Techniques for Organizational Appraisal

1. Techniques for
organizational
appraisal
STRATEGIC MANAGEMENT
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2. Value Chain
Analysis
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3.  Framework that companies can use to identify
and evaluate the ways in which their resources
and capabilities can add value is value chain
analysis
 Michael E. Porter introduced this framework in
the year 1985
 Enables companies to understand which parts
of their operations or activities create value by
segmenting the value chain into primary and
secondary activities
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Introduction

4. Shikha Sota
Diagram

5.  Primary activities, shown vertically, represent
traditional line activities such as inbound logistics,
operations, outbound logistics, marketing and sales,
and service.
 Support activities, shown horizontally, are
represented by a company’s staff activities and
include its financial infrastructure, human resource
management practices, technological
development, and procurement activities.
Value Chain
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6.  Primary activities, shown vertically, represent
traditional line activities such as inbound logistics,
operations, outbound logistics, marketing and sales,
and service.
 Support activities, shown horizontally, are
represented by a company’s staff activities and
include its financial infrastructure, human resource
management practices, technological
development, and procurement activities.
Value Chain
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7. Inbound Logistics
Examine all activities related to
 Receipt
 Control
 Warehousing
 Inventory
 Distribution of raw materials or component parts
into the production process.
Primary activities
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Value Chain

8. Operations
Activities to be examined are all those necessary to
convert the inputs (raw materials or components)
available as a result of inbound logistics into finished
products.
Examples include machining, assembly, equipment
maintenance, and packaging.
Primary activities
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Value Chain

9.  Outbound Logistics
Company’s activities involved with
 Collection
 Storage
 Physical distribution of products to customers.
Examples include warehousing or storage of finished
products, material handling, and order processing.
Primary activities
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Value Chain

10.  Marketing and Sales
Several marketing and sales activities must be
completed to both induce customers to purchase
products and ensure that products are available.
 Developing advertising and promotion campaigns
 Selecting and developing distribution channels
 Selecting, training, developing, and supporting a
sales force.
Primary activities
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Value Chain

11.  Service
These are the activities that a company offers to
enhance or maintain a product’s value, including
installation, product use training, adjustment, repair,
and warranty services.
Primary activities
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Value Chain

12.  Procurement
Activities completed to purchase the inputs needed
to produce a company’s products,
 Including items consumed or used in the
manufacturing process (such as raw materials or
component parts), supplies, and fixed assets
(machinery, equipment and facilities).
Support activities
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Value Chain

13.  Technological Development
All activities that are completed to either improve a
company’s products or its production processes.
 This includes basic research, process and
equipment design, product design, and servicing
procedures.
Support activities
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Value Chain

14.  Human Resource Management
These activities are related to the recruiting, hiring,
training, developing, and compensating (including
performance assessment and reward systems) of a
company’s employees.
Support activities
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Value Chain

15.  Company Infrastructure
These activities support the activities performed in
the company’s value chain, including general
management practices, planning, finance,
accounting, legal, and government relations.
 By performing its infrastructure related activities, a
company identifies external opportunities and
threats, and internal strengths and weaknesses
related to company resources and capabilities,
and supports or nurtures its core competencies.
Support activities
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Value Chain

16. Quantitative
analysis

17. Quantitative
analysis
Financial
analysis
Non financial
analysis

18. Financial Analysis
 Ratio analysis
 EVA (Economic Value Added)
 ABC (Activity Based Costing)
Non-Financial Analysis
Everything can not be expressed in monetary
terms
Goodwill, employee morale, service call rate,
inventory units used per period, absenteeism

19. Comparative
analysis

20. Comparative
analysis
Historical
analysis
Industry norms Benchmarking

21. Historical analysis
 Comparison with one’s own performance over a
period of time.
 Graphical representation of company’s
performance
 Comparison can be done to see improvements
& pitfalls

22. Industry Norms
 Comparison with competitors
 More specifically, comparison with strategic
groups
 Strategic groups are conceptually defined
cluster of competitors that share the same
strategies.

23. Benchmarking
 Benchmark is the reference point for taking
measures against.
 Purpose is to find the best performers in an area
so that one could match one’s own
performance with them and even surpass them.

24. Benchmarking
Performance Benchmarking
Process Benchmarking
Strategic Benchmarking

25. Benchmarking
Internal Benchmarking
Competitive Benchmarking
Functional Benchmarking
Generic Benchmarking

26. Comprehensive
Analysis

27. Key Factor Rating
Organizational Capability Profile (OCP)
 Financial Capability Profile
(a) Sources of funds
(b) Usage of funds
(c) Management of funds
 Marketing Capability Profile
(a) Product related
(b) Price related
(c) Promotion related
(d) Integrative & Systematic

28. Key Factor Rating
 Operations Capability Factor
(a) Production system
(b) Operation & Control system
(c) R&D system
 Personnel Capability Factor
(a) Personnel system
(b) Organization & employee characteristics
(c) Industrial Relations
 General Management Capability
(a) General Management Systems
(b) External Relations
(c) Organization climate

29. Balanced Scorecard
 A model integrating financial and non financial
measures. (Kaplan & Norton 1996)
 Causal link between outcomes and performance
drivers of such outcomes
 Translates the vision and strategy of a business
unit into objectives and measures in 4 distinct
areas
 Financial
 Customer
 Internal Business process
 Learning and growth

30. Financial Perspective
How do we look to
our Shareholders?
Customer
Perspective
How do our customers
look at us?
Learning and Growth
Perspective
How can we continue to
improve?
Internal Business
Perspective
What we must excel
at?
Balanced Scorecard

31.  Financial Perspective - This consists of costs or
measurement involved, in terms of rate of return on
capital (ROI) employed and operating income of the
organization.
 Customer Perspective - Measures the level of customer
satisfaction, customer retention and market share held
by the organization.
 Business Process Perspective - This consists of measures
such as cost and quality related to the business
processes.
 Learning and Growth Perspective - Consists of measures
such as employee satisfaction, employee retention and
knowledge management.
Balanced Scorecard