Measuring Strengths and Weaknesses (Scanning the Internal Environment)

What are Strengths and Weaknesses?

Strengths - a companys competitive advantages and other distinctive competencies

distinctive competency - something an organization does exceedingly well

Weaknesses - constraints that hinder movements in certain directions

Types of Competencies

Superior manufacturing skills in producing a high quality product. Superior system for delivering customer orders accurately and swiftly. Better after-sale service capability. More skill in achieving low operating costs. Superior product design capability. Unusual innovativeness in new product development. Better merchandising and product display skills. Superior mastery of an important technology. Better marketing and customer research. Unusually effective salesforce. Expertise in integrating multiple technologies to create whole families of new products.

Company Resources can be Strengths or Weaknesses

Companies control resources (assets, competencies, processes, skills or knowledge). They can be strengths or weaknesses. Must ask:

1. 2. 3. 4.

Does it provide a competitive edge? (value) Do other competitors posses it? (rareness) Is it costly for others to imitate? (imitability) Is the firm organized to exploit the resource? (organization)

Value Chain Analysis

Analyzing the firms value creating activities. This is a good way to begin analyzing strengths and weaknesses.

Corporate Value Chain

Firm Infrastructure (general management, accounting, finance, strategic planning) Human Resource Management (recruiting, training, development) Support Activities Technology Development (R&D, product and process improvement) Procurement (purchasing of raw materials, machines, supplies) Profit Margin
Source: Adapted/repri nted with the permission of the The Free Press, an imprint of Simon & Schuster, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter, p. 37. Copyright 1985 by Michael E. Porter.

Inbound Logistics (raw materials handling and warehousing)

Operations (machining, assembling, testing)

Outbound Logistics (warehousing and distribution of finished product)

Marketing and Sales (advertising, promotion, pricing, channel relations)

Service (installation, repair, parts)

Primary Activities

Using Value Chain Analysis

Examine your value chain for strengths and weaknesses. Determine how to reduce non-value work.

Examine linkages between activities.

Scanning Internal Resources

Scan the internal environment and evaluate: A. Organizational Structure B. Organizational Culture C. Organizational Resources 1. Marketing 2. Finance 3. Research & Development 4. Operations 5. Human Resources 6. Information Systems

Typical Strengths & Weaknesses of Some Functional Areas of the Firm

Function Marketing Strengths Weaknesses Strong salesforce Insufficient salesforce Excellent distribution Poor forecasting Excellent mktg information Excess cash Large credit line Excellent cost info Using wrong cost system Heavily leveraged No timely reporting (e.g., inventory) Insufficient R&D spending

Finance/Acct

R&D/Design

Experienced designers Patent protection Excellent quality Short cycle times Excellent delivery times

Operations

High production costs Unreliable delivery

Measuring Strengths and Weaknesses at Maytag

Internal Factors Strengths
Quality Maytag culture Experienced top management Vertical integration Employee relations Hoovers international orientation

Weight

Rating

Weighted Score

Comments

1
.15 .05 .10 .05 .15

2
5 4 4 3 3

3
.75 .20 .40 .15 .45

5
Quality key to success Know appliances Dedicated factories Good, but deteriorating Hoover name in cleaners

Weaknesses
Process-oriented R&D Distribution channels Financial position Global positioning .05 .05 .15 .20 2 2 2 2 .10 .10 .30 .40 Slow on new products Superstores replacing small dealers High debt load Hoover weak outside the United Kingdom and Australia Investing now

Manufacturing facilities

.05

.20

Total Weighted Score

1.00

3.05