THE INTERNAL ORGANISATION

weaknesses >>> strengths >>> core competencies >>> competitive advantage

an organisation's strategies have to be designed to improve on a firm's building

are a firm's strengths that cannot be easily matched or imitated involves taking advantage of core competencies

- -
weaknesses >>> strengths >>>
an organisation's strategies have to be designed to improve on a firm's

-
core competencies >>> competitive advantage
building

are a firm's strengths that cannot be easily matched or imitated involves taking advantage of core competencies
Internal Au it
requires gathering and assimilating information about an
organisation's management, marketing, finance/accounting,
production/operations, research & development (R&D) and
management information systems (tv1 IS) and provides more
opportunity for employees to understand how their jobs,
departments and divisions fit into the whole organisation
�ESOURCE BASED VIEW
• It is an approach to competitive advantage, where
internal resources are regarded to be more important
than external factors
• its focus is towards three all-encompassing categories -
physical resources C:,, human resources• and
organisational resources 8 measured in terms of a set of
empirical indicators:
Orare
(i) hard to imitate
� not easily substitutable J
• valuable

...
• Outsoutce,
 Value Chai� A�alysis refers to a process
Firm Infrastructure The Value Chain whereby an organisation determines the
Porter 1985 cos s associat n w·t ,rg sat on1I
Human Resource Management c•ivities from purchasing raw materials
to manufacturing products to marketing
Technology Development the products. It consists of:
involved with
Procurement product's physical creation, sales and
distribution to buyers, and service
after the sale; activities include
0 Service, marketing/sales, outbound/
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inbound logistics and operations
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firm infrastructure, HRM,
;:;· Support Activities technologies development and
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Primary Activities procurement

BENCHMARKING
• an analytical tool used to determine whether an organisation's value chain activities
are competitive compared to rivals and thus conducive to winning the marketplace
• entails measuring costs of value chain activities across an industry to determine "best
pract· ces"
 �
• _
• integrating
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strategy and culture
Organisational culture significantly affects
JLusiness decisions and thus must be evaluated
1 9.iring an internal strategic-management

a11dit. If strategies can capitalise on cult11ral

strengths, such as a strong work ethic or
highly ethical beliefs, then management often
can swiftly and easily implement changes.
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R ANI All N
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• The functions of management consist of five basic activities:
planning, organising, motivating, staffing and controlling
• These activities are important to assess in strategic planning
because an organisation should continually capitalise on its
management strengths and improve on its management
weaknesses
• Are company objectives and goals measurable and well communicated?
• Do managers at all hierarchical levels plan effectively?
• Do managers delegate authority well?

·'�
• Is the organisation's structure appropriate?
• Are job descriptions and job specifications clear?
• Is employee morale high?
• Are employee turnover and absenteeism low?
• Are organisational reward and control mechanisms effective?
mar e 1n
• fleciM ket

the process of defining, anticipating,

creating, and fulfilling customers' needs
and wants for products and services
• Are markets segmented effectively?
• Is the organization positioned well among competitors?
• Has the firm's market share been increasing?

·'�
• Are present channels of distribution reliable and cost effective?
• Does the firm have an effective sales organization?
• Does the firm conduct market research
• Are product quality and customer service good?
• Are the firm's products and services priced appropriately?
• Does the firm have an effective promotion, advertising, and publicity strategy?
• Are marketing, planning, and budgeting effective?
• Do the firm's marketing managers have adequate experience and training?
• Is the firm's Internet presence excellent as compared to rivals?
 .
1 :ii !' [II I
�­
The functions of finance/accounting look infio decisions
that involve investment, financing and dividend
• How has each ratio changed over time?
• How does each ratio compare to industry norms?
• How does each ratio compare with key competitors?
• Where is the firm financially strong and weak as indicated by financial ratio analyses?
• Can the firm raise needed short-term capital?
• Can the firm raise needed long-term capital through debt and/ or equity?
• Does the firm have sufficient working capital?
• Are capital budgeting procedures effective?
• Are dividend payout policies reasonable?
• Does the firm have good relations with its investors and stockholders?
• Are the firm's financial managers experienced and well trained?
• Is the firm's debt situation excellent?
 Production/operations management deals with
inputs, transformations, and outputs that vary PRODUCTION&
across industries and markets. OPERATIONS
- • Are supplies of raw materials, parts,
and sub-assemblies reliable and
reasonable?
• Are facilities, equipment, machinery,
and offices in good condition?
1 [.____.�] = • Are inventory-control policies and
procedures effective?
•• 4 · Are quality-control policies and
procedures effective?
• Are facilities, resources, and markets
strategically located?
• Does the firm have technological
competencies?
Investigative activities that a business chooses to conduct with the intention of making :a discovery that can either lead to the development of new products or procedures, or t rovement of existing products or procedures.

• Does the firm have R&D facilities? Are they adequate?

•
•
•
•
If outside R&D firms are used, are they cost-effective?
Are the organization's R&D personnel well qualified?
Are R&D resources allocated effectively?
Are management information and computer systems adequate?
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• Is communication between R&D and other organizational units effective?
• Are present products technologically competitive? / �,,. •

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management
INFORMATION
A management information system's purpose
is to improve the performance of an
enterprise by improving the quality of
managerial decisions
An effective information system thus collects,
codes, stores, synthesizes, and presents
information in such a manner that it answers
important operating and strategic questions
-
-- -
-
-
• Do all managers in the firm use the information system to make decisions?
• Is there a chief information officer or director of information systems position
in the firm?
• Are data in the information system updated regularly?
• Do managers from all functional areas of the firm contribute input to the
information system?
• Are there effective passwords for entry into the firm's information system?
• Are strategists of the firm familiar with the information systems of rival firms?
• Is the information system user-friendly?
• Do all users of the information system understand the competitive advantages
that information can provide firms?
• Are computer training workshops provided for users of the information
system?
• Is the firm's information system continually being improved in content- and
user-friendliness?
• Strengths must receive a 3
or 4 rating and weaknesses
must receive a 1 or 2 rating
• TotaI weighted scores
below 2.5 characterise
organisations that are
weak internally, whereas
scores significantly above
2.5 indicate a strong
internal position
Starbucks Inc.

STRENGTHS WEIGHT RATING WEIGHTED

SCORE
S1 Starbucks (brand value of US$5.38 billion) has 21,366 company-operated and licensed stores operating in 66 countries over Americas, Europe, Middle East, 0.09 4 0.36
Africa and China/Asia Pacific, generally carrying Starbucks Coffee, Seattle’s Best Coffee, Teavana, Tazo, Evolution Fresh, La Boulange and Torrefazione Italia
Coffee brands. (INFRASTRUCTURE, PROCUREMENT,PRIMARY ACTIVITIES)
(http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoaWxkSUQ9LTF8VHlwZT0z&t=1)
S2 It promotes the Starbucks Experience, built upon the criteria of customer service, community-focused store operations and customer loyalty. 0.10 4 0.40
(INFRASTRUCTURE, TECHNOLOGY, SALES & MARKETING, SERVICE)
(http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoaWxkSUQ9LTF8VHlwZT0z&t=1)
S3 Its company-operated stores are located in high-traffic, high-visibility locations in or near a variety of settings, including downtown and suburban retail centres, 0.07 4 0.28
office buildings, university campuses, and in select rural and off-highway locations (including “drive-thrus”) with selected markets providing free wireless
internet and the use of the Starbucks Card. (INFRASTRUCTURE, MARKETING & SALES)
(http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoaWxkSUQ9LTF8VHlwZT0z&t=1)
S4 Howard Schultz purchased Starbucks in 1987, resigned in 2000 and returned as CEO 8 years later. (INFRASTRUCTURE) 0.05 3 0.15
(http://www.biography.com/people/howard-schultz-21166227#continued-success)
S5 It controls coffee purchasing, roasting and packaging, and the global distribution of coffee used in its operations; in addition, it operates farmer support centres 0.09 4 0.36
in Costa Rica, Rwanda, China, Ethiopia, Tanzania, Colombia and Guatemala, staffed with agronomists and sustainability experts under the CAFÉ (Coffee and
Farmer Equity) practices. (HRM, TECHNOLOGY, INBOUND LOGISTICS, OPERATIONS) (http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoaWxk SUQ9LTF8VHlwZT0z&t=1)
S6 Its average dividends per share growth rate has been 41.90% per year for the past 5 years. (INFRASTRUCTURE) 0.08 4 0.32
(http://www.gurufocus.com/term/payout/SBUX/Dividend%252BPayout%252BRatio/Starbucks%2BCorp)
S7 It offers health care to part-time, as well as full-time, workers; 401(k) matching contributions; annual stock grants to employees (Bean Stock); and tuition 0.07 3 0.21
reimbursement. (HRM) (http://www.cbsnews.com/news/for-some-starbucks-workers-job-leaves-bitter-taste/)
WEAKNESSES
W1 Revenue from its company-operated stores account for about 70%-80% of its total net revenues. (INFRASTRUCTURE, PRIMARY ACTIVITIES) 0.06 1 0.06
(http://www.bidnessetc.com/business/starbucks-corporation-sbux-brewing-up-to-be-a-long-term-buy/)
W2 Its products contain caffeine, dairy products, sugar and other compounds, the health effects of which are the subject of public scrutiny. (PROCUREMENT, 0.06 2 0.12
TECHNOLOGY, INBOUND LOGISTICS, SALES & MARKETING) (http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoaWxkSUQ9LTF8VHlwZT0z&t=1)
W3 Its year-on-year annual revenue change does not show consistent growth i.e. 9.27% (2011) to 13.67% (2012) to 11.98% (2013). (INFRASTRUCTURE) 0.06 2 0.12
(http://csimarket.com/stocks/singleY_growth_rates.php?code=SBUX&rev)
W4 The byproducts of Starbucks' expanded food and beverage menus (including La Boulange) are coffee brand dilution, an over-abundance of choice and execution 0.08 1 0.08
complexities (supply chain and employee training). (INFTRASTRUCTURE, HRM, PRIMARY ACTIVITIES) (http://www.fool.com/investing/general/2014/06/24/3-
glaring-problems-with-starbucks-us-strategy.aspx; http://www.cnbc.com/id/101331766)
W5 It uses scheduling software to try to match the number of workers it has in a store at any given time to the amount of business it gets and posts worker 0.08 2 0.16
schedules 1 week in advance to contain costs – resulting in smaller wages and no work/life balance. (HRM, TECHNOLOGY, PRIMARY ACTIVITIES)
(http://www.nytimes.com/interactive/2014/08/13/us/starbucks-workers-scheduling-
hours.html?hp&action=click&pgtype=Homepage&version=HpSumSmallMediaHigh&module=second-column-region&region=top-news&WT.nav=top-
news&_r=1; http://www.cbsnews.com/news/for-some-starbucks-workers-job-leaves-bitter-taste/)
W6 39% of its company-owned stores offer the recycling option; in addition, energy consumption in its company-operated stores stands at 7.1% between 2008 and 0.06 2 0.12
2013, as compared to its goal of 25% reduction by 2015; 1.8% of beverages have been sold in personal tumblers compared to a goal of 5% by 2015.
(INFRASTRUCTURE, TECHNOLOGY, PRIMARY ACTIVITIES) (http://www.starbucks.com/responsibility/global-report)
W7 Arbitration proceedings resulted in an order to pay Kraft $2.23 billion in damages plus prejudgment interest and attorneys' fees. (INFRASTRUCTURE, 0.05 2 0.10
PROCUREMENT) (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoa WxkSUQ9LTF8VHlwZT0z&t=1)
1.00 2.84