Also known as corporate appraisal,

appraisal of internal factors, audit of

organizational competence or appraising
organizational competencies & resources,
is the systematic evaluation of the
organizations strengths & weakness.
It is the process through which strategists
& managers analyze the various factors
of their organization to evaluate their
relative strengths & weaknesses so as to
meet the opportunities & threats of
environment.

 It

is considered as beginning of the

strategic management.
Enables mangers to overcome their
weakness.
It enables organization to improve its
weaknesses.
Organization can try alternatives
methods.

STRATEGIC ADVANTAGE

ORGANIZATIONAL CAPABILITY
COMPETENCI
ES
SYNERGISTIC EFFECTS
STRENGTHS &
WEAKNESSES

ORGANIZATIONAL
RESOURCES

ORGANIZATIONAL
BEHAVIOUR

firm is bundle of resources-tangible

& intangible-includes all assets,
capabilities, organizational
processes, information, knowledge
etc.
3 types of resources: Physical,
human & organizational

Manifestation
of
various
forces
&
influences
operating
in
internal
environment of an organization that create
the ability for , or place constraints on, the
usage of resources.
Forces that affect organizational behavior
are-quality of leadership, management
philosophy, shared values & culture,
quality of work environment ,organizational
climate, organizational politics, use of
power etc.

 Strength

is the inherent capability

which an organization can use to
gain strategic advantage.
Weakness is inherent limitation or
constraint which creates a strategic
disadvantage for an organization.

 Synergy

is an idea that the whole is

greater or lesser than the sum of its
parts.

 Competencies

are special qualities

possessed by an organization that
make them withstand the pressures of
competition in the marketplace.
Net result of strategic advantage &
disadvantage that exists for an
organization determine its ability to
compete with its rivals.
Specific ability is distinctive
competence.

The inherent capacity or potential of an

organization to use its strengths &
overcome its weaknesses in order to
exploit the opportunities & face the
threats in its external environment.

 Outcome of competitive advantage.

Competitive advantage is strategic

advantage where there is more than

one or more identified rivals against
whom rewards or penalties can be
measured.

 Value Chain Approach

Functional approach

FIRM INFRASTRUCTURE
HUMAN RESOURCE
MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
INBOUND
LOGISTIC
S

OPERATIO OUTBOUN MKTG SERVI

N
D
&
CE
LOGISTIC SALE
S
S

 Inbound Logistics
Operations
Outbound logistics
Marketing & sales
Services

 Firm Infrastructure
Human resource management
Technology development
procurement

 Provides

clarity about weaknesses &

strengths.
Difficult to implement
Concept of value is hazy
Traditional cost analysis method
cant be adopted
Requires data collected from various
sources

 Functional

approach of organizational
analysis takes into account various
functional areas & evaluates these for
identifying strengths & weaknesses.
Functional areas to be evaluated:
Production/Operations
Marketing
Finance
Human Resource
General Management

Allocation & use of resources

Rationalization of resources
Locational Pattern
Production capacity & its use
Cost Structure
Cost-Volume-Profit Relationship
Operation procedures
Raw material availability
Inventory control systems
Research & development
Patent rights

 Competitive Competence
Product Mix
Product Life cycle
Marketing Research
Channels of distribution
Sales Force
Pricing
Promotional efforts

 Capital cost
Capital Structure
Financial planning
Tax benefits
Pattern of shareholding
Relationship with shareholders

financiers
Accounting procedures

&

 Quality of personnel
Personal turnover & absenteeism
Industrial relations

 Leadership
Top management

constitution &

philosophy
Organizational image &prestige
Organizational climate
Management practices
Organizational structure
Organizational external relationship

 Internal

analysis
VRIO Framework
Value Chain analysis
Quantitative analysis
Qualitative Analysis
Comparative Analysis
Historical Analysis
Industry Norms
Benchmarking

 Comprehensive

Analysis
Key factor rating
Business Intelligence system
Balanced Scorecard

 Valuable ,Rare ,Inimitable ,organized

It helps to determine the strategic

significance of an organizations
capabilities

VALUABLE
?

RARE?

COSTLY
TO
IMITATE?

ORGANIZ
ED FOR
USAGE?

STRENGT
HS OR
WEAKNES
S?

No

No

Weakness

Yes

No

Yes

Strength

Yes

Yes

No

Yes

Strength &
Distinctive
Competenc
e

Yes

Yes

Yes

Yes

Strength &
sustainable
distinctive
competenc
e

 Financial

analysis-Ratio analysis,
activity based accounting
Non Financial Analysis- Employee
turnover, goodwill, rate of
absenteeism

 Strengths

& weaknesses cannot be

expressed in quantitative terms.
It is best used to express corporate
culture, ability to absorb, assimilate
knowledge etc
It requires survey approach
Also considered as soft

 Historical Analysis
Industry Norms
Benchmarking

 Compare

performance, strength &

weakness with past
Measure of how well an organization
has performed
Should be develop to know in depth
the reasons for bad performance.

 Comparing

oneself with those firm

having same strategies
It provides a good idea to firms
regarding the areas in which they
excel or need improvements
Helps in locating strengths &
weaknesses

benchmark is the reference point for

taking measures against.
Purpose is to find best performers in
that area
What is to be compared ;Three types:
Performance, process & Strategic
benchmarking
Against whom to be compared; four
types:Internal,Competitive,functional,
generic

 Key factor rating

Business Intelligence
Balanced score card

system

 Organizational

Capability profile

Factors appraised

Degree of strength/weakness
Weakness
Strength
-5
+5

Production/operation factors
Marketing factors
Financial factors
Personnel & management factors

Normal
0