Identify strategic internal factors

Step 1: Identify strategic internal factors

In step 1, managers identify and examine key aspects of the organisation’s basic capabilities, limitations, and characteristics – those internal capabilities that are most critical to success in a particular industry or competitive area. Factors strategic to organisations in the fast food industry, for example, would be quite different from those strategic to organisations in the aircraft industry. A strategic internal factor for fast food businesses may be the speed at which orders can be processed. This strategic internal factor is not important at all to business organisations manufacturing aircraft.

Identify strategic

internal factors

Evaluate strategic

internal factors

Develop input for the

strategic planning

process

Figure 4.5: Step in the development of an organisation profile

Source: Smit, et al. (2013:100)

In the letter case access to the latest and most advanced technological research is a strategic internal factor.

Strategic factor can also vary between organisations in the same industry. For example, the strategic of Edgars Stores and a very exclusive woman’s boutique would be based on different internal strengths: Edgars on its strength in mass marketing, credit facilities,

extensive advertising, and specialised man agerial skills; the exclusive woman’s boutique on high quality, image, and customer loyalty.

How do managers decide which factors are truly strategic for the survival of their business organisation? To help managers with this challenging task, the following approaches have been identified.

The evaluation of functional segments

The functional approach to internal assessment concentrates on in-depth studies of the functional areas of an organisation. This would mean making a thorough analysis of its marketing, financial, production, human resources, research and development, external relations functions. In Table 4.1, the focus is on general management as one of the key internal factors in an organisation, and the factors listed have been identified as potential strengths or weaknesses. This table serves as an illustration of how one of the segments of the organisation has been assessed in terms of those factors critical to its success. According to Table 4.1, the major strengths of this organisation are clear and realistic mission statement, its policies and procedures, its integration with the other systems, and its reaction to external changes. Weaknesses in the general management function are the organisational structure and planning systems.

The value-chain approach

A second approach to identifying an organisation’s strengths and weaknesses (internal assessment) is called the value-chain approach. A mining company such as Kumba.

Table 4.1 The development of an organizational profile

Key internal factor

Potential

Strengths

And weaknesses

- ---

1. Clear and realistic mission statement

2. Organisation’s record

3. Planning systems

4. Organisational structure

5. Policies and procedures

6. Effectiveness and utilization of

control system 7. Alignment

with

organizational

culture 8. Innovative decision making

9. Integration with other systems

10. Reaction to external changes

Resources use this approach extensively in assessing their own strengths and weakness. So too do financial institutions such as First National Bank, Standard Bank, ABSA and Ned bank. The value-chain approach can be used in any type of business to assess its strengths and weakness. The value chain looks at an organisation as a chain of activities that transforms inputs into outputs that customer value. The value chain distinguishes between two types of activities in an organisation:  Primary activities;  Secondary activities.

The primary activities are those involved in the physical production (or delivery) of the product (or service). In the case of Toyota South Africa, these activities will relate to the actual manufacturing of the cars in the assembly plant and marketing and transfer to the buyer – including after-sales service. The secondary activities provide the infrastructure that The primary activities are those involved in the physical production (or delivery) of the product (or service). In the case of Toyota South Africa, these activities will relate to the actual manufacturing of the cars in the assembly plant and marketing and transfer to the buyer – including after-sales service. The secondary activities provide the infrastructure that

The value-chain approach surveys the costs across the series of activities that the organisation performs in order to determine where the organisation has low-cost advantages. In order to determine whether Toyo ta SA’s assembly line is strength to the company or weakness, Toyota SA can compare their cost of assembling a motor car to the comparable costs of other car manufacturers. If it costs Toyota R80 000 to completely assemble a mid-sized car but it costs a competitor R75 000 to perform the same activities, Toyota will consider the assembly part of the value chain as a weakness to their company.

Low cost does not have to be the only yardstick that can be used to determine Toyota SA’s strengths and weaknesses if the value-chain approach is used. Differentiation and response

time can also be used a yardsticks. Research companies often do research to determine industry standards against which business organisations can measure them. Synovate is such

a research company that determines industry yardsticks for the motor industry. For instance, the industry average for servicing a motor car in South Africa is 80.3% customer satisfaction. Nissan achieved 85.5% for their customer satisfaction. This obviously means that is strength for Nissan – something on which they can build their strategy .

General administration

Human resource management

Research and development Technology and systems Procurement

Margin

Inbound Operations Outbound Marketing After - sales Logistics Logistics

and sales service