Internal Environmental Analysis

LOGO
BPMN 6023 STRATEGIC MANAGEMENT
Internal Environmental
Analysis
Prepared for : Prof Dr Ajay Chauhan
Prepared by : 1. Logeswari d/o Uthama Puthran
808844
2. Mohd Faiz bin Zalwi @ Alwi
808856
Contents
Internal scanning: Organization analysis
Resource-based View
Business Model
Value-Chain Analysis
Scanning Functional Resources
Scanning Functional Resources and Capabilities
The Strategic Audit: A Checklist for Organization analysis
Synthesis of Internal Factors
Introduction
What is an Internal Analysis?
Internal Analysis
Identifies and evaluates resources, capabilities,
and core competencies
Looks at the organizations
o Current vision
o Mission
o Strategic objectives
o Strategies
Why Do an Internal Analysis?
It is the only way to identify an organizations

strengths and weaknesses
Its needed for making good strategic decisions
INTERNAL SCANNING:
ORGANIZATION ANALYSIS
Internal
strategic
factors
Critical strength and

weaknesses to determine if firm
able to take advantage of
opportunities and avoid threats
Organizational
analysis
Concerned with identifying and

developing an organizations
resources and competencies
RESOURCE-BASED VIEW
Resources
Asset (tangible
and intangible),
competency,
process, skill or
knowledge
controlled by
the corporation
Capabilities
A corporation
ability to
exploit its
resources
RESOURCE-BASED VIEW
Core
competen
cy
Competency
RESOURCE-BASED VIEW
Barney, VRIO framework
Value
Does it
provide
competitive
advantage?
Rareness
Do other
competitors
posses it?
Imitability
Is it costly
for other to
imitate?
Organization
Is the firm
organized to
exploit the
resource?
RESOURCE-BASED VIEW
Using resources to gain competitive
advantage
Identify and classify resources in terms of
strengths and weaknesses
Combine the firms strengths into specific
capabilities and core competencies
Appraise profit potential- Are there any
distinctive competencies?
Select the strategy that best exploits the
firms capabilities and competencies relative to
external opportunities
Identify resource gaps and invest in upgrading
weaknesses
RESOURCE-BASED VIEW
Determine the sustainability of an
advantage
RESOURCE-BASED VIEW
RESOURCE-BASED VIEW
Explicit knowledge- knowledge that can be easily
articulated and communicated
Tacit knowledge- knowledge that is not easily

communicated because it is deeply rooted in employee
experience or in the companys culture
BUSINESS MODEL
AIR ASIA (LOW COST CARRIERS
BUSINESS MODEL)
VALUE-CHAIN ANALYSIS
Value chain- a linked set of value creating
activities that begin with basic raw
materials coming from suppliers, moving on
to a series of value-added activities
involved in producing and marking a
product or service, and ending with
distributors getting the final goods into the
hands of the ultimate consumer
Corporate Value Chain Analysis
SCANNING FUNCTIONAL
RESOURCES
SCANNING FUNCTIONAL
RESOURCES
Basic Organizational Structures
SCANNING FUNCTIONAL
RESOURCES
Corporate Culture: Attributes
SCANNING FUNCTIONAL RESOURCES AND

CAPABILITIES
MANAGEMENT
STRATEGIC MARKETING ISSUES
STRATEGIC FINANCIAL ISSUES
STRATEGIC RESEARCH AND DEVELOPMENT
(R & D) ISSUES
STRATEGIC OPERATION ISSUES
STRATEGIC HUMAN RESOURCES ISSUES

CAPABILITIES
MANAGEMENT
Management is a process of coordinating activities,
which comprises of five functions:
PLANNING
ORGANIZING
MOTIVATING
MANAGEMENT
STAFFING
CONTROLLING

CAPABILITIES
STRATEGIC MARKETING ISSUE
1. Market Position and Segmentation
Who are our Customer? in terms of market, product,

and geographic locations.
2. Marketing
Mix
refers to the particular

combination of key variables (product, place, promotion
and price); to affect demand & to gain competitive
advantage
3. Product Life Cycle
-is a graph showing time
plotted against the monetary sales of a product as it

moves from introduction through growth and maturity
and to decline.
4. Brand and Corporate Reputation
A
Brand is a name given to a companys product which
identifies that item in the mind of the consumer.

CAPABILITIES
1.
Market Position and Segmentation - Who are our Customer?

in terms of market, product, and geographic locations. To
discover what niches to seek, which new types of products to
develop,

CAPABILITIES
2. Marketing Mix
refers to the particular combination
of key variables ( 4Ps :Product, Place, Promotion and Price);

under a corporations control that can be used to affect demand &
to gain competitive advantage.

CAPABILITIES
1.
Product Life Cycle -is
a graph showing time plotted against the

monetary sales of a product as it moves from introduction through growth
and maturity and to decline.

CAPABILITIES
1. Brand and Corporate Reputation
A Brand is a name given to a companys product which
identifies that item in the mind of the consumer.
- Over time and with proper advertising, a brand connotes
various characteristics in the consumer mind.
- For example, Disney stands for family entertainment,
BMW means high-performance autos
- A Corporate Reputation is a widely held perception of a
company by the general public. It consists of two
attributes:
1) Stakeholders perception of a corporations ability to
produce quality goods and;
2) A Corporations prominence in the minds of stakeholders.
A good corporate reputation can be a strategic resources.

CAPABILITIES
To Identify a Companys Strengths and Weaknesses from the
financial perspective.
1. Financial Leverage
The concept of financial leverage (the ratio of total debt to
total assets) is helpful in describing how debt is used to
increase the earnings available to common shareholders.
2. Capital Budgeting
Capital Budgeting is the analyzing and ranking of possible
investments in fixed assets such as land, buildings, and
equipment in terms of the additional outlays and additional
receipts that will result from each investment.
*Hurdle point

CAPABILITIES
To Identify a Companys Strengths and Weaknesses from the

financial perspective.
Question concerning the financial position of the company, its

stability and competitiveness could only be answered after a
thorough and detailed financial analysis.
Adequate capital is the basic foundation to run any business. It is
essential to control cash flow within the organization to ensure
conformity with its intended use
Budgeting plays important role to ensure that all allocation of cash
is appropriately distributed.
Determining of financial strengths and weakness is important for
effective strategy formulation activities and to compliment other
departments within the company such as the operation,
management and marketing division.

CAPABILITIES
1. Financial Ratios
The five main ratios is used in evaluating the
companys financial positions;
1.
2.
3.
4.
5.
Liquidity Ratios
Leverage Ratios
Activity Ratios
Profitability Ratios
Growths Ratios

CAPABILITIES
1. Financial Ratios
Liquidity ratios measure a firms ability to
meet its current financial obligations.
Liquidity Ratios include:
Net working capital
Current Ratio
Quick Ratio

CAPABILITIES
Net Working Capital
While not technically a ratio, Net Working Capital (NWC) is a key element for
internal control.
The higher this number the better.
NWC is found by subtracting current liabilities from current assets.
This is a sign of growing assets while keeping their liabilities stable.

CAPABILITIES
Current Ratio
The Current Ratio is a direct evaluation of a
companys liquidity.
The higher this value, the more liquid a firms
resources are.
Current Ratio is found by dividing current
assets by current liabilities.
This could be improved by lowering the
reliance on debt financing.

CAPABILITIES
Quick Ratio
The Quick Ratio is comparable to the Current
Ratio except that it takes inventory levels
into consideration.
This is found by subtracting inventories from
current assets and then dividing by current
assets.

CAPABILITIES
Activity Ratio Analysis
Activity Ratios are used to measure the speed
with which accounts are converted into cash.
Activity Ratios include:
Inventory Turnover
Average Collection Period
Total Asset Turnover

CAPABILITIES
Inventory Turnover
Inventory Turnover is measurement of a firms
inventory liquidity.
This is found by cost of goods sold(COGS) by
inventory.
Generally a lower number is better.

CAPABILITIES
Total Asset Turnover
Total Asset Turnover illustrates the firms ability and
proficiency in using its assets to generated sales.
It is found by dividing sales by total assets, and is
measured in times per year
When using cross-sectional analysis, a company must
take special care in comparing Total Asset Turnover
because new assets tend to have lower turnover.

CAPABILITIES
Debt Ratio Analysis
A companys debt position is a measure of how much of the
firms profits are generated using money borrowed from
other companies or individuals.
Debt Ratios include:
Financial Leverage Multiplier
Debt Ratio
Interest Coverage Ratio

CAPABILITIES
Financial Leverage Multiplier
The Financial Leverage Multiplier (FLM) is used to
convert the companys Return On Assets to its
Return on Equity.
This reflects the impact of
leverage, or use of debt, on owners return.
It is the ratio of total assets to stockholders equity.

CAPABILITIES
Profitability Ratio Analysis
Profitability Ratios evaluate a companys
earnings with respect to sales, assets,
owners investments and share values.
Profitability Ratios include
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Total Assets
Return on Equity

CAPABILITIES
Gross Profit Margin
The Gross Profit Margin(GPR) is the
percentage of each sales dollar that
remains after the firm has paid for the
goods sold.
It is found by subtracting COGS from sales
and dividing by sales.

CAPABILITIES
Net Profit Margin
Net Profit Margin(NPR), one of the most
popular indicators of company health,
measures the percentage of sales revenue
remaining after ALL expenses are paid.
NPR is found by dividing net profits by sales

CAPABILITIES
Return on Total Assets
Return of Total Assets(ROA), also known as return on
investment, measures a firms effectiveness at
generating profits with its assets.
ROA is found by dividing the net profits after taxes by
total assets.

CAPABILITIES
Return on Equity
The Return on Equity(ROE) is extremely important to
potential investors.
ROE is found by dividing net profit by owners equity.

CAPABILITIES

CAPABILITIES

CAPABILITIES

CAPABILITIES
STRATEGIC RESEARCH AND DEVELOPMENT (R & D)
ISSUES
1. R & D Intensity, Technological Competence, and
Technology Transfer -The Company must make available
the resources necessary for effective research and development.
A Companys R & D intensity is a principal means of gaining
market share in global competition. The amount spent on R & D
often varies by industry.
2. R & D Mix
- Basic R & D is conducted by scientists in wellequipped laboratories where the focus is on the theoretical
problem areas. Product R & D- concentrates on marketing
and is concerned with product or product packaging
improvements
3. Engineering
&
- concerned with engineering,

concentrating on quality control, and the development of design
specifications and improved production equipment

CAPABILITIES
STRATEGIC RESEARCH AND DEVELOPMENT (R & D) ISSUES
Impact of Technological of Discontinuity on Strategy
In the corporate planning process, it is generally assumed that incremental progress in

technology will occur. But pass developments in a given technology cannot be extrapolated
into the future because every technology has its limits. The key to competitiveness is to
determine when to shift resources to a technology that has more potential.

CAPABILITIES
1. Experience Curve -
unit production costs

decline by some fixed percentage each time the
total accumulated volume of production units
doubles
2. Flexible Manufacturing
Customization The use
for
Mass
of ComputerAssisted
Design
and
Computer-Assisted
Manufacturing (CAD/CAM) and robot technology
means that learning time is shorter and products
can be manufactured in small, customized batches
in a process call mass customization the low cost
production of individually customized goods and
services.

CAPABILITIES
BUSINESS PROCESS AND OPERATION
AirAsia has fostered a dependency on Internet technology for its operational

and strategic management, and provides an online ticket booking services to
traveler online. The following shows the home page of AirAsia.com as the
company key channel of marketing and sales.

CAPABILITIES
BUSINESS PROCESS AND OPERATION

CAPABILITIES
STRATEGIC HUMAN RESOURCE (HRM)
ISSUES
1. Increasing Use of Teams
2. Union Relations and temporary/PartTime Workers
3. Quality of Work Life and Human Diversity
4. Impact on Performance
5. Supply Chain Management

CAPABILITIES
STRATEGIC HUMAN RESOURCE (HRM) ISSUES
Teams
Autonomous (self-managed)- a group of people
working together without a supervisor to plan,
coordinate and evaluate their work
Cross-functional work teams- various disciplines are
involved in a project from the beginning
Concurrent engineering- specialists work side-byside and compare notes constantly to design
cost-effective products with features customers
want

CAPABILITIES
Virtual Teams - groups of geographically or

organizationally dispersed coworkers
that are assembled using a combination
of telecommunications and information
technologies
to
accomplish
organizational tasks.

CAPABILITIES
2. Union Relations and temporary/Part-Time Workers -
If the
corporation is unionized, a good human resource manager should be able
to work closely with the union. To save jobs, Unions are increasingly
willing to support new strategic initiatives and employee involvement. To
increase flexibility, avoid layoffs, and reduce labor costs, corporations are
using more temporary (also known as contingent) workers.
3. Quality of Work Life and Human Diversity
-Human Resource
departments have found that to reduce employee dissatisfaction and
unionization efforts (or, conversely, to improve employee satisfaction and
existing union relations), they must consider the quality of work life in
the design of jobs. To Improve the corporations quality of work life by
(1) Introducing participative problem solving
(2) Restructuring Work,
(3) Introducing innovative reward systems, and
(4) improving the work environment
Human Diversity refers to the mix in the workplace of people from
different races, cultures, and backgrounds.

CAPABILITIES
4. Impact on Performance
A current trend in corporate

information systems/ technology is the increasing use of the
internet for marketing, intranets for internal communication,
and extranets for logistics and distribution.
INTRANET is an information network within an organization
that also has access to the external worldwide Internet.
EXTRANET is an information network within an organization
that is available to key suppliers and customers.
5. Supply Chain Management
- is the forming of
networks for sourcing raw materials, manufacturing products
or creating services, storing and distributing the goods, and
delivering them to customers and consumers.

CAPABILITIES
Evaluate people and partners in AirAsia
The AirAsia Team have highly competitive and attractive compensation

packages.
In order to provide customer excellent service, AirAsia arrange a
series of training course to their in-house flight attendant. The
training courses include awareness on safety standards, aviation
terminology, in flight service procedures, product knowledge and so
on.
AirAsia chose many kinds of field partners as their complementors.
Their partnership can divide into two main kinds: direct partners and
indirect partners.
Direct partners have strong relationship with the airline, for example,
hotels, travel agencies and so on. And indirect partner included
Facebook, Twitter Koolred and Youtube.
AirAsia is company which rely on Internet a lot so with those
communities, AirAsia can build strong connection with their customers
THE STRATEGIC AUDIT : A CHECKLIST FOR

ORGANIZATIONAL ANALYSIS
STRENGTHS AND WEAKNESSES (SWOT)
When all the factors related with
internal
analysis
ascertained
(management,
marketing,
financial
and
operation/production),
the
organisation is then able to see
its position more clearly. In
addition, the companys strengths
and
weakness
can
also
be
identified.
THE STRATEGIC AUDIT : A CHECKLIST FOR

ORGANIZATIONAL ANALYSIS
AirAsia SWOT Analysis
Strengths
Low cost operations
Fewer management level, effective, focused and aggressive
management
Simple proven business model that consistently delivers that lowest
fares
Penetrate and stimulate to potential markets
Multi-skilled staffs means efficient and incentive workforce
Single type fleet minimize maintenance fee and easy for pilot dispatch
Weaknesses
Service resource is limited by lower costs
Limited human resources could not handle irregular situation
Government interference and regulation on airport deals and
passenger compensation
Non-central location of secondary airports
Brand
is vital for market position and developing it is
always a
Company Logo
www.themegallery.com
SYNTHESIS OF INTERNAL FACTORS

INTERNAL FACTOR ANALYSIS SUMMARY (IFAS)
LOGO
Thank You !
Click to edit company slogan .
INTERNAL STRATEGIC
FACTORS
Strength
Weakness
Low cost carrier
Service resource is limited by

lower costs
First mover advantage (first

low cost airline in Asia)
Limited human resources
More seats per aircraft
Regulation on airport
Single type fleet minimize

maintenance fee
Complaints from customers

(flight delays)
Reduced staff numbers

Brand name
RESOURCES, CAPABILITIES,
COMPETENCIES
Resources
Constructive and supportive management

Highly skilled employees
Capabilities to reduce cost
Capabilities
Quick turnaround time

Low-cost short haul
High rate aircraft utilization
Competencies
The strategic decision in using one type of

aircraft
The synergy between AA management and its
employees
The capabilities themselves
BUSINESS MODEL
VALUE-CHAIN ANALYSIS:
KFC
VALUE-CHAIN ANALYSIS:
AIR ASIA

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LOGO

BPMN 6023 STRATEGIC MANAGEMENT

Why Do an Internal Analysis?

It is the only way to identify an organizations

Its needed for making good strategic decisions

Critical strength and

Concerned with identifying and

Tacit knowledge- knowledge that is not easily

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

Who are our Customer? in terms of market, product,

refers to the particular

3. Product Life Cycle

-is a graph showing time

plotted against the monetary sales of a product as it

4. Brand and Corporate Reputation

SCANNING FUNCTIONAL RESOURCES AND

Market Position and Segmentation - Who are our Customer?

SCANNING FUNCTIONAL RESOURCES AND

refers to the particular combination

of key variables ( 4Ps :Product, Place, Promotion and Price);

SCANNING FUNCTIONAL RESOURCES AND

Product Life Cycle -is

a graph showing time plotted against the

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

To Identify a Companys Strengths and Weaknesses from the

Question concerning the financial position of the company, its

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

- concerned with engineering,

SCANNING FUNCTIONAL RESOURCES AND

In the corporate planning process, it is generally assumed that incremental progress in

SCANNING FUNCTIONAL RESOURCES AND

unit production costs

SCANNING FUNCTIONAL RESOURCES AND

AirAsia has fostered a dependency on Internet technology for its operational

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

SCANNING FUNCTIONAL RESOURCES AND

Virtual Teams - groups of geographically or

SCANNING FUNCTIONAL RESOURCES AND

3. Quality of Work Life and Human Diversity