COMPETENCE LEVEL IN PERFORMING
G4: STRATEGIC MANAGEMENT KEY BUSINESS OPERATIONS
FRAMEWORK
● COMPETENCE - Something an
INTERNAL AUDIT organization is good at doing. It is a
cross-functional integration and
● is a process in which the information
coordination of capabilities.
about key internal factors is gathered
● CORE COMPETENCE - A proficiently
and compiled in order to ascertain the
performed internal activity that is
strengths & weaknesses of the
central to a company's strategy and
organization
competitiveness. It is a collection of
● assesses an organization's strengths
competencies that crosses divisional
and weaknesses, establishing a clear
boundaries, is widespread within the
mission statement.
corporation, and is something that the
1.Informs strategies and objectives corporation can do exceedingly well
● DISTINCTIVE COMPETENCE - A
2. Varies by organization and division competitively valuable activity that a
company performs better than its rivals
3. Shapes unique strengths and a basis for sustainable competitive
advantage.
4. Converts weaknesses into strengths
MOBILIZING COMPANY RESOURCES TO
IMPORTANCE OF INTERNAL AUDIT
PRODUCE COMPETITIVE ADVANTAGE
● Helps to determine the firm's strengths
and weaknesses
● Helps to select the opportunities to be
tapped in line with its capacity.
● Matches objectives to its capacity
● Assesses capacity-gap and takes
steps to overcome it
STRENGTH RESOURCES
1. Skills
VRIO FRAMEWORK OF ANALYSIS
2. Physical Assets
3. Human Assets ● Developed in 1991 by DR. JOY
4. Organizational Assets BARNEY
5. Intangible Assets 1. VALUE
6. Strategic Alliances 2. RARENESS
3. IMITABILITY
4. ORGANIZATION
GAINING COMPETITIVE ADVANTAGE STRATEGIC IMPORTANCE OF
RESOURCES
- ROBERT GRANT'S 5 steps MODEL-
STRATEGIC CAPABILITY - ability of an
1. Identify and classify the firm's organization to put its resources and
resources in terms of strengths and capabilities to the best advantage so as to
weaknesses. enable it to gain competitive advantage."
2. Combine the firm's strengths into Johnson and Scholes (2002)
specific capabilities and core
competencies. THREE TYPES OF RESOURCES
3. Appraise the profit potential of these
capabilities and competencies in terms 1. AVAILABLE RESOURCES - Are used
of their potential for sustainable in the activities of the organization that
competitive advantage and the ability create competences.
to harvest the profits resulting from 2. THRESHOLD RESOURCES - Are
their use. basic resources needed by a firm for
4. Select the strategy that best exploits its existence and survival in the
the firm's capabilities and marketplace.
competencies relative to external 3. UNIQUE RESOURCES - Are those
opportunities. that are critically required to achieve
5. Identify resource gaps and invest in competitive advantage.
upgrading weaknesses.
IDENTIFYING COMPANY RESOURCE
WEAKNESSES AND COMPETITIVE
DEFICIENCIES
A "Resource weakness" or "Competitive
deficiency" is something the company lacks
or does poorly in comparison to others or a
condition that puts it at a disadvantage in the
marketplace such as:
● Inferior or unproven skills, expertise, or
intellectual capital.
CHARACTERISTICS OF THE ● Deficiencies in competitively important
COMPETITIVE POWER OF RESOURCE physical, organizational, or intangible
STRENGTH assets.
● Missing or competitively inferior
1. Hard to copy capabilities in key areas.
2. Durable and has staying power
3. Competitively superior STRATEGY AND CORPORATE CULTURE
4. Cannot be surpassed by the different
resource strengths and competitive ● CORPORATE CULTURE - is the set
capabilities of rivals of values, beliefs, and behaviors that
define a company's work environment.
● CULTURAL INTENSITY - is the policies, indicating the organization's financial
degree to which members of a unit health.
accept the norms, values, or other
culture content associated with the FINANCIAL ANALYSIS TYPICALLY
unit. EVALUATES:
● CULTURAL INTEGRATION - is the
● PROFITABILITY - ability to utilize
extent to which units throughout an
assets to produce profit.
organization share a common culture.
● LIQUIDITY - ability to convert assets
CORPORATE CULTURE FULFILLS into cash to meet current financial
SEVERAL IMPORTANT FUNCTIONS IN AN needs.
ORGANIZATION: ● LEVERAGE - balance between debt
and equity
● Conveys a sense of identity for ● OPERATING EFFICIENCY -
employees. performance of various operating
● Helps generate employee commitment subunits relative to inputs utilized
to something greater than themselves.
● Adds to the stability of the organization TYPICAL LIST OF STRENGTHS IN
as a social system. FINANCIAL EFFICIENCY
● Serves as a frame of reference for
● Favorable attitude of shareholders,
employees to understand
debenture-holders and potential
organizational activities and to use as
investors
a guide for appropriate behavior
● Easy access to low cost fund
WHEN MATCHING STRATEGY WITH ● Cooperation from financial institutions
CULTURE, IT IS IMPORTANT TO and banks
UNDERSTAND THAT: ● Efficient management information
system, as well as, budgetary control
1. There is no 'best' and 'worst' culture . system
2. This matching of strategy and culture ● Tax benefits from central and state
is likely to become embedded over a governments
period of time ● High level of creditworthiness
3. In many organizations, cohesiveness ● Most favorable debt-equity ratio and
of culture is found at levels below the liquidity
corporate entity.
MARKETING AND DISTRIBUTION
FUNCTIONAL ANALYSIS
● Marketing generates customer interest
FINANCIAL ANALYSIS of a firm's financial and demand for a product or service,
health involves analyzing financial statements while distribution ensures its timely and
to identify issues and improve performance. efficient delivery to the customer,
ultimately impacting customer
FINANCIAL STRATEGIES reflect priorities, satisfaction.
expectations, capital structure, cash flow
requirements, and credit and payment
STRENGTHS IN THE MARKETING AND HUMAN RESOURCES
DISTRIBUTION CAPABILITY INCLUDE:
● The human resources management
● Established brand image functions relate to the centralized
● Most feasible marketing channel management of personnel, their
partners activities, development and control for
● Favorable attitude of consumers the whole organization.
towards product quality
● Most efficient distribution logistic J.M. IVANEVICH AND W.F. GLUECK
system IDENTIFIED THE FOLLOWING
● Wide range of products STRATEGIES IN HUMAN RESOURCE:
● Market oriented product pricing
● Employ the skills and abilities of the
● Effective sales promotion and
workforce efficiently.
advertising
● Provide the organization with well-
● Effective feed-back of market
trained and well-motivated employees.
information
● Increase employees’ job satisfaction
● Effective marketing management
and self-actualization.
information systems.
● Develop and maintain a quality of work
OPERATIONS life that makes employment in the
organization a desirable personal and
● The operation function is performed by social situation.
a group of persons in a business who ● Communicate HRM policies to all
are responsible for producing the employees.
goods or providing the services that ● Manage change to the mutual
the business offers to the public. advantage of individuals, groups, the
enterprise and the public
THE STRATEGIC MANAGEMENT OF
OPERATIONS CONCENTRATES ON THE RESEARCH AND DEVELOPMENT
FOLLOWING ISSUES:
● The research activities related to
● Selecting and designing of products or searching for new products, new
services to meet customer needs; manufacturing processes,
● Designing and updating production improvements of existing products,
facilities so that products or services processes or equipment.
are produced efficiently; and
● Controlling of the scheduling of THE R&D STRATEGIES SHOULD
machines and labor so that products or ADDRESS:
services are available on schedule and
● The focus of R&D activities (pure and
in the quantities and quality required to
applied research)
meet customer needs
● The relationship of R&D activities to
other functional areas (e.g. operations
and marketing)
● The aggressiveness of the firm's R&D. characteristics like age and
The time horizon for results expected income (demographic), and the
from the R & D department. surrounding physical
environment (environmental).
G5: EXTERNAL AUDIT 3. Political, government, and legal
Forces
EXTERNAL AUDIT ○ Refers to external factors
● Examines the tools and concepts related to government policies,
expected to lead an outer vital laws, and political stability that
administration review (sometimes impact businesses,
called environmental scanning or organizations, and societies.
industry analysis) 4. Technological forces
○ Represent major opportunities
THE NATURE OF AN EXTERNAL AUDIT and threats that must be
● The purpose of this is to develop a considered in formulating
finite list of opportunities that could strategies.
benefit a firm and threat that should be 5. Competitive forces
avoided. ○ refer to the major factors in an
industry that interact with an
INDUSTRIAL ORGANIZATION organization and determine its
● Is a approach to competitive structure and profitability.
advantage advocate that external
industry are more important than KEY EXTERNAL FACTORS SHOULD BE:
internal industry in a firm achieving 1. Important to achieving long-term and
competitive advantage annual objectives
2. Measurable
KEY EXTERNAL FORCES 3. Applicable to all competing firms
4. Hierarchical
Can be divided into 5 broad categories
PORTER’S FIVE (5) FORCES MODEL
1. Economic Forces
○ Is economic factors that 1. RIVALRY AMONG COMPETING
significantly impact the economy FIRMS
as a whole. ○ Is usually the most powerful of
2. Social, cultural, demographic, and the five competitive forces
environmental Forces 2. POTENTIAL ENTRY OF NEW
○ Is a group of external factors COMPETITORS
that influence a society or ○ Whenever new firms can easily
organization, including the enter a particular industry, the
attitudes, beliefs, and behaviors intensity of competitiveness
of people within a community among firms increases
(social), their cultural norms and
traditions (cultural), statistical
3. POTENTIAL DEVELOPMENT OF economies, cultures, and societies.
SUBSTITUTE PRODUCTS This interconnectedness is driven by a
○ In many industries, firms are in variety of factors
close competition with
producers of substitute products GLOBALIZATION STRATEGY
in other industries
● Is a plan that businesses use to
4. BARGAINING POWER OF
expand their operations and reach
SUPPLIERS
customers in international markets.
○ Affects the intensity of
● It involves a series of coordinated
competition in an industry,
actions to enter and operate effectively
especially when there is a large
in a globalized world.
number of suppliers
5. BARGAINING POWER OF INDUSTRY ANALYSIS
CONSUMERS
○ Refers to the ability of EXTERNAL FACTOR EVALUATION (EFE)
customers to influence a seller’s MATRIX
pricing, product quality, or
customer service by applying ● Strategic tool used by businesses to
pressure analyze a company's external
environment.
MULTINATIONAL CORPORATIONS ● The opportunities and threats.
● MNCs Face unique and diverse risk, IDENTIFY KEY EXTERNAL FACTORS
such as exploration of assets, currency ● Economic
losses through exchange rate ● Political
fluctuations, contracts and ● Social
agreements, social political ● Technological
disturbances, import/export restrictions ● Competitive
and trade barriers ● Environmental
Here's why MNCs are important: COMPETITIVE PROFILE MATRIX (CPM)
● They create jobs ● Identifies a firm’s major competitors
● They bring new ideas and its particular strengths and
But there are also challenges weaknesses.
● They can sometimes exploit workers
● They can harm the environment IDENTIFY KEY INTERNAL FACTORS
● Brand
GLOBALIZATION
● Reputation
● Is a complex and multifaceted ● Innovation
phenomenon that has reshaped the ● Product quality
world in profound ways. ● Customer service
● It refers to the increasing
interconnectedness of nations,
