Human Resources/STRATEGIC MANGEMENT
assessment of the strategic capability of an organization centre on the appraisal of its performance in different functional areas. Critically examine the statement.
1.''Assessment of the strategic capability of an organization centre on the appraisal of its performance in different functional areas.''critically examine the statement.
Strategic capabilities refer to the capabilities of the members of the organization that enable the formation and deployment of strategy in pursuit of a sustainable advantage. Working within the strategic management framework, capable people are woven into effective processes, inspired by the business design construct, and compelled by purpose to create the competencies of the business organization that produces advantage.
Tiers of capabilities --
There are three tiers of capabilities, from the basics to the advanced capabilities needed to sustain advantage --
1. Leadership & Management
perspective skills - judgment & flexibility to have the right reaction for the situation
learning -- for self-development and an adaptive learning organization
strategic management as a self-improving learning process
synergistic process integration -- business model synergy and harmony
• Business Architecture
capability creation - harness imagination to produce distinctive competencies and value
synergy creation - Innovative designs with uniquely synergistic networks of business model elements
modularity in design - Optimization of structure, complexity, and economies
adaptability - design in adaptive learning and continuous innovation
business model types - e.g. complex, volume, value disciplines
As businesses compete with one another for customers, market share and revenue, they employ tactics according to deliberate strategies. The process of shaping strategies and putting them into action is the responsibility of a business' leadership. However, not all businesses have the same advantages when it comes to developing and employing strategy.
Strategic capability refers to a business' ability to successfully employ competitive strategies that allow it to survive and increase its value over time. While strategic capability does take into account the strategies a business uses, it focuses on the organization's assets, resources and market position, projecting how well it will be able to employ strategies in the future. There is no single method or universal metric for measuring or noting strategic capability.
A business' strategic capability is a major component in remaining financially viable and growing despite the presence of competitors in a free market. Many groups of interested parties attempt to measure and track strategic capability. They include investors, who want to put their money into businesses with reasonable chances of future success and growth. Employees also care about strategic capability since it identifies businesses that are stable and unlikely to go under or those that need to cut costs through layoffs. Business leaders track strategic capability, not only for their own companies but also for competitors to better understand the markets in which they operate. Finally, financial analysts and government regulatory agencies have interests in strategic capability since it plays a role in how they value and monitor businesses.
THIS IS CARRIED OUT FOR THE ORGANIZATION AS A WHOLE, AS WELL AS THE VARIOUS DEPARTMENTS LIKE MARKETING/ HR/OPERATION/FINANCE ETC.
Many elements can potentially contribute to a business' strategic capability. Assets such as cash, property and patents all contribute to a business' ability to formulate and employ strategies. Other elements of strategic capability include human resources and organizational structure, since employee skills and leadership mechanisms all contribute to a business' competitiveness. Pricing can also be a part of strategic capability, with businesses that understand how to manipulate prices to maximize profits likely to enjoy strategic advantages over competitors that have trouble arriving at profitable price points for their products.
Strategic Value Analysis
Assessing strategic capability is a complex process, in part because of the number of factors it must address. The process of evaluating a business' strategic capability is known as a strategic value analysis. It relies on data from annual reports, public surveys and market trends to determine which businesses in a given industry have strategic capabilities that others lack. As businesses change and acquire additional resources, analysts must continually perform new strategic value analyses.
• 1. STRATEGIC CAPABILITY
Position audit is examination of an organization’s strategic capability Strategic capability is defined by the adequacy and suitability of resources and competencies. Organization’s resources: men, money, materials, markets, management, methods Unique resource is better than that of competitor and difficult to imitate. Limiting factor: shortage or difficulty of supply Resource based strategy: distinctive resource can be a source of sustained competitive advantage.
Cost Efficiency Economies of scale: reducing cost per unit by increasing sales volume. Supply costs: transport costs; quantity of purchase Design of products and processes: reducing wastage, efficient designs. Experience: learning curve, experience curve
Sustainable Competitive Advantage Value to buyers: satisfying customer needs Rarity: De Beers Robustness: Apple Non-substitutability: not easily substituted Dynamic capabilities: change, innovate and learn
Knowledge Organizational knowledge is the collective and shared experience accumulated through systems, routines and activities of sharing across the organization Tangible knowledge and Intangible Knowledge Data, information and knowledge Knowledge Management: is the process by which organizations generate value from their intellectual and knowledge-based assets.
Knowledge Knowledge management systems Office automation Groupware Intranet Extranet Internet Expert system Database
Value Chain The value chain describes those activities of the organization that add value to purchase inputs. Value activities are the means by which a firm creates value in its products. Value Chain Diagram Value Network Diagram
The Product Portfolio New Products and innovation Must develop new products Consumer needs Source of growth for the company Response to environment and technology Every product is born, has its stages and then dies New Product Development strategies: 1. acquisition 2. new product development (original products, product improvements, product modifications, new brands)
New Product Odds Up to 90 % of new products meet failure New Coke, Eagle Snacks, Zap Mail, Premier “Smokeless” cigarettes, Arch Deluxe Reasons: Market overestimation Actual product poorly designed Incorrectly positioned Wrong timing for launch Price too high Poor advertisement
Process Idea generation Idea screening Concept development and testing Marketing strategy development Business analysis Product development Test marketing Commercialization
Product Life Cycle Product launch – happy life Cover costs Earn profits Length not know in advance Coca-Cola, Gillette, Budweiser, American Express, Wells-Fargo, and Tabasco
PLC – S Curve
Introduction Stage Product launch Takes time Slow growth Negative profits High promotion and distribution cost
Growth Stage Product, if satisfies market, enters growth stage Sales climb quickly Early adopters continue, new join through favorable word of mouth New competitors enter market Competition – increase in sale points Spread of sales, unit cost reduces Sustain rapid growth New market segments Prices may be lowered to attract more customers (iPod)
Maturity At some point sale slows down, product enters maturity stage Lasts longer Marketing management most of the time deals with mature products More producers selling the same product Greater competition Prices down, increase in sales promotion Drop in profit Well established competitors stay
Maturity Product manager should modify market, product and marketing mix Market: increase consumption of product, new users, present users Product: quality, features, style (milk pak, Honda City) Four Ps
Decline Stage Eventually dip Oat meal, VHS tapes, VCR, Tape recorders Reasons: technology, consumer tastes, increased competition, profits decline, withdrawal from market Furthermore: Weak product costly to firm Management time Price adjustments Advertising/sales efforts Reputation of other co products affected Old Spice/ co can sell brands
Benchmarking Benchmarking is the process of gauging the internal practices and activities within a firm to an external reference or standard. It is a continuous process of measuring one’s own products, services, systems, and practices against the world’s toughest competitors to identify areas for improvement. Managers while benchmarking their practices should set realistic goals and gradually increase the level of difficulty to encourage employees. This technique is also known as shaping. For example, if an organization wants to meet the 1 % defects benchmark from its existing 20 %. It would be appropriate to set 15 % goals in the first place. Once this goal is achieved the manager can set a new target of 10 % and gradually meet the benchmark of 1 %. To use shaping effectively in benchmarking practices, the following tips can be considered:
Benchmarking Identify a benchmark (product, service or process) Identify comparables. Collect data to accurately define goals. Collect data to determine the current performance of the organization against the benchmark. Make the target specific. Train the staff to meet set goals. Provide feedback and reinforce set goals. Review progress periodically.
Managing Strategic Capability Competencies can be extended Things that do not create value should cease Best practices to be extended Activities that add value should be extended New and improved way of working should be introduced Weakness should be remedied External links should be improved
SWOT analysis Environmental analysis Internal appraisal TOWS Matrix