PG III-Organisational Appraisal 2003

8/8/2019 PG III-Organisational Appraisal 2003

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Environmental AppraisalEnvironmental Appraisal


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Characteristics of EnvironmentCharacteristics of Environment Environment is complex: It comprise of

surroundings, external subjects, influences thataffect the organization

Dynamic: Continuous change take place

(shape, size and character) Multi faceted: Ex, new development is taken

as opportunity by some organization whileother consider it as threat.

Environment has far reaching impact:growth of industry and profitability greatlydepend on the changes taking place in theexternal environment


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Environmental AppraisalEnvironmental Appraisal

y External environment: factors outside the

organization which provide opportunity

and pose threatto organization

y Internal environment refers to the factors

with in the organization which enhances

strength and minimizes Weakness.


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SWOTSWOT

y Opportunity: Favorable conditions which

strengthen/ consolidates organization

position.

y Threat: Unfavorable org. environment

creating risk for organization ex: newcompetitors


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y Strength: Inherent capacity of an

organization which has strategic

advantage over its competitors. Ex:

superior R&D

yWeakness: Inherent limitation or

constraints creating strategic disadvantage

ex: overdependence of single product lineis risky for a company in crisis time.


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Factors for environment appraisalFactors for environment appraisal

y To draw the clear picture of opportunitiesand threat, necessary to appraise the

environment

Strategist related factor: Since strategist plays

a central role formulation of strategies.Their

characteristic such as age, education,

experience, motivational level, style

Organizational related factors: Nature of

business, size & complexity and market nature

Environmental related factors: Nature of

environment such as: complexity, volatility and

diversity.


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Step 1: Environmental ScanningStep 1: Environmental Scanning

y The process by which organization

monitor their relevant environment to

identify opportunity & threats affecting

their business:

Event: Important and specific occurrence in

environment area like gas leakage in union

carbide Trends:These are the general tendencies or

course of action along which event takes

place ex: focus on safety measures


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y Issues:These are the current concern

arising in response to event & trend ex;

event arising of environmental pollution

y Expectations:These are the demands

made by interested groups with respond

to issues Ex: general public expects Govt.

to make the legislation/ rules & regulationabout safety measures in public interest


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Organizational Appraisal


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REQUIREMENTS FORREQUIREMENTS FOR

ORGANIZATIONALORGANIZATIONALAPPRAISALAPPRAISAL

Organization capability- Capacity & ability to use distinctive

competencies to excel in a

particular field

- Ability to use its S & W to exploit O

& T in its external environment

Organization resources

- Physical & humancost, availability - strength / weakness


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ORGANIZATIONALAPPRAISALORGANIZATIONALAPPRAISAL

Organization behavior

Identity character of an organization

leadership, Mgt. Philosophy, values, culture, Qly

of work environment, Organization climate,

organization politics etc.Resource Behavior

Distinctive competence - Any advantage a company has

over its competitor- it can do something which theycannot or can do better- opportunity for an organization

to capitalize - low cost, Superior Quality, R&D skills

etc.


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METHODS & TECHNIQUES USEDMETHODS & TECHNIQUES USED

FORORGANIZATIONALAPPRAISALFORORGANIZATIONALAPPRAISAL

Comprehensive, long term

Financial Analysis - Ratio Analysis, EVA,ABC

Key factor rating - Rating of different factorsthrough different questions

Value chain analysis

VRIO framework


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METHODS & TECHNIQUES USED FORMETHODS & TECHNIQUES USED FOR


BCG, GE Matrix , McKinsey 7S

Balanced ScorecardCompetitive Advantage Profile

Strategic Advantage profile

Internal FactorAnalysis Summary


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Organizational Capability Profile (OCP) - Weakness(-5),

Normal(0), Strength(5)Financial Capability Profile

(a) Sources of funds

(b) Usage of funds(c) Management of funds

Marketing Capability Profile

(a) Product related

(b) Price related

(c) Promotion related

(d) Integrative & Systematic


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Operations Capability Factor(a) Production system

(b) Operation & Control system

(c) R&D system

Personnel Capability Factor(a) Personnel system

(b) Organization & employee characteristics

(c) Industrial Relations

General Management Capability

(a) General Management Systems

(b) External Relations (c) Organization climate


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EXAMPLES OF ORGANIZATIONALEXAMPLES OF ORGANIZATIONAL

CAPABILITYPROFILECAPABILITYPROFILE

Financial Capability

Bajaj - Cash Management

Reliance - high investor confidence

Marketing CapabilityHindustan Lever- Distribution Channel

IDBI/ICICI Bank- Wide variety of products

Tata - Company / Product Image


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CAPAB

IL

ITYPR

OFIL

ECAPAB

IL

ITYPR

OFIL

EOperations Capability

Lakshmi machine works - absorb imported technology

Balmer & Lawrie - R&D -New specialty chemicals


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CAPABILITY PROFILECAPABILITY PROFILE

General management capability

Malayalam Manaroma

largest selling newspaper

Unchallenged leadership - Unified, stable

Best edited & most professionally produced


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VRIO FRAMEWORKVRIO FRAMEWORK

Resource- asset, competency, skill,knowledge

e.g. patents, brand name,

y Value : Does it provide competitive advantage?

y Rarity: Do other competitors possess it?

y Imitability: Is it costly for others to imitate?

y Organisation : Is the firm organised to exploit the

resource?


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VRIO FRAMEWORK . . .VRIO FRAMEWORK . . .

y A resource is an asset, skill, competency or

knowledge controlled by the corporation.

y A resource is a strength if it providescompetitive advantage

y e.g. patents, brand name, economies of scale,

idea-driven, standardized mass production


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ETOP (EnvironmentalThreatETOP (EnvironmentalThreat

Opportunity Profile)Opportunity Profile)y Environmental Sectors

Social

PoliticalEconomic

Regulatory

Market

SuppliersTechnological

Customer preference for sports cycles,

which are fashionable

No significant factor

Growing affluence among urban consumer potential

is high

Bicycle industry a thrust area for export, industry

growth 7 to 8%, product 30%

Mostly ancillaries & associated companies supplies

parts & componentsTechnological up gradation of industry in progress

Favorable

impact

Neutral

impact

unfavorable

impact


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y This analysis helps the strategist to

understand about the various factors that

can have positive impact on the growth of

the industry

y This would further help the organization

in formulating better strategies

ETOP (EnvironmentalThreatETOP (EnvironmentalThreat

Opportunity Profile)Opportunity Profile)


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SAP (strategic advantage profile)SAP (strategic advantage profile)

y Based on the details ofOCP it is easy to

prepare SAP.

y SAP provide a picture of critical areas

which can have a relationship of the

strategic posture of the firm in the future

y In this upward arrow denotes Strength,

denotes weakness. Denotes neutralposition.


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SAP (Strategic Advantage Profile)SAP (Strategic Advantage Profile)

Capability factor Competitivestrength and weakness

Finance High cost of capital

Marketing Fierce competition in the industry, companyposition is secure

Operation plant and machinery in excellent condition,

ancillaries & associated parts are available

Personal quality of managers and workers

comparable with that in competitive companies

General Management sound and proactive decision making


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Significance ofSAPSignificance ofSAP

y SAP indicates that strategists initiate

action to cove the gaps and use the

companys strength with respect to the

environmental threats and opportunities(ETOP)

PG III-Organisational Appraisal 2003

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