Organizational Appraisal

Dynamics of Internal Environment
Organizational Capability Factors
Consideration in Organizational Appraisal
Methods and Techniques
Structuring Organizational Appraisal

1. Organizational appraisal Pranab Kishor Choudhary

2. Content Dynamics of Internal Environment 1 Organizational Capability Factors 2 Consideration in Organizational Appraisal 3 Methods and Techniques 4 5 Structuring Organizational Appraisal

3. Content Dynamics of Internal Environment 1 Consideration in Organizational Appraisal 2 Methods and Techniques 3 Structuring Organizational Appraisal 4

4. Dynamics of Internal Environment

5. What is internal environment The resources, behavior, strengths and weaknesses, synergistic effects and competencies determines the nature of organization’s internal environment.

6. Organizational Resources Organizational Behavior Strengths and Weaknesses Synergistic Effect Competencies Organizational Capability Strategic Advantage Frame Work for the development of Strategic Advantage

7. Organizational Resources Tangible or Intangible Resources Physical Resources Technology, Plant and equipment, geographic location, access to raw material, etc. Human Resources Training, Experience, Judgement, Intelligence, Relationships, etc. Organizational Resources Formal and Informal System, Structure These resources leads to strategic advantage if they are Valuable Rare Costly to imitate Non-substitutable Strategic Advantage Sustainable Strategic Advantage

8. Organizational Behavior Manifestation of various forces and influences operating in the organization Quality of leadership Management philosophy Values and Culture Organizational Climate Politics Together these forces create the ability or become hurdle to the usage of resources

9. Strengths and Weaknesses Organizational resources and behavior does not exist in isolation Together they create strengths and weaknesses Strength is inherent capability which can be used to gain strategic advantage Weakness is inherent limitation which creates a strategic disadvantage Not absolute but relative

10. Synergistic Effect Strengths and weaknesses combine within or across functional area. Whole is greater than the sum of its part. Efficiency of one functional area support other functional area to grow. Inefficiency of one functional area pulls down the productivity of other functional areas Synergistic effects leads to development of competencies

11. Competencies Organizations ability to compete with the rivals Its net result of strategic advantages and disadvantages The capability of an organization to use it’s competencies exceedingly well turns the competencies into core competencies Apple’s core competencies includes innovation in mobile device technology, high quality customer service, simplicity and strong brand reputation. When a specific ability is possessed exclusively by an organization its Distinctive competencies. Apple’s distinctive competencies are well-designed, user-friendly products that are like no other in the market Competencies Competition

12. Organizational Capability Inherent quality of an organization to Use its strengths Over come its weaknesses. Exploit opportunities Face threats Without capability even valuable and rare resources are worthless. It is sum total of resources and behavior, strengths and weaknesses, synergistic effects occurring in, and competencies of an organization.

13. Strategic Advantage Outcome of organizational capabilities Strategic advantage leads to profit, market value, market share, brand reputation etc. Strategic disadvantage leads to loss of market share, decline in profit etc. Strategic advantage can be measured using the parameter in which they are expressed in. Higher profitability = Better strategic advantage Strategic advantage can be tracked in performance trend of organization.

14. Consideration in Organizational Appraisal

15. Purpose of Organizational Appraisal Determine the organizational capabilities in term of Strengths and weaknesses that lie within different functional areas Strengths and weakness need to be matched with environmental opportunities and threats The outcome of appraisal will affect the strategy formulation

16. Factors affecting Organizational Appraisal Nature of Organization Nature of internal environment Complexity Diversity

17. Approaches to Organizational Appraisal May range from highly systematic to ad-hoc Systematic is pro-active measure To explore opportunities Ad-hoc is generally reactive To avert crisis

18. Employee Opinion Company Files and Documents Financial Statements Management Information system Company reports Magazines and Journals Sources of Information Internal External

19. Methods and Techniques

20. 3 Types of methods and techniques Internal Analysis VRIO Framework Value Chain Analysis Quantitative Analysis Financial Analysis Non-financial Analysis Qualitative Analysis Comparative Analysis Historical Analysis Industry Norms Benchmarking Comprehensive Analysis Key Factor Rating Business Intelligence System Balanced Scorecard

21. Internal Analysis Organization Centric

22. VRIO Framework Given by Jay Barney VRIO is an acronym for the four question framework asked about a resource or capability to determine its competitive potential The question of Value The question of Rarity The question of Imitability (ease/difficulty to imitate) The question of Organization (ability to exploit the resources or capability)

23. VRIO Framework Valuable? Rare? Costly to imitate? Exploited by the organization? Competitive implication No Competitive disadvantage Yes No Competitive parity Yes Yes No Temporary competitive advantage Yes Yes Yes No Unexploited competitive advantage Yes Yes Yes Yes Sustained competitive advantage

24. Value Chain Based on the series of activities an organization performs May start with procurement of raw material and go up to delivering the end product to consumer Value chain consists of primary activities and support activities

25. Value Chain Analysis Value Chain Analysis Requires Recognizing the activities and classifying them into primary and support activities Identifying the steps in activities that add value for the customer Identifying scope for increasing value contribution The Value Chain analysis provide clarity about strengths and weaknesses residing in the value chain. Limitation of Value Chain Analysis Simple in concept but difficult to implement Designed for manufacturing organization and needs be adapted for service organization. Concept of value is hazy.

26. Quantitative Analysis Rely on numbers Financial and Non-financial both can be assessed.

27. Financial Analysis Financial Analysis Ratio Analysis Liquidity, profitability, leverage etc. Economic Value Added (EVA) Analysis Wealth of a company Devised by Stern Stewart & Company Activity Based Cost (ABC) Accounting Identifies major activities and their cost in the value chain Identifies cost drivers

28. Non- Finacial Analysis Employee Turn Over Absenteeism Market ranking Rate of advertising recall Total Cycle time of production Inventory units used per period Service call rate

29. Qualitative Analysis Based on informed opinion, judgment, intuition, or hunch Tenor of corporate culture, Ability to absorb and assimilate knowledge, or the level of morale among employee. Qualitative and quantitative analysis can be used in combination

30. Comparative Analysis Competition and Growth

31. Historical Analysis Analysis of performance of the organization over a period of time Standard part of annual report of company Good or bad performance is indicator of strengths or weaknesses respectively Does not discovers specific reason for change in performance. Longer period should be taken in to account.

32. Industry Norms Comparison of organization with competitors on wide range of parameters. Assumption is businesses operate in similar environment within an industry Concept of strategic group Obtaining information is the biggest hurdle.

33. Benchmarking Reference Point Process of finding the best practice within or outside the industry ‘ The practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match and even surpass them at it’ - The American Productivity and quality center Time consuming and expensive Needs to be done on continues basis

34. Performance Benchmarking Process Benchmarking Strategic Benchmarking Generic Benchmarking Functional Benchmarking Competitive Benchmarking Internal Benchmarking What is to be compared Against whom to compare Classification of Benchmarking

35. Structuring Organizational Appraisal

36. Strengths, weaknesses + Opportunities, threats Organizational Appraisal Environmental Appraisal Strategic Alternative 2 Strategic Alternative 1 Strategic Alternative n Strategic Choice Structuring Organizational Appraisal

37. Organizational Capability Profile (OCP)

38. Strategic Advantage Profile Concise form of OCP Picture of critical areas in relation to strategic posture of firm in future Capability Factors Nature of Impact Competitive strengths or weaknesses Finance High cost of capital; reserve and surplus position unsatisfactory Marketing Fierce competition in industry; company’s position secure at present Operations Plant and machinery in excellent condition Personnel Quality of employees comparable with that of competitors Information Management Advanced management information system in place General Management High quality and experienced top management with proactive stance

39. Bombardier 1960s-70s 1959 1942 Commercial snowmobile company Founded Iconic Snowmobile vehicle Ski-Doo Become leader in rail/ transportation Acquisitions Acquired Canadair Aerospace industry 1986

40. Bombardier Insert the title of your subtitle Here 2008 1995 1989 Most used aircraft for regional flights CRJ regional aircraft Learjet, de Havilland and Acquisitions Plans to take on Boeing and Airbus C-Series Aircraft Refused to offer bulk discounts to the major carriers Missteps 2008 -2015

41. Pierre Beaudoin stepped down in 2015 as the company continued to spiral downward. The C-Series has yet to make any real penetration in the market with orders of less than 250 planes (and none in the past 1½ years) as of 12/31/15 compared to 3,072 orders for Boeing’s 737 and 4,471 for Airbus’s 320. As the investment of billions in the program was underway, the company decided to launch two new business jets further stretching Resources The company has invested over $5 billion in the C-Series alone and has had a net negative cash burn for the past five years. The stock is now worth one-tenth of what it was in 2011 and the company is asking for a bailout from the Canadian government as they lay off nearly 10% of their workforce. Sources : S. Deveau & F. Tomesco , “Why Bombardier Is Struggling to Build Bigger Planes,” Bloomberg Business , February 4, 2016 Bombardier