Organizational Capability Profile - Tools used - 1

·        VRIO FRAMEWORK

 

•          Value : Does it provide competitive advantage?

•          Resource- asset, competency, skill,knowledge e.g. patents, brand name,

•          Rarity: Do other competitors possess it?

•          Imitability: Is it costly for others to imitate?

•          Organisation : Is the firm organised to exploit the resource

 A resource is an asset, skill, competency or knowledge controlled by the corporation.  A resource is a strength if it provides competitive advantage

e.g. patents, brand name, economies of scale, idea driven, standardised mass production

The SWOT Analysis is a prerequisite for VRIO 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

Next logical steps are :

Identify firms resources- S&W

Combine firms strength into specific capabilities

Appraise- profit potential, sustainable competitive advantage, ability to convert it to a profitable proposition

Select strategy - firm’s resources& capability relative to external opportun

Identify resource gaps and invest in upgrading weaknesses

·        BALANCED SCORECARD- KAPLAN & NORTON

A method of implementing a business strategy by translating it into a set of performance measures derived from strategic goals that allocate rewards to executives and managers based on their success at meeting or exceeding the performance measures. The 4performance measures

• Customer perspective

• Internal business perspective

• Innovation & learning perspective

• Financial perspective

Balanced Scorecard is a model integrating financial and non financial measures. (Kaplan & Norton 1996) Causal link between outcomes and performance drivers of such outcomes. It translates the vision and strategy of a business unit into objectives and measures in 4 distinct areas viz.., Customer,Internal Business process, Learning and growth and Financial

Reasons for the Need of a Balanced Scorecard

1. Focus on traditional financial accounting measures such as ROA, ROE, EPS gives misleading signals to executives with regards to quality and innovation. It is important to look at the means used to achieve outcomes such as ROA, not just focus on the outcomes themselves

2. Executive performance needs to be judged on success at meeting a mix of both financial and non-financial measures to effectively operate a business

3. Some non-financial measures are drivers of financial outcome measures which give managers more control to take corrective actions quickly. (Example: controls in jet cockpit for pilot)

4. Too many measures, such as hundreds of possible cost accounting index measures, can confuse and distract an executive from focusing on important strategic priorities. The balanced scorecard disciplines an executive to focus on several important measures that drive the strategy.

PROBLEMS THAT BALANCED SCORE CARD SOLVES

✓ Unclarified vision & strategy

✓ Non – alignment of long term & short term goals

✓ Measurement issues

✓ Communication gap

✓ Excessive focus on financial parameters

✓ Non availability of feedback

·        Financial Analysis

The financial analysis tools generally used are:

o   Ratio Analysis

o   Economic value added

§  Net Operating Profit after Tax (NOPAT)

§  Weighted Average cost of Capital(WACC)

o   Activity Based Costing (ABC)

n   Activity in Value chain

n    Specific activities

 

Those who read this also read 

1.  Balanced Score Card 

2. Strategic Advantage Profile, BCG Matrix, GE Portfolio Matrix, PIMS

3. Internal Factor Analysis