Very Short Question Answer
1. Point out the areas of internal analysis.
The areas of internal analysis are:
- Production and operations
- Marketing
- Finance
- Human resource
2. What do you mean by internal analysis?
Internal analysis is an assessment of strengths and weaknesses of an organization. Organizations must exploit and expand on their strengths, as well as reduce or eliminate its weaknesses; thus furthering their competitive advantage, in order to achieve profitability.
3. Give any two examples of marketing resources.
Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services. Marketing mix and market segmentation are the examples of marketing resources.
4. Write any two components of analysis under human resource management.
- Working condition of employees and Employee turnover
- Absenteeism and Discipline.
5. Define value chain analysis.
Value chain can be defined as the set of activities including design, production, marketing and distribution. Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not.
Short Question Answer
1. What is internal analysis? Explain effectiveness analysis as a technique of internal analysis.
Internal analysis is the process of observing an organizational internal environment to identify the strength and weaknesses that may influence the organization’s ability to achieve goals. In other words, internal analysis refers to organizational analysis in order to locate and identify its strengths and weakness. It diagnoses the internal environment of the organization to aware the strategist to use the resources in order to exploit the opportunities and combat the threats.
Effectiveness Analysis as a Technique of Internal Analysis
The success of a firm largely depends on the features of the products that it offers. It enables a firm to outperform the competitors and achieve the long term-term objectives. This requires an organization to perform effectively. Product feature/effectiveness analysis assesses how well an organization is matching its products and services to the requirements of target customers. It includes the following.
Customer requirements
- Product attributes: They involve the features of the products as expected by the customers.
- Service expectations: They include the services expected by the buyer before, during and after service.
- Price sensitivity: It includes the consciousness of the customers towards price of products.
Value added by the organization
- Product features: They involve the features of the products added by the organization to enhance product effectiveness.
- Service performance: It includes the services provided by the organization.
- Communication: It includes the communication to the customers regarding product and services.
Degree of matching: It refers matching between product features and value added by the organization. If there is reconciliation between the above two, the matching is high. It leads to customer satisfaction and increased sales. It eventually becomes a source of market advantage.
2. What is internal analysis? Explain the process of internal analysis.
Internal analysis is the process of observing an organizational internal environment to identify the strength and weaknesses that may influence the organization’s ability to achieve goals. In other words, internal analysis refers to organizational analysis in order to locate and identify its strengths and weakness. It diagnoses the internal environment of the organization to aware the strategist to use the resources in order to exploit the opportunities and combat the threats.
Process of Internal Analysis
- Define, vision, mission, goals and strategies: In the first stage of internal analysis, the organizational vision, mission, objectives and strategies are analyzed. Vision is the future aspiration of an organization. Mission is the reason of the organizational existence. Goals are the desired outcomes. Strategies are the means through which the goals are achieved. Clear definitions of the above components help assess resource requirement of an organization.
- Assess strengths and weakness of each function: The next step in internal analysis is to identify strengths and weakness associated with key capability factors or functional areas of the business. Strengths and weakness can be assessed in terms of past results, comparison of current performance against standards, and benchmarking with the performance of competitors.
- Identify key organizational capability factors: Capability is what an organization can do well. First of all, capability factors of strategic importance are identified. Such factors include unique resources. The resources which are valuable, rare, costly and/or difficult to imitate are known as unique resources. They can be human, physical, financial and intellectual resources.
- Identify core competency: After the identification of unique resources, the core competency is analyzed. A core competency is the sum of competencies that is widespread within the organization. It is something that the organization can do exceedingly well. Core competencies are the firm’s most important sources of competitive advantage
- Locate strategic advantage: It is concerned with locating or identifying competitive advantages of organization. Competitive advantage refers to the unique advantages that an organization has over its rivals, which cannot be easily imitated. In the light of strengths, which competitors do not possesses at present and cannot imitate, at least, in the near future -it can be located. It may be unique innovation skills, sophisticated information technology, highly at skilled and responsive employees, low cost, better after sales services etc.3.
3. Explain the process of value chain analysis.
Value chain can be defined as the set of activities including design, production, marketing and distribution. Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not.
The process of value chain analysis is mentioned below.
- Identification of activities: In the first stage of value chain analysis, the organizational activities are identified as primary and secondary activities. It enables the identification of competitive advantage or disadvantage from each activity,.
- Allocation of cost: In the second stage of value chain analysis, the costs are allocated to the primary as well as secondary activities. Similarly, the assets to be employed to each activity are also assessed. This is further compared with the key competitor to determine the cost and benefit from each activity.
- Identification of the activities that differentiates the firm: Beyond cost benefit analysis, value chain analysis also attempts to distinct the firm from the competitors. This enables the development of core competency for a sustainable competitive advantage.
- Evaluation of value chain: In the last stage of value chain analysis, the overall value chain is evaluated. For this, the following points are considered.
The company’s mission and strategy serve as the base of analysing the business activities. For example, the firms pursuing cost leadership strategy should focus in the activities that create costs significantly.
The nature and relative importance of the value chain may differ with the nature of industry. The importance of the activities may be situational.
4. Explain in brief the different techniques of cost efficiency analysis.
Cost efficiency is one of the major sources of competitive advantage. It is the utilization of organizational resource in such a way that the overall costs are minimized without compromising in the quality. Value chain analysis always attempts cost efficiency. It is a source of competitive advantage as it enhances customer value. Cost efficiency is a means of strategic capability. It involves both appropriate resources and competences to manage costs. It benefits the customers in terms of lower prices or more product features for the same price. It can be analyzed by,
- Economies of scale: The reduction in product costs from an increase in size of an operating unit is known as economies of scale. Under it, the per unit of output generally decreases with increasing scale as fixed costs are spread out over more units of output. This has been a source of competitive advantage especially in motor vehicles, chemicals and metal industries. However, it is less significant in other sectors as leather goods and textiles
- Supply cost: Supply cost is very significant in overall cost position. Location is a factor that influences supply cost. It is because most of the steel or glass factories are located close to raw material or energy sources. The relationship with the supplier also determines supply cost.
- Product process and design: Efficiency in product process leads to decrease in overall cost of production. Similarly, product design also affects the cost does efficiency. Simplified product design results in economies during production, sales and even after sales which would be a source of competitive advantage.
- Experience: Experience is a key source of cost efficiency. The experienced firms learn how to conduct particular activity more efficiently and develop core competency in the activity. They are able to reduce their unit cost year by year.
Long Question Answer
1. Define internal analysis? Explain effectiveness analysis as a technique of internal analysis.
Internal analysis is the process of observing an organizational internal environment to identify the strength and weaknesses that may influence the organization’s ability to achieve goals. In other words, internal analysis refers to organizational analysis in order to locate and identify its strengths and weakness. It diagnoses the internal environment of the organization to aware the strategist to use the resources in order to exploit the opportunities and combat the threats.
Effectiveness Analysis as a Technique of Internal Analysis
The success of a firm largely depends on the features of the products that it offers. It enables a firm to outperform the competitors and achieve the long term-term objectives. This requires an organization to perform effectively. Product feature/effectiveness analysis assesses how well an organization is matching its products and services to the requirements of target customers. It includes the following.
Customer requirements
- Product attributes: They involve the features of the products as expected by the customers.
- Service expectations: They include the services expected by the buyer before, during and after service.
- Price sensitivity: It includes the consciousness of the customers towards price of products.
Value added by the organization
- Product features: They involve the features of the products added by the organization to enhance product effectiveness.
- Service performance: It includes the services provided by the organization.
- Communication: It includes the communication to the customers regarding product and services.
Degree of matching: It refers matching between product features and value added by the organization. If there is reconciliation between the above two, the matching is high. It leads to customer satisfaction and increased sales. It eventually becomes a source of market advantage.