(c) Macmillan & Tampoe The Strategy Formulation Process Chapter 10 Strategic Assessment Analysis of Resources, Capabilities and Competence

(c) Macmillan & Tampoe Figure 10.1 Some commonly used techniques for internal analysis Single Businesses Resource Audit (10.2) Analysis of cost and profit (10.3) Benchmarking (10.4) Value Chain Analysis (10.5) Supply Chain Analysis(10.6) Multiple Businesses Assessing Parenting Advantage (10.10) Portfolio Analysis (10.11) Both Single and Multiple Businesses Core Competencies (10.7) Shareholder Value Analysis (10.8) Distinctive Organisational Capabilities (10.9)

(c) Macmillan & Tampoe Resource Audit Resources Physical Human Financial Other Quality and Quantity Unique resources A good initial analysis

(c) Macmillan & Tampoe Analysis of Costs and Profit Current sources of profits and trends Recast standard reporting to give new insights Pragmatic approach to get value from time and effort spent A good initial analysis

(c) Macmillan & Tampoe Benchmarking Objective comparison with best in class Benchmarking clubs common Simple in theory - Hard in practice Observed differences in performance may be due to differences in parameters Qualitative observations may be more valuable than quantitative

(c) Macmillan & Tampoe Value Chain Analysis Basic Value chain in Fig Elegant in theory Time-consuming in practice Revised value chain to reflect power of people and knowledge

(c) Macmillan & Tampoe Figure 10.3 Revised Value Chain PRIMARY ACTIVITIES INFORMATION SYSTEMS & KNOWLEDGE MANAGEMENT HUMAN RESOURCE MANAGEMENT basic skills, know-how, technologies strategic assets core competence price, place, promotion product service technical, management, marketing, sales, production revenue, profit, market share, customer satisfaction, loyalty Firm’s infrastructure Technology trapping and commercialisation Strategic Management SUPPORT ACTIVITIES PROCUREMENT AND SUPPLIER MANAGEMENT Source: adapted from Porter, M (1985), Martin (1995) to reflect recent developments

(c) Macmillan & Tampoe Figure 10.4 The Core Competence Perspective Traditional Perspective Core Competence Perspective Market share of present marketsShare of future opportunities Strategic Business Unit FocusCorporate Competence Stand-alonePattern of alliances Speed to MarketPerseverance towards long-term vision Adapted from Hamel, G & Prahalad, C.K. (1994) Competing for the Future

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

(c) Macmillan & Tampoe Figure 10.5 The roots of core competence for a typical manufacturing business (C) Mahen Tampoe February 6, 1996 Different products, parts, sub-assemblies Knowledge based, person specific professional service Rule or process based provision, of knowledge & functionality CORE COMPETENCE Basic technologies, bodies of knowledge, corporate or individual learning, relationship culture, strategic assets, parts, processes, raw materials, supply chain management Product or Service (as chosen by the customer)

(c) Macmillan & Tampoe Figure 10.6 The roots of core competence for typical professional services firms Staff Skills Mindset Inter- personal Skills Professional knowledge Task Skills Personality Embodied as Core Competence Products & Services Collective knowledge of the organisation (C) Mahen Tampoe February 6, 1996

(c) Macmillan & Tampoe Figure 10.7 Applying Shareholder Value Analysis Adapted from Rappaport (1986 ) Management Decisions Creating Shareholder Value Shareholder Return Dividends Capital Growth Cash from Operations Discount Rate Debt Corporate Objective Valuation Components Duration of Value growth Sales Growth Op. Profit Margin Fixed & Working Capital investment Cost of Capital Value Drivers Operating Investment Financing

(c) Macmillan & Tampoe Assessing Parenting Advantage Stand-alone influence Linkage influence Central functions and service Corporate development

(c) Macmillan & Tampoe Figure 10.9 Portfolio Analysis Source: Originally Boston Consulting Group. In Widespread use HighLow High Low Market Share Market Growth Rate ?

(c) Macmillan & Tampoe Choosing the right tools for internal analysis Start with simple techniques Consider all tools and identify those likely to be useful Define the competitive capabilities the enterprise needs Identify the subsystems which support these capabilities Identify core competence relative to competitive capabilities Determine changes to enhance/improve core competence Take a systemic view Adjust the methods of analysis in the light of what is found