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Functional analysis
      Unit -2
Identifying major strengths and weaknesses of an
  corporate on the basis of major functional areas-
Marketing function as a resource to
                 organization
• Variables may include      • ; relative position on
  market position and          product life cycle;
  market share;              • new product
• reputation in the            development capability;
  community;                 • negotiating,
• client or patient          • sales and promotional
  perceptions;                 competence
• status as market leader
  or follower;
• mix and depth of product
  or service portfolio
• Example: Coca-Cola’s strong market position in
  the soft drinks sector.
Finance as a resource to organization

• profitability              • cash flow;
• return on capital          • relative efficiency of use
  employed (ROCE)              of assets;
• earnings per share (EPS)   • margin of safety;
• financial management         financial structure
  skills and competences       (ownership, mix of
                               equity and loan capital);
Example: the potential financial performance of a
 well-established, well-located, and well-managed
 hotel whose popularity and positive reputation
 may generate a significant degree of both
 profitability and cash flow from its high occupancy
 rate.
Operational efficiency as an strength
• type, location, age, and • requirements;
  productivity of          • quality and reliability
  operational assets;        of output;
• operational flexibility; • relationship with
• success rates in treating suppliers;
  patients;                 • cost-effectiveness;
• capacity for rapid
  response or just-in-time
  (JIT)
Example: Toyota’s “lean” manufacturing process.
Technological area as a resource

• type and complexity of      • research and
  technology;                   development (R&D),
• ability to manage           • and new product
  changing technology           development (NPD).
• need for continuing
  investment in innovation,
• 3M‟s ability continuously to develop new
  technologies and new products; Boeing‟s
  development of the “7” range of aircraft (707,
  727,737, 747, 757, 767, and 777); ongoing
  developments in surgical and drug treatments
Human Resources as a corporate
                 strength
• employee type,                 • staff education, training
• competence,                      and experience;
• quality and productivity;      • staff attitude and
                                   culture; expectations;
• ease of recruitment and
  retention;                     • employee relations
                                   history and attitude to
• staff skill and flexibility;     management;
• capacity for response,         • degree of customer
  change and creativity;           service orientation;
  cost-effectiveness (etc).
Example: Virgin Atlantic airline cabin crew‟s high
 degree of customer orientation and customer
 service provision.
Functional analysis of organisation


1. Establish a table with column headings:
 Factors,
Strengths/Weaknesses, Standards and
 Comparison. For each factor to be
 evaluated, the question must be
 asked, “Compared to what?”
2. Standards or criteria may be

a. The industry average for the factor being
 evaluated
b. The best firm‟s values
c. The best value of any firm on each criterion
d. A previously set objective
e. A previous forecast
3. Functional factors should be selected
from the following functional areas:

 a. Marketing
 b. Operations/Production
 c. Finance and accounting
 d. Human resources, especially management and
 organization
 e. Information systems
 f. Quality of all transactions, relationships, and
 outputs
FUNCTIONAL ANALYSIS OF
              ORGANIZATION
FACTORS               STRENGTHS/   STANDARDS   RESULT
                      WEAKNESSE
                      S
a. Marketing
b.
Operations/Producti
on
c. Finance and
accounting
d. Human resources,
e. Information
systems
f. Quality of all
transactions,
relationships, and
outputs
Functional analysis
Value Chain Analysis

A value chain is a linked set of value-creating
 activities beginning with basic raw material
 coming from suppliers, moving on to a series of
 value-added activities involved in producing and
 marketing a product or service and ending with
 distributors getting the final goods into the hands
 of the ultimate customer
Industry Value Chain Analysis
  A PETROLEUM COMPANY
A firm has an area of expertise where its primary
 activity lies in industry. An company‟s „Centre of
 gravity‟ is that part of the chain,
: which is most important to the company
:where its greatest expertise and capabilities
 exists
:
Corporate value chain analysis

Different products --------- Different Value chains


Steps in corporate value chain analysis
1. Examine each product line‟s value chain to
   identify strengths and weaknesses
2. Examine the linkages within each product line
3. Examine the potential synergies among the
   value chain of different product lines or
   business units.
Functional analysis
Organizational Appraisal
Resource

A resource is an asset, competency, process,
 skill, or knowledge controlled by an organization.
A resource is a strength
if It is superior ability to perform relative to their
 competencies. A weakness if Perform poorly
VRIO Framework

Value – Does it provide competitive advantage
 over competitors?
Rareness- Do other competitors possess it?
Imitability- Is it costly to imitate it ?
Organization- Is the firm organized to exploit the
 resources
If the answer is yes about any resource
      then it is of strategic importance



Value        Does it provide competitive advantage   Yes   No
             over competitors?
Rarenes      Do other competitors possess it?        Yes   No
s
Imitability Is it costly to imitate it ?             Yes   No

Organiza     Is the firm organized to exploit the    Yes   No
tion         resources
stages in organizational appraisal

1. Identify and classify the firms resources in
   terms of strenghts and weaknesses.
2. Combine the firms strengths into specific
   capabilities. Corporate capabilities are the
   things that an organization does exceedingly
   well.
3. Appraise the profit potential of these resources
   and capabilities in terms of their potential for
   sustainable competitive advantage.
4. Select the best strategy that best exploits the
    firm‟s resources and capabilities relative to
    external opportunities.
5. Identify resource gaps and invest in upgrading
    weaknesses.

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Functional analysis

  • 2. Identifying major strengths and weaknesses of an corporate on the basis of major functional areas-
  • 3. Marketing function as a resource to organization • Variables may include • ; relative position on market position and product life cycle; market share; • new product • reputation in the development capability; community; • negotiating, • client or patient • sales and promotional perceptions; competence • status as market leader or follower; • mix and depth of product or service portfolio
  • 4. • Example: Coca-Cola’s strong market position in the soft drinks sector.
  • 5. Finance as a resource to organization • profitability • cash flow; • return on capital • relative efficiency of use employed (ROCE) of assets; • earnings per share (EPS) • margin of safety; • financial management financial structure skills and competences (ownership, mix of equity and loan capital);
  • 6. Example: the potential financial performance of a well-established, well-located, and well-managed hotel whose popularity and positive reputation may generate a significant degree of both profitability and cash flow from its high occupancy rate.
  • 7. Operational efficiency as an strength • type, location, age, and • requirements; productivity of • quality and reliability operational assets; of output; • operational flexibility; • relationship with • success rates in treating suppliers; patients; • cost-effectiveness; • capacity for rapid response or just-in-time (JIT)
  • 8. Example: Toyota’s “lean” manufacturing process.
  • 9. Technological area as a resource • type and complexity of • research and technology; development (R&D), • ability to manage • and new product changing technology development (NPD). • need for continuing investment in innovation,
  • 10. • 3M‟s ability continuously to develop new technologies and new products; Boeing‟s development of the “7” range of aircraft (707, 727,737, 747, 757, 767, and 777); ongoing developments in surgical and drug treatments
  • 11. Human Resources as a corporate strength • employee type, • staff education, training • competence, and experience; • quality and productivity; • staff attitude and culture; expectations; • ease of recruitment and retention; • employee relations history and attitude to • staff skill and flexibility; management; • capacity for response, • degree of customer change and creativity; service orientation; cost-effectiveness (etc).
  • 12. Example: Virgin Atlantic airline cabin crew‟s high degree of customer orientation and customer service provision.
  • 13. Functional analysis of organisation 1. Establish a table with column headings: Factors, Strengths/Weaknesses, Standards and Comparison. For each factor to be evaluated, the question must be asked, “Compared to what?”
  • 14. 2. Standards or criteria may be a. The industry average for the factor being evaluated b. The best firm‟s values c. The best value of any firm on each criterion d. A previously set objective e. A previous forecast
  • 15. 3. Functional factors should be selected from the following functional areas: a. Marketing b. Operations/Production c. Finance and accounting d. Human resources, especially management and organization e. Information systems f. Quality of all transactions, relationships, and outputs
  • 16. FUNCTIONAL ANALYSIS OF ORGANIZATION FACTORS STRENGTHS/ STANDARDS RESULT WEAKNESSE S a. Marketing b. Operations/Producti on c. Finance and accounting d. Human resources, e. Information systems f. Quality of all transactions, relationships, and outputs
  • 18. Value Chain Analysis A value chain is a linked set of value-creating activities beginning with basic raw material coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service and ending with distributors getting the final goods into the hands of the ultimate customer
  • 19. Industry Value Chain Analysis A PETROLEUM COMPANY
  • 20. A firm has an area of expertise where its primary activity lies in industry. An company‟s „Centre of gravity‟ is that part of the chain, : which is most important to the company :where its greatest expertise and capabilities exists :
  • 21. Corporate value chain analysis Different products --------- Different Value chains Steps in corporate value chain analysis 1. Examine each product line‟s value chain to identify strengths and weaknesses 2. Examine the linkages within each product line 3. Examine the potential synergies among the value chain of different product lines or business units.
  • 24. Resource A resource is an asset, competency, process, skill, or knowledge controlled by an organization.
  • 25. A resource is a strength if It is superior ability to perform relative to their competencies. A weakness if Perform poorly
  • 26. VRIO Framework Value – Does it provide competitive advantage over competitors? Rareness- Do other competitors possess it? Imitability- Is it costly to imitate it ? Organization- Is the firm organized to exploit the resources
  • 27. If the answer is yes about any resource then it is of strategic importance Value Does it provide competitive advantage Yes No over competitors? Rarenes Do other competitors possess it? Yes No s Imitability Is it costly to imitate it ? Yes No Organiza Is the firm organized to exploit the Yes No tion resources
  • 28. stages in organizational appraisal 1. Identify and classify the firms resources in terms of strenghts and weaknesses. 2. Combine the firms strengths into specific capabilities. Corporate capabilities are the things that an organization does exceedingly well. 3. Appraise the profit potential of these resources and capabilities in terms of their potential for sustainable competitive advantage.
  • 29. 4. Select the best strategy that best exploits the firm‟s resources and capabilities relative to external opportunities. 5. Identify resource gaps and invest in upgrading weaknesses.