Internal Analysis

Management strategy – internal analysis
Yossi Spiegel Recanati Graduate School of Business Administration

Purpose of the class
Cover step 2b in the formulation of strategy - internal analysis Determine what the organization can do:
Structure Performance Abilities Incentives

Determines the boundaries of the firm:
Horizontal Vertical

Determine whether goals and strategies are feasible If not, what does it take to make them feasible? – organizations are not human beings! Analyze the firm’s organizational structure and performance Consider the firm’s ability and resources (what does it mean firm’s “ability?”)

Internal analysis

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Structure, performance, abilities, and incentives
Determine the Strengths and Weaknesses in SWOT
Structure:
What’s the current structure? How does it match up with the firm’s goals? What’s the optimal structure?

Performance:
How does the firm perform relative to benchmarks? How well can the firm do? How should it be evaluated?

Abilities:
What are the firm’s assets? What are its unique skills? How does the firm match up with rivals? Which new abilities should the firm develop?

Incentives:
What are the firm’s incentive mechanisms? How should the incentive mechanisms be adjusted?
Internal analysis 3

The firm’s boundaries
Horizontal boundaries:
Products Types of customers served by the firm Geographic basis

Vertical boundaries (the set of functional activities the firm performs):
Purchasing and sales Manufacturing Assembly operations Marketing Aftermarket services
Internal analysis 4

Value chain

Value chain
Definition: the sequence of functional tasks performed by the organization Viewing the production process as a value chain is helpful for analyzing value creation and for determining the vertical boundaries of the organization The organization should focus on value creating activities and buy the rest from outsiders

Internal analysis

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The Indian machine tools industry
The... [continues]

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