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LO2 Assess an organisation’s internal environment and capabilities

LO2 Assess an organisation’s internal environment and capabilities. 1. P2 Analyse the internal environment and capabilities of a given organisation using appropriate frameworks.

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LO2 Assess an organisation’s internal environment and capabilities

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  1. LO2 Assess an organisation’s internal environment and capabilities 1. P2 Analyse the internal environment and capabilities of a given organisation using appropriate frameworks. 2. M2 Critically evaluate the internal environment to assess strengths and weaknesses of an organisation’s internal capabilities, structure and skill set. 3. D1 Critique and interpret information and data applying environmental and competitive analysis to produce a set of valid strategic directions, objectives and tactical actions

  2. What defines the Organizational Environment Organizational environments are composed of forces or institutions surrounding an organization that affect performance, operations, and resources. It includes all of the elements that exist outside of the organization's boundaries and have the potential to affect a portion or all of the organization. Examples include government regulatory agencies, competitors, customers, suppliers, and pressure from the public.

  3. Organisational Internal Environment An organization's internal environment consists of the entities, conditions, events, and factors within the organization that influence choices and activities. It exposes the strengths and weaknesses found within the organization. Factors that are frequently considered part of the internal environment include the employee behavior, the organization's culture, mission statement, and leadership styles.

  4. Discovering Core Competencies Value Creation Value Chain Analysis Four Criteria of Sustainable Advantages Core Competencies Competitive Advantage Capabilities • Valuable • Rare • Costly to Imitate • Nonsubstitutable • Resources • Tangible • Intangible • Outsource Components ofInternal Analysis

  5. Organisational External Environment An organization's external environment consists of the entities, conditions, events, and factors surrounding the organization that influence choices and activities and determine its opportunities and threats. It is also called an operating environment. Examples of factors affecting an organization's external environment include customers, public opinion, economic conditions, government regulations, and competition.

  6. What are strategic capabilities Strategic capability refers to a business' ability to successfully employ competitive strategies that allow it to survive and increase its value over time. The capability of a business is what a company needs to be able to do to execute its business strategy.

  7. Strategic capabilities cont’d Another way to think about capabilities is as a collection of people, process, and technology gathered for a specific purpose.

  8. Key Elements of Business Strategies:Understanding Resources, Capabilities, and Competencies is Selecting a business strategy that exploits valuable resources and distinctive competencies (ie. competitive advantages) Ensuring that all resources and capabilities are fully employed and exploited Building and regenerating valuable resources and distinctive competencies -- competitive advantages

  9. What is Resourced-based view Strategy The resource-based view (RBV) is a model that sees resources as key to superior firm performance. Each organization is a collection of unique resources and capabilities that provides the basis for its strategy and the primary source of its returns. If a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain competitive advantage.

  10. What are Resources Resources are inputs into a firm's production process, such as capital, equipment, the skills of individual employees, patents, finance, and talented managers. Resources are either tangible or intangible in nature. With increasing effectiveness, the set of resources available to the firm tends to become larger. Individual resources may not yield to a competitive advantage. It is through the synergistic combination and integration of sets of resources that competitive advantages are formed.

  11. The VRIN characteristics The important features for a resource to be strategically important are as below Valuable - When resources are able to bring value to the firm they can be a source of competitive advantage. Rare - Resources have to deliver a unique strategy to provide a competitive advantage to the firm as compared to the competing firms. Consider the case where a resource is valuable but it exists in the competitor firms as well. Such a resource is not rare to provide competitive advantage

  12. The VRIN characteristics Cont’d Inimitable - Resources can be sources of sustained competitive advantage if competing firms cannot obtain them. Consider the case where a resource is valuable and rare but the competing organizations can copy them easily. Such resources also cannot be sources of competitive advantage

  13. The VRIN characteristics Cont’d Non-substitutable - Resources should not be able to be replaced by any other strategically equivalent valuable resources. If two resources can be utilized separately to implement the same strategy then they are strategically equivalent. Such resources are substitutable and so are not sources of sustained competitive advantage. The VRIN characteristics mentioned above are individually necessary for the resources to be valuable

  14. VRIO FRAMEWORK The VRIO framework is great for evaluation of a company’s resources. It complements the PESTLE analysis method, which is mostly used by marketers to analyse and monitor the macro-environmental factors that have an impact on an organization. Business analysts can use VRIO to accurately assess the internal resources of a business, its competitive advantage potential, and the possibilities of improvement of resources within relevant business areas.

  15. What is Capability A capability is the capacity for a set of resources to integratively perform a stretch task or an activity. Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate. As a source of competitive advantage, a capability "should be neither so simple that it is highly imitable, nor so complex that it defies internal steering and control.

  16. What are Core Competencies A core competency is a concept in management theory introduced by C. K. Prahalad and Gary Hamel. It can be defined as "a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace". Core competencies fulfill three criteria: Provides potential access to a wide variety of markets.

  17. What are core Competencies Cont’d Core competencies are the main strengths or strategic advantages of a business, including the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace

  18. What are core Competencies Cont’d Distinctive competencies are the combination of the best practices and technical skills that increase the competitiveness of an organization. Cutting-Edge Examples of Core Competencies Toyota’s Core Competencies – It’s a bit unusual, but it’s essential for you to know that operating without a distinctive competency is also possible. Toyota operates under two ideals: continuous improvement and respect for people.

  19. What are core Competencies Cont’d Google Inc. Core Competencies – Google’s goal is to educate the society, help them achieve their goals and care for the environment/culture. People come to Google with innovative and out-of-this-world strategies.

  20. What are core Competencies Cont’d Apple Inc. Core Competencies – Apple’s distinctive competencies encompass innovation, marketing, quality, strong customer service, simplicity and a strong financial performance. Furthermore, Apple has a reputable brand, owing to its magnificent products. For instance, iPhone, iMac, iPod, iWatch, etc. Listen to Apple employees talking about the company’s competencies

  21. Competitive Positioning Competitive positioning is about defining how you'll “differentiate” your offering and create value for your market. It's about carving out a spot in the competitive landscape, putting your stake in the ground, and winning mindshare in the marketplace – being known for a certain “something.”

  22. What is Competitive advantage A competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices.

  23. References http://study.com/academy/lesson/what-is-an-organizational-environment-definition-theory-quiz.html http://smallbusiness.chron.com/strategic-capability-15828.html https://hbr.org/2004/06/capitalizing-on-capabilities http://inevitablesteps.com/business/distinctive-competencies/

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