share.
 BCG matrix is to evaluate the strategic position of
the business brand portfolio and its potential.
Star –

• Market leader,
• Peak of product life cycle,
• Enough cash to maintain high share (market),
• More resources
• Investment to support high growth
• No immediate profits
• Great potential – future
• Medium risk category
• If Growth rate slow - becomes cash cows

Strategic choices: Vertical integration, horizontal integration,

market penetration, market development, product
development
Question Marks

• (Problem children/wild cats)

• New products with potential for success
• More resources bit future uncertain
• High risk category
• Money taken from mature products & spent on ?
• Slow growth - becomes dogs

Strategic choices: Market penetration, market

development, product development, divestiture
Cash cows –

• More money needed for maintaining market

share
• Declining stage of life cycle

Strategic choices: Product development, diversification,

divestiture, retrenchment

Dogs –

• Weak market share,

• low growth market cash trap of the company

Strategic choices: Retrenchment, liquidation,

divestiture
BENEFITS OF THE MATRIX:
 Easy to perform;
 Helps to understand the strategic positions of
business portfolio;
 It’s a good starting point for further more thorough
analysis.

MAIN LIMITATIONS :
 Business can only be classified to four quadrants;
 Does not include other external factors that may
change the situation completely.
 It denies that synergies between different units
exist.
CELL MATRIX
 General Electric Matrix (GE Cell Matrix)

• The GE Matrix overcomes a number of the disadvantages of the

BCG Box.
• Firstly, market attractiveness replaces market growth as the
dimension of industry attractiveness, and includes a broader range
of factors other than just the market growth rate.
• Secondly, competitive strength replaces market share as the
dimension by which the competitive position of each SBU is
assessed.
• The diagram below illustrates some of the possible elements that
determine market attractiveness and competitive strength by
applying the GE Matrix to the UK retailing market:
UK retailing market:
 PIMS

The Profit Impact of Market Strategies (PIMS) is a

comprehensive, long-term study of the performance of strategic
business units (SBUs) in thousands of companies in all major
industries.

The PIMS project began at General Electric in the mid-1960s. It

was continued at Harvard University in the early 1970s, then was
taken over by the Strategic Planning Institute (SPI) in 1975.

Since then, SPI researchers and consultants have continued

working on the development and application of PIMS data.
• According to the SPI, the PIMS database is-

• "a collection of statistically documented experiences drawn

from thousands of businesses, designed to help understand
what kinds of strategies (e.g. quality, pricing, vertical
integration, innovation, advertising) work best in what kinds of
business environments.
• The data constitute a key resource for such critical
management tasks as evaluating business performance,
analyzing new business opportunities, evaluating and reality
testing new strategies, and screening business portfolios.”

• The main function of PIMS is to highlight the relationship

between a business's key strategic decisions and its results.
• Analyzed correctly, the data can help managers gain a better
understanding of their business environment, identify critical
factors in improving the position of their company, and
develop strategies that will enable them to create a sustainable
advantage.

• PIMS principles are taught in business schools, and the data

are widely used in academic research. As a result, PIMS has
influenced business strategy in companies around the world.
 MCKINSEY’S 7S FRAMEWORK

Structure
Strategy
System

Super ordinate
Goals

Skills
Style
Staff
• McKinsey 7s model was developed in 1980s by McKinsey consultants Tom
Peters, Robert Waterman and Julien Philips with a help from Richard
Pascale and Anthony G. Athos.

• Since the introduction, the model has been widely used by academics and
practitioners and remains one of the most popular strategic planning tools.

• The goal of the model was to show how 7 elements of the company:
Structure, Strategy, Skills, Staff, Style, Systems, and Shared values, can be
aligned together to achieve effectiveness in a company.

• The key point of the model is that all the seven areas are interconnected and
a change in one area requires change in the rest of a firm for it to function
effectively.
The most common uses of the framework are:

• To facilitate organizational change.

• To help implement new strategy.
• To identify how each area may change in a future.
• To facilitate the merger of organizations.
 MCKINSEY’S 7S FRAMEWORK
Style

One of the seven handles, which top management can use to bring
about organization Change with change of systems & procedures
- Style of functioning changes
- Culture of organization changes
Staff :

Update knowledge & skills to keep quickness with change

Strategy
Includes purpose, mission, objectives, goal, action plans &
policies,7S model emphasize - Development easy – execution

Systems
Procedures & methods framed by organization & followed by
operational personnel in the respective functional area.
Traditional systems Change in view of advanced technology &
processes developed
Structure
Relationship between/among various positions and activities,
Design of structure - critical task for top management.
Need based structural changes - to cope with specific strategic
tasks without abandoning basic structural divisions throughout
the organizations.

Skills
Acquainted with state of the art technology & improvised
methods & practices
 MCKINSEY’S 7S FRAMEWORK - SKILLS

Procter & Gamble - Best known - Skills in product management

Hindustan Lever & Richardson Hindustan - Marketing skills
BHEL, TELCO, L&T - Engineering skills
DCL, Mecon & M.N. Dastur & Company - Project consulting skills

Super ordinate Goals

Fundamental ideas of business

Main values
Broad notions of future directions
 In short MCKINSEY’S FRAMEWORK

“A set of values and aspirations that goes beyond the conventional

formal statement of corporate objectives.
All targets and attention of all activities and exercise of the other
six levers of any organization should be directed towards
accomplishment of the best possible goals” the ultimate & terminal
point - where organization will have to reach ultimately.

Effective organizational change

May be understood as a complex relationship between 7Ss.
 TOWS
Matrix or Analysis
A TOWS analysis involves the same basic process of listing
strengths, weaknesses, opportunities and threats as a SWOT
analysis, but with a TOWS analysis, threats and opportunities are
examined first and weaknesses and strengths are examined last.

After creating a list of threats, opportunistic, weaknesses and

strengths, managers examine ways the company can take
advantage of opportunities and minimize threats by exploiting
strengths and overcoming weaknesses.
 TOWS Matrix

Internal (S) (W)

List 5-10 List 5-10
External Internal strengths Internal Weakness
(O) SO Strategies WO Strategies
List 5-10 Use ‘S’ to take Take advantage of ‘O’
External advantage of ‘O’ by overcoming ‘W’
Opportunities
(T) ST Strategies WT Strategies
List 5-10
Use ‘S’ to avoid Minimize ‘W’ and
External Threats
‘T’ avoid ‘T’

- Generate Alternative Strategies

Environmental
Threat
and
Opportunity
profile

(ETOP)
• Environment analysis results in a mass of information
related to forces in the environment.

• They deal with events, trends, issues, and expectations.

• Structuring of environmental issues is necessary to

make them meaning full for strategy formulation

• ETOP(Environmental Threat and Opportunity Profile)

is a technique to structure environmental issues.
 ETOP involves:

• Dividing the environment into different sectors.

• Each sectors can be subdivided into sub sectors.
•.

• Analyzing the impact of each sector and

subsector
on the organization.
• Describe the impact in the form of a statement
 Advantage of ETOP
• It provides a clear of which sector and sub sectors
have favorable impact on the organization. It helps
interpret the result of environment analysis.

• The organization can assess its competitive position.

• Appropriate strategies can be formulated to take

advantage of opportunities and counter the threat.

• SWOT analysis (Strategic weakness, opportunities

and threats.)