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Chapter 15
Internal Appraisal of the Organization
Answer to End of Chapter Exercises

Q 15.1
a) Product/service attributes
i) Functionality
ii) Quality
iii) Price
iv) Time
- Customer relationship
- Image

Students may have some problem in identifying the difference between functionality
and quality in a service environment. One approach could be to consider aspects of
service such as comfort, aesthetics of the building and bars, security could be issues
related to functionality. Quality might have a more limited meaning as conformance
to standard e.g. the club opens at the due time, queues at the union bar are not
unnecessarily long because of a shortage of staff?
If it is not possible to compete on price then the organisation needs to provide
different attributes. Customer relationship is important. A more protective
environment possibly than is provided in the local nightclubs. Students should be
able to discuss/identify attributes that can be provided.
c) Benchmarking:
- No. visitors
- Gross profit % compared to last year other facilities
- No of special events

Q 15.2
What are the attributes of the products or services provided by the following
organisations which should be reflected in their value chain?

a) A supermarket
i) Functionality quality of the food; specialist food; width of isles; height of
gondolas, facilities such as quick cash outs for small purchases and quick check for
trusted customers, good parking, trolleys that work
ii) Quality compliance with standard
iii) Price depends on strategy though price is important for most consumers.
iv) Time time to park, check out time
- Customer relationship - friendliness of staff
- Image different supermarkets have a different image

Supermarkets may differentiate themselves on price or quality. It could be argued that

some supermarkets operate a confrontation strategy.
b) A restaurant.
i) Functionality quality of the food; quantity of food!, dcor of the
estabilishment, waitering service, ambience/ music; quality of the chairs and cutlery.
ii) Quality compliance with standard
iii) Price

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iv) Time speed of delivery (particularly at lunchtime when time is often of

importance.
- Customer relationship - friendliness of staff
- Image different restaurants have a different image.
For many restaurants this will be on the basis of product/service attributes e.g. cost or
quality.
Restaurants may also consider the customer relationship is important and for some
top-class restaurants image is important e.g. it is important to be seen at a particular
restaurant.
c) A fast food outlet. price, but a minimum quality level is likely to be also
important.

d) A chain of bookshops
i) Functionality provision of reading space, coffee facilities, availability of
stock to read, other aspects of ambience
ii) Quality
iii) Price
iv) Time availability of books
- Customer relationship - friendliness of staff
- Image
Many bookshops can no longer compete on price with internet companies. They need
to offer additional facilties.

Siegmund

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Q 15.3
a)
10% High
IM

Market
Growth
%
5%
Low
K

FP

CM
0%
High Low

Greater market share smaller market share

than largest competitor **

FP Food processors
IM Icecream makers
CM Coffee makers
K - Kettles
**Note that some companies compare the market share of their products against the
market share of the largest competitor, while others just use a percentage market
share.

The BCG matrix (if based on a comparison v largest competitor) suggests that
Siegmund Ltd has only one cash cow. A strategy might be to invest the funds
generated by this cash cow into the products that are question marks.

In the particular case of Siegmund Ltd, further information has been provided which
may call this interpretation into question. The food processor range of the company,
for example, is still the market leader, however market share is declining and
additional funding is needed for product development. Similarly the sales manager is
concerned about the lack of investment in the coffee maker range. This would indicate
that further funds are required to update these products. In addition it is indicated that
a further investment of 30 million is required to upgrade the production facilities of
the organisation.

15.3 b)
The sales forecast seems rather unrealistic given
i) The likely product life cycle of the different product ranges and the lack of
investment that has taken place in recent years.
Sales of the food processor range of products for example is forecast to increase over
the coming years even though consumer demand in general is likely to decline for the

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next two years; at least two competitors have introduced new product designs; market
growth has declined and is now at only 2%.

15.3 c) i) & ii)

Primary activities Potential areas to look at in order to
improve delivery time
Inbound logistics Review ordering and delivery
ordering of raw materials procedures. Consider introduction of JIT
delivery of raw materials methods.

Operations Time is spent in waiting to be processed

and to be inspected by independent
inspectors.
Consider JIT, workforce inspecting their
own work, introduction of computer
aided manufacture to eliminate stages of
production.
Outbound logistics Reduce time in finished goods and
eliminate final inspection?
Distribution Distributed to warehouse. Consider direct
delivery to the customer.

15.3 d)

Strengths
S1 Brand name -Loyalty of customers
S2 A number of products are market leaders
S3 Highly skilled workforce

Weaknesses
W1 - Competitor products more reliable
W2 - Major investment programme required to update manufacturing facilities
W3 - Poor on-time delivery record.
W4 - Research and development resources are declining
W5 - Product development falling behind competitors
W6 - Skill shortages in the factory following staff leaving to join other organisations.
W7 lack of finance available.

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Q 15.4 - Internal appraisal of Assembly division of McLoed Ltd

The internal appraisal can include
1) market analysis and appraisal of products and services
2) assessment of ability of organisation to deliver the attributes that add value.
3) Resource audit
4) Value chain analysis

1) market analysis and appraisal of products and services

Product portfolio analysis
8% High

Market Hybrid/city bikes

Growth
%
0%
Low

Road bikes
Mountain bikes
-8%
High Low
12% 6% 0%
market share

Resource audit
Financial performance profits declining. Some funding available for the
development of some facilities
Human resources talented engineers

Limited information available and needs more information in order to undertake :-

assessment of ability of organisation to deliver the attributes that add value; Resource
audit; Value chain analysis

2008 John Wiley & Sons Ltd.

www.wileyeurope.com/college/bowhill