Slide 1Analyzing the Internal Environment of the FirmLearning ObjectivesQuestionCoherence in Strategic DirectionSlide 6Slide 7Slide 8Slide 9Slide 10Slide 11Value-Chain AnalysisSlide 13Example - IBM Electronics Value Chain ManagementThe Value ChainPrimary Activity: Inbound LogisticsPrimary Activity: OperationsPrimary Activity: Outbound LogisticsPrimary Activity: Marketing and SalesExample: Pizza’s Global FootprintPrimary Activity: ServiceSupport Activity: ProcurementSlide 23Support Activity: Technology DevelopmentSupport Activity: Human Resource ManagementSupport Activity: General AdministrationInterrelationships among Value-Chain Activities within and across OrganizationsApplying the Value Chain to Service OrganizationsValue Chain in Service IndustryEvaluating Firm PerformanceFinancial Ratio AnalysisSlide 32Slide 33The Balance ScorecardSlide 35Customer PerspectiveInternal Business PerspectiveInnovation and Learning PerspectiveExampleFinancial PerspectivePotential Limitations of the Balanced ScorecardMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 Analyzing the Internal Environment of the FirmLearning ObjectivesAfter reading this chapter, you should have a good understanding of:How an awareness of strategic goals can help an organization achieve coherence in its strategic direction.The primary and support activities of a firm’s value chain.How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.The value of recognizing how the interests of a variety of stakeholders can be interrelated.3-3QuestionWhich of the following is not included in the hierarchy of goals of strategic direction?a) Mission Statementb) Company Visionc) SWOT analysisd) Strategic objectives3-4Coherence in Strategic DirectionCompany visionMassively inspiringOverarchingLong-termDriven by and evokes passionFundamental statement of the organization’sValuesAspirationGoalsHierarchy of GoalsCompany visionCompany vision3-5Coherence in Strategic DirectionMission statementsPurpose of the companyBasis of competition and competitive advantagesMore specific than visionFocused on the means by which the firm will competeHierarchy of GoalsCompany visionCompany visionMission statementsMission statements3-6Coherence in Strategic Direction3-7Coherence in Strategic DirectionStrategic objectivesOperationalize the mission statementProvide guidance on how the organization can fulfill or move toward the “higher goals”More specificCover a more well-defined time frameHierarchy of GoalsCompany visionCompany visionMission statementsMission statementsStrategic objectivesStrategic objectives3-8Coherence in Strategic DirectionStrategic objectivesMeasurableSpecificAppropriateRealisticTimely ChallengingResolve conflicts that ariseYardstick for rewards and incentivesHierarchy of GoalsCompany visionCompany visionMission statementsMission statementsStrategic objectivesStrategic objectives3-9Coherence in Strategic Direction3-10QuestionValue is measured by:a) supply of a firm’s product/serviceb) a firm’s net worth c) A firm’s customer based) A firm’s total revenue3-11Value-Chain AnalysisSecond key tool to understanding an organization’s internal environmentSequential process of value-creating activitiesThe amount that buyers are willing to pay for what a firm provides themValue is measured by total revenue3-12Value-Chain AnalysisFirm is profitable to the extent the value it receives exceeds the total costs involved in creating its product or servicePorter describes two different categories of activities:Primary – inbound logistics, operations, outbound logistics, marketing and sales, and serviceSupport activities – procurement, technology development, human resource management, general management3-13Example - IBM Electronics Value Chain Management Helps companies save money The benefits of streamlining a business with value chain management include: Lower infrastructure costs associated with collaboration.Create commonality in parts and suppliers.Control inventory by getting the supply chain talking to the demand chain.Cut transaction costs by integrating with public and private exchanges.Deliver products to market faster while minimizing risk and capital investment.Source: www.ibm.com3-14The Value Chain3-15Primary Activity: Inbound LogisticsAssociated with receiving, storing and distributing inputs to the productLocation of distribution facilitiesMaterial and inventory control systemsSystems to reduce time to send “returns” to suppliersWarehouse layout and designs3-16Primary Activity: OperationsAssociated with transforming inputs into the final product formEfficient plant operationsAppropriate level of automation in manufacturingQuality production control systemsEfficient plant layout and workflow design3-17Primary Activity: Outbound LogisticsAssociated with collecting, storing, and distributing the product or service to buyersEffective shipping processesEfficient finished goods warehousing processesShipping of goods in large lot sizesQuality material handling equipment3-18Primary Activity: Marketing and SalesAssociated with purchases of products and services by end users and the inducements used to get them to make purchasesHighly motivated and competent sales forceInnovative approaches to promotion and advertisingSelection of most appropriate distribution channelsProper identification of customer segments and needsEffective pricing strategies3-19Example: Pizza’s Global FootprintDomino Pizza store described as "more a logistics company than food service, since supply chain management is the factor that differentiates the winners from the losers" in this businessDomino's Pizza has 8,000 stores in 54 countries and sales of $4.6 billionknown for development of centralized ingredient logistics systems Outbound logistics make use of scooters, bikes, fleet-footed delivery boys and vans www.forbes.com/logistics/2007/02/20/pizza-shipping-logistics-biz-logistics-cx_rm_0221pizza.html3-20Primary