Steps for Corporate Capability appraisal
In
order to analyze the capabilities of an organization the following procedure
can be followed:
1)
Identification of key areas In the first step the key areas related to the
organizational capabilities like marketing, finance, production, personnel etc.
are identified. Then to find out the corporate capabilities it is necessary to
analyze the performance of each area.
2)
Grading of areas
On
the basis of relative significance of different factors it is important to rank
or grade the different areas. Equal values cannot be assigned to different
areas.
3)
SWOT
The
SWOT analysis is crucial for analyzing the organizational capabilities. It is
very important to determine the position of the organization in the market.
With the help of the SWOT analysis the overall contribution of each area is
analyzed.
SWOT Analysis
·
Identify & classify firm’s
resources-S&W
·
Combine firm’s strength into specific
capabilities – Corporate capability- may be distinctive competence
·
Strategy that best exploits the firms
resources
· Identify resource gaps & Invest in upgrading
PROFILE OF OCP
The
OCP is drawn in the form of a chart, the strategists are required to
systematically assess the various functional areas & subjectively assign
values to different functional capacity factored & sub factor along a scale
ranging from values of -5 to +5. In orde to draft the profile, 1st identify the capability that are important to
your customer & that differentiates you from competitors & then
incorporate them in a presentation or document.
1]
Customer focus:- Your capability profile must incorporate the information
customers & prospects need, when they are evaluating your company as a
potential supplier or business partnered customers need to know about your
current capability current capability & your future direction. They want to
know that you have the technical expertise & market understanding to supply
quality products that meet their performance requirement.
2]
People:- The skills & knowledge of your people represent an important part
of your organizational capability. Describe the qualifications & experience
of key staff, together with any outstanding achievement such as awards for
innovation, involvement with industry associations or leadership in a
particular discipline, the skills of your business partners also contribute to
your capability.
3]
Resources:- Many other assets contribute to your organizational capability,
including patents, products manufacturing facilities, information systems &
distribution network. Those assets differentiate you from competitors,
particularly if they are hard to match, customize the assets to your customers
needs a customer with sites in a number of different countries.
4] Stability:- Stability is an important aspect of organizational capacity, you can build confidence in your customers by demonstrating that you have a stable management team capable of managing your business effectively.
The organization is generally divided into six
largely accepted and commonly understood functional areas. These are:
i.
Finance
ii.
Marketing
iii.
Operations
iv.
Personnel
v.
Information and
vi.
General management
The
following section deals with critical elements analyzed in the key areas of a
business for organizational capability profiling.
1. Financial
Capability Profile
The factors relate to
the availability, usages & management of funds & all allied aspects
that have a bearing on an organization’s capacity to implement its strategies.
(a) Sources of funds
(b) Usage of funds
(c) Management of
funds
The aspects related
to the availability, usages and management of funds are related to the
financial capability of an organization. These financial factors have a bearing
on an organization’s capacity and capability to implement its strategies. Some
of the factors that influence an organization financial capability are:
a) Sources of Funds :
This deals with the factors like structure of capital, procurement of capital,
pattern of financing, working capital availability, borrowing, capital and
credit availability etc.
b) Usage of funds :
Factors related to usage of funds capital structure, procurement of capital,
controllership, financing and relationship with leaders, bankers and financial
institutions.
It include factors
related to capital investment, fixed asset acquisition, current assets, loans
and advances and dividend distribution are concerned with the capability of a
firm to use its funds effectively and efficiently.
c) Management of
funds: Financial, accounting, budgeting system, management control system,
cash, inflation, credit, return and risk management, cost reduction and control,
tax planning and advantages are all the factors that are related to proper
management of the funds. All these above factors collectively shows a number of
strength and weaknes that reflects the financial capability of an organization
2. Marketing
Capability Profile
Marketing
capability factors relate to the pricing, promotion and distribution of
products or services, and all the allied aspects that have a bearing on an
organization's capacity and ability to implement its strategies.
(a)
Product related
(b)
Price related
(c)
Place related
(d)
Promotion related
(d)
Integrative & Systematic
Some
of the factors related to marketing capability of an organization are:
a) Product:
Variety, mix quality, differentiation, positioning, packaging etc are all
related to the product.
b) Price:
Pricing objectives, policies, changes, protection, advantages etc are all
related to the price of the product.
c)
Place: Distribution, transportation and
logistics, marketing channels, marketing intermediaries etc are all related to
the place of the product.
d) Promotion:
Promotional tools. Sales promotion, advertising, public relations etc. are
related to promotion of the product.
e) Integrative
and systemic factors: marketing mix, market standing, company image, marketing
organization, marketing system, marketing management information system etc..
3. Operations
Capability Factor
The
factors related to the production of goods and services and effective
utilization of material resources are categorized into operations capability of
an organization. These factors and all the allied aspects have a bearing on an
organization’s capacity and capability to effectively implement its strategies.
Some of the factors that have a bearing on an organization’s operations
capability are:
·
Production
system
·
Operation
& Control system
·
R&D
system
a) Production
system: Capacity, location, layout, product or service design, work systems,
degree of automation, extent of vertical integration etc. are all related to
the production system.
b) Operation
& Control System: Aggregate production planning, material supply, inventory,
cost and quality control, maintenance systems and procedures etc. are all
related to the operations and control system.
c)
R&D system : Personnel facilities,
product development, patent rights, level of technology used, technical
collaboration and support etc are all related to the research and development
system
4. Personnel Capability Factor
(a) Personnel
system (b) Organization & employee characteristics (c) Industrial Relations
The
factors related to the existence and use of human resources and skills are
categorized into personnel capability of the organization. These factors and
all the allied aspects have a bearing on an organization capacity and
capability to implement its strategies effectively and efficiently. Some of the
factors that influence the personnel capability of an organization are:
a)
System for manpower planning, selection, development, compensation,
communication and appraisal, procedures, standards etc. are all related to the
personnel system of an organization.
b)
Corporate image, quality of managers, staff and workers perception,
availability of opportunities for development of employees, working conditions
etc. are all related to the organizational and employee characteristics.
c)
Union management relationship, collective bargaining, safety, welfare and
security, employee satisfaction and morale etc. are all related to the
industrial relations of an organization.
5) Information Management Capability
Information
management capability factors are the factors that are related to the design
and management of the flow of information from outside into, and within an
organization for the purpose of making decisions. These factors and all the
allied aspects have a bearing on an organization’s capacity and ability to
implement its strategies.
Information
management capacity factor relate to the design and management of the flow of
information from outside into, and within an organization for the purpose of
decision-making and all allied aspects that have a hearing on an organizations
capacity and ability to compliment its strategies.
Some of
the important factors which influence the Information management capacity of
any organization are as follows.
✓
Acquisition and retention of information
✓
Processing and synthesis of information
✓
Retrieval and usage of information
✓
Transmission and dissemination
Some of
the factors that have a bearing on an organization’s information capacity and
capability along these lines are:
a) Sources, quantity, quality and timeliness
of information, retention capacity and security of information are the factors
that are related to the acquisition and retention of information of an
organization.
b)
Database management, computer systems, software capability and ability to
synthesis information are the factors that are related to the processing and
synthesis of the information.
c)
Availability and appropriateness of information formats, and capacity to
assimilate and use of information are the factors related to the retrieval and
usage of information.
d)
Speed, scope, width and depth of coverage of information and a willingness to
accept information are the factors related to the transmission and
dissemination of information
e) Availability
of IT infrastructure, its relevance and capability to organizational needs, up
gradation of facilities, willingness to invest in the state of the art systems,
availability of computer professionals and top management support are the
factors related to the integrative, systematic and supportive factors of an
organization.
6. General
Management Capability
The
factors related to the integration, coordination, and direction of the
functional capabilities of an organization towards its common goals is
categorized into general management capability factors. These factors and all
the allied aspects have a bearing on an organization ability to implement its
strategies effectively. Some of the factors that have a bearing on an
organization’s general management capability are:
·
General
Management Systems
·
General
Managers
·
External
Relations
·
Organization
climate
The
strategic management system and its orientation form part of General Management
System.
a)
Strategic management system, processes related to setting strategic intent,
formulation and implementation of strategies, evaluation system of strategies,
management information system, corporate planning system etc. are all related
to the general management system of an organization.
b)
Orientation, risk propensity, values, norms, personnel goals, competence,
capacity for work, track record, balance of functional experience etc. are the
factors related to the general managers of an organization.
c)
Influence on and rapport with the government, regulatory agencies and financial
institutions, public relations, sense of social responsibility, public image as
corporate citizen etc are the factors related to the external relationships
d)
Organizational culture, use of power, political processes introduction,
acceptance and management of change, nature of organization’s structure and
control etc are the factors related to the organizational climate of an
organization.
Two
important profile i.e. a) Organizational Capability Profile b) Strategic Advantage
Profile are prepared after following the above steps. For the purpose of
decision making and strategic planning these profiles are very important for
the top management. It represents SWOT analysis of the company in various
strategic areas. It depicts ranking of key areas and it helps in preparation of
action plans. a) Functional area profile In this a matrix is prepared for all
the functional areas of an organization along with the characteristics common
to each other. The functional area of an organization is finance, marketing,
production, human resources, research and development etc. Here the strategist
are required to systematically assess the various functional areas and
subjectively assign values to the different capability factors and sub factors
along a scale ranging from -5 to 5.Each area must be considered with respect to
what its policies and approaches should be. This approach allows the firm to
analyze the strategic deployment of funds and its strength and weakness over a
period of time as compare to those of its competitors. With the help of this
profile the strategists are in the position to identify the gaps that needs to
be corrected and the opportunities that could be used.
Examples of OCP
Some
examples of OCP from the corporates are given below:
1.
Financial
Capability
Bajaj
- Cash Management
LIC - Centralized payment, decentralized
collection
Reliance - high investor confidence
Escorts
- Amicable relation with FIS (world's top-ranked technology provider to the
banking industry)
2.
Marketing
Capability
Hindustan
Lever - Distribution Channel
IDBI/ICICI
Bank - Wide variety of products
Tata
- Company / ProductImage
3.
Operations
Capability
Lakshmi
machine works - absorb imported technology
Balmer & Lawrie - R&D
- New specialty chemicals
4.
Personnel
Capability
Apollo Tyres - Industrial relations problem ;
- General management capability
Malayalam Manaroma - Unchallenged leadership
- Largest selling newspaper
- Unified, stable
Best edited & most professionally produced
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