Means of diversification

The means of diversification can be:

a.Acquisition :It is organization taking over another operating organization through purchase of shares of ownership. The acquired organization generally keeps its separate identify.

b.Merger :It is one organization merging with another.Merger is combination of tow into one.It involves purchase of assets and liabilities.

c.Joint venture:Firms created and operated for the benefits of co-owners.It is a cooperative arrangement involving equity investment.Joint ventures are co-owned.

d.Strategic alliances :Cooperative arrangement without equity investment to contributed expertise or skills to a cooperative project.Licencing arrangement is an example.

d.Divestment :It is sale of a business to exit from the market.The reason can be.

• Poor performance.Get rid of losers.
• More value of assets in other uses.
• Finance other acquisitions.
• Finance ongoing operations.

e.Liquidation :The organization is sold in part to close down.

f.Corporate entrepreneurship :It refers to Establishment of new ventures within an existing organization.It is based on creativity and innovation.Internal sources of funds are used.It is also called entrepreneurship.

Evaluting benefits of diversification

Diversification creates value for shareholders.The benefits of diversification should be evaluated in

terms of the following factors.

· Core competency :Diversification should capitalize on core competencies that create value.

It should intangible resources it should meet the following requirements.

a.Competitive advantage:It should provide strength in relation to competitors.

b.Similar of existing business :The new business should have similarity to existing business to

capitalize on core competencies.

c.Difficult to imitate :The bundle of competencies should be difficult for competencies to imitate.

The competitive advantage should be sustainable.

· Sharing infrastructure :Infrastructure is tangible resources,such as production facilities,purchasing

procedures,marketing networks and logistics.The ability to share these resources is an important benefit of

diversification.

a.The new business should have similar needs.Resources sharing should be possible to gain benefits

of diversification.

· Balancing financial resources :Different business have different levels of cash flow.Some

businesses product more such than they need.Other need more cash that they can produced.

Diversification should efficiently balance cash flows across family of business units.It should combine cash

producers and cash users in the same corporation.It is also called portfolio management approach.

a.G matrix,GE matrix,life cycle portfolio model tools of portfolio management.

· Maintain growth :Diversification should provide continued growth.It should be a source of growth.

The growth should be in terms of sales,market share and profit.

a.Diversification should generate the best return on shareholder investment.However,high levels of

growth may lead to decline in profitability.Marginal business may need to be acquired.

· Reduce risk :Diversification should reduce risk.Risk implies awareness about alternatives

but unwariness about outcomes.A diversified business portfolio can reduced variability of overall profit.

Countercyclical business reduced risk.A bad year in one business is offset by improved performance of

other business.

· The above factors together produce synthetics affects.

Diversification

Diversification is a corporate level strategy.It takes the organization away from its existing and products.It exploits core competencies in new business.The aim is to create value for shareholders with better returns and high risks.It can be of two forms.

a.Related diversification :It is within the industry.Existing skills and facilities are shared.For example,Unilever is diversified in consumer goods industry in similar areas.

• Vertical integration :Backward or forward integration into adjacent activities of current business.
• Horizontal integration :Integration into activities which are competitive or complementary with present activities.It entails moving into more than one industry.

b.Unrelated diversification :It is moving beyond the industry in new business areas.It can be in new markets or already existing markets.It builds a portfolio of unrelated business.
Advantages of vertical integration

• Cost saving through economics of scale.
• Added technological capabilities.Better coordinated operations.
• Increased differentiation capabilities for products.
• Increased certainly in supply of inputs.
• In ceased profitability.Reduced costs of buying and selling.

Disadvantage of vertical integration

1. Increase risk through

• Added capital investment.
• Looking up resources.
• Vested interests in protecting present technology and production facilities.

2.Over dependence on in house sources of supply.
3.Problem of balancing skills and capacity in value chain.
4.Radically different skills and capabilities may not be needed.
5.Reduces flexibility.Outsources may not be possible.
6.Difficulties arise in integrating various specialisations.

Strategies within grand strategies

a.Stability strategy

• No change strategy:Doing nothing new.
• Pause strategy:Moving with caution.Moving after rest.
• Profit strategy:To sustain profitability.

b.Expansion strategy

• Concentration strategy:Specialization in one activity.The example is fast food chains.
• Integration strategy :Combination activities,vertical or horizontal.
• Diversification strategy :Change in business definition in terms of developing,markets and functions.
• Cooperation strategy :Competition through competition among rival firms,e.g.mergers,acquisitions,joint venture,strategic alliances.

c.Retrenchment strategy

• Turnround strategy :Reversing a negative trend.
• Divestment strategy :Sale of a portion business.
• Liquidation :Closing down by selling assets.

d.Combination strategy

• Simultaneous strategy :Applied same time in different business.
• Sequential strategy :Applied at different time in same business.
• Simultaneous strategy :Combination of both.
  

Strategy alternative at corporate level

Corporate level strategies aim to be maximize stockholder value.Corporate level alternative strategies can be :
a.Stability strategy :This strategy this pursued relatively stable environment.The organization is the market leader.There is on change in products,markets and functions.
Benefit

• It is less risky.
• It is easy to pursue.Routines are not distributed.
• The organization is doing well and stays successful.
• It is action oriented.Manager do not consider alternative.
• Inefficiencies are avoided.
• Control of business can be maintained.

b.This strategy is pursued in highly competitive environment new product.Markets and functions are added.
Benefits

• Expansion is essential for long term survival and growth in changing environments.It facilities growth in size.
• Effectiveness results from expansion.
• High risk products reward.
• Monopoly power can gained by expansion and control through increase side.
• Experience curve and scale of opportunities Can provides strategic advantage.

c.Retrenchment strategy :The strategy is pursued in threatening environment.Products,market and functions are reduced.
Benefit

• The organization is currently not doing well.Greater returns can be gained in other opportunities.
• The organization can put its house in order to improve its performance.profit can grow.Tax advantages can be taken.
• Stakeholder pressure to improve performance can be deals with.

d.Combination strategy:This strategy is pursued in changing environments.The organization has multiple business units.It simultaneously uses combinations of stability,expansion and retrenchment strategies to different parts of the organization.
Benefit

• This strategy is useful to large many environment.
• This strategy is adaptive to many environments.
• It is useful in periods of economic transition.
• This strategy is not easy to use.
  

Identify strategic options

Strategic options are strategic alternatives.They are carefully identified.They can be for:
1.Strategic :

• Grand strategic :In terms of stability,expansion,retrenchment and combination.
• Market oriented strategies :In terms of low-cost leadership,product differentiation and market focus.
  

2.Directions :The options for directions for strategy development can be.

• Protect /build :Through consolidation or penetration home market.
• Product development :develop new products for home market.
• Market development :Offer existing products in new markets.
• Diversification :Going away from existing markets and production.

3.Methods:The options for methods of strategy development can be :

• Internal development :Developing new products and new market.
• Mergers and acquisitions :Taking over ownership of other organizations.
  

• Joint development and strategic alliance :Partnership tie-ups between organizations to jointly achieve mutually beneficial strategic objectives.
  

Identifying critical success factors

Critical success factors are from specific.They can be identified through:

• Identifying success factors for key result areas of an organization.
• Managerial rules of thumb based on judgement and practical experience.
• Organizational success stories about what led to success in the past bin key result areas.
• Creative technique such as brainstorming.Delphi technique etc.
• Export opinion about critical success factors.
• Changes in environment.

Success of critical success factors:

• Industry characteristics :CSFs are generally industry specific.For example,pricing and product mix in supermarket and load factors in airlines.
• Competitive position :It is an relation to competitors.For example,dominant position of IBM in computer.
• External environment :Change in external environmental situation can allow CSFs to emerge.For example,energy availability.,
• Organizational development :Internal developments in the organization can also give rise to CSFs.Recruiting executives is a CSF for a firm whose key executives have left.
  

Critical success factors

Critical success factors are strategic factors.They are crucial for the success of an organization.They must be carefully identified for objectives setting and strategy strategy formulation.Strategic decision making is guide by them.Strategic management should consciously look for critical success factors.Management must understand them in order to be successful.They are essential for gaining competitive advantage.
Critical success factors are sources of strength for an organization.They are organization specific.They can be :

• Unique physical resources :Ownership of natural resources,hi-tech planets and equipment.
• Important expertise :Technological know-how,e-commerce capability.It generally varies from industry to industry.
• Valuable human resources :Competent,experienced,motivated,goodwill customer loyalty.
  
• Unique intellectual resources:Valuable brand,patent,trademark,goodwill,customers loyalty.
• Strategic alliances :Global network for sharing resources,capabilities and core competencies to pursue mutual interests.Important franchising contracts.
• Competitive capability :Market leadership,product innovation,high quality promotional talents,distribution networks,information communication systems,effective customers service,strong financial position,cost advantage.
  

Organizational norms analysis

Meaning :Organizational norms are acceptable standard of behavior within an organization.They are informal rules of behavior.They provide order to organizational activities.They influence the behavior of employees.Conformity to norms is a powerful force in the internal environment of an organization.

Types :Organizational norms can be of the following types:

• Performance norms :They related to time worked,jobs done,level of output and latencies etc.
  
• Appearance norms :They regulated appearance of individual employees.They related to dress,loyalty,to organization etc.
• Social arrangement norms :They regulated social interactions in the organization.They related to friendship,social games,eating lunch etc.
• Resources allocation norms :They regulated allocation of resources.They related to pay,Assignment etc.

Sources :Organizational norms develop gradually from:

• Past situations :Past experiences of managers and employees carried over from past situations.
• Critical incidents :They established precedent and become organizational norms.
• Conscious decisions :Organizational decisions serve as norms.They are explicit statement.

Purposes :Organizational norms serve the following purpose :

• Survival :Norms facilities organizational survival.
• Behavior predication :Norms increase the predictability of the behavior of employees.
• Problem reduction :Norms reduce embarrassing interpersonal of employees.
• Identify :Norms provide a distinctive identify to the organization.
  

Strategic implications of SWOT matricx ,advantage and disadvantage

The SWOT matrix can be used as matching tool development strategies.They can be :

• 1.So strategies :Internal strengths are used to take advantage of external opportunities.This is the strategy desired by all organization.

• 2.Wo strategic :Internal weakness are overcome by taking advantage of external opportunities .

• 3.St strategic :Internal strategic are used to avoid external threats.

• 4.Wt strategic :Internal weakness are minimised and external threats are avoided for severally.

Advantage :

• An opportunities has no value unless resources are available to take advantage of it.SWOT analysis facilities the finding strategic fit between external opportunities and internal resources.
• It cam be used to invest in weakness to make them competitive.Threats can also be avoided.
• It is the ens sens of strategy formulation.Alternative strategies can also be formulated .
• It can be used for finding a niche to take advantage of market opportunities.
• IT helps organizations to adapt to environmental changes.

Disadvantage :

• It generates lengthily list of opportunities,threats,strengths and weakness.
• It does not indicate priorities.
• The same factors can be placed in two categorises,for example,student number is both a strength and weakness for Tribhuwan University.
• It has no link to strategy implementation.
  

SWOT analysis

Strengths,weakness,opportunities,threats analysis is done to understand the external and internal environment of an organization.The forces in the external environment provide opportunities and threats.
The forces in the internal environment provide strengths and weakness.

• Strength:It is something the organization does well relative to competitors.It arises from resources and competencies available in an organization.It create strategic advantage.
• Weakness :It is something the organization does poorly relative to competitors.It arises from deficiency in resources and competencies.It creates strategic disadvantage.
• Opportunity :It is the major favorable situation in an organizations externally environment.It provide position superiority in relation to competitors.
• Threat :It is a major unfavorable situation in a organization's external environment.It provides position of inferiority in relation to competitors.

Through SWOT analysis internal strengths can be matched with internal opportunities to gain strategic advantage.Similarly,internal weakness can be corrected and external threats can be avoided.The aim is to product a good fit between resources capability and external opportunities.SWOT analysis

Financial analysis

Financial analysis is the use of financial figure for assessing financial strengths and weakness.The financial figure are contained in financial statements consisting of balance sheet,income statement,and cash follow statement.
Financial analysis examines relationship between two numbers to measure financial soundness,profitability,and efficiency.It is a valuable part of SWOT analysis.
Tools of financial analysis
a.Ratio show relationship between figure for evaluating financial performance.They identify strengths and weakness in financial performance.The popularly used ratios for financial analysis consist of:

• Liquidity ratios :The measure ability to pay back short term debts. Current ratio is a good indicator of liquidity.It is an important indicator of risk.
• Profitability ratios :They measure the overall efficiency of operations.These ratios express profits as percent of sales or total assets.
• Activity ratios :They measure the efficiency in resources use of activities related to manufacturing,marketing,and inventory.
• Leverage ratios :They measure the efficiency ability to meet long term financial obligation in terms of debts.They are also known as solvency ratios.They deal with capital structure.

b.Economics value added :It defines profitability in terms of the return on capital above the cost of servicing the capital employed.It is the wealth created for owners.It is based on the idea that earning should exceed the cost of capital investment.
This tool in useful to identify addition to assess strengths and weakness.

• Activity based costing :It identify specific activities and assigns costs to activities responsible for creating cost drivers.It keeps tab on the costs within each activity.It identifies cost drivers.They are factors are that cause costs.It also estimates costs of same activities of the rivers.This tool is useful to identify cost drivers for assessing strength and weakness .
• Financial analysis is a convenient and reliable basis for assessing strengths and weakness.But financial statements have limitations.This limits the strategic use of financial analysis.
  

Resources development matrix

Resources have been a strategic important in organizational analysis.they can be ;

• Available resources :They are developed resources into various functions of the organization.They are physical,human,financial and intellectual resources.
• Threshold resources :They are needed to stay in business.Their need tends to rise with time.
• Unique resources :They are valuable,rare,no-substitutable and costly to imitate.

Resources development assessment is used to judge:

• Need to change current resources to reach threshold level for staying in business.
• Requirements of unique resources to sustain strategic resources.
• Combination of unique resources and core competencies.It is used to again strategic advantage.This is the desired combination.
• Combination of unique resources and threshold competencies.Unique resources are freed up to invest in functional activities that provide core competencies.
• Combination of threshold resources and core competitors.More resources are deployed in functional activities that provide core competitors.
• Combination of threshold resources and threshold competencies.Environmental changes have made the resources base redundant.Such resources are disposed of.This is the worst scenario.
  

Value chain analysis

An organization can create strategic advantage by managing its value chain.A value chain is a set of inter linked value creating activities performed by an organization.These activities being with inputs,go through processing and continue up to outputs marketed to customer.It is concerned with producing and delivering products to customers.
Value chain analysis is helpful in understanding how value is create or lost.The focus of value chain analysis is to examine the organization in the context of a chain value creating activities.It is internal to the organization.
Prof. Michael Porter developed the value chain concept.It identifies two types of activities for an organization.

1.Primary activities :
They are directly related to the creating or delivery of the product to the customer.They consists of five sub-activities.

• Inbound logistic :Receiving and storing raw materials;material handing,stoke control,material transport.
• Operations :Converting raw material into finished productive manufacturing,packaging,assembling,testing.
• Outbound logistics :Order processing and physical distribution;collected,store and distributed products to customers.
• Marketing and sales :Pricing,promotion and selling products to satisfy customer needs.
• Service :Installation,repairs,spare and training.They enhance or maintain value of product.

2.Support activities :They are provided to sustain the primary activities.They consists of four sub-activities.

• Procurement :Activities related to processes for purchasing inputs.
• Technology development :Activities related to acquiring new technologies and research and development for innovation.
• Human resources management :Activities related to acquisition,development,utilization and maintenance of human resources.
• Infrastructure :Activities related to infrastructure building,such as strategic planing,quality control,accounting,finance,information management,organization design.

Cost and imitation

1.Factors that make imitation costly

• Unique historical conditions :They contributed to unique evolutionary pattern of growth for a particular organization.Unique location,patents and mineral rights are example,Disney's Mickey Mouse.
• Causal ambiguity :This occurs competitors are unable to understand the foundation of strategic advantage for an organization.
• Social complexity :Complex social factors,such as interpersonal relationship,trust,friendship and reputation make imitation costly.
• Economic deterrence :Scale sensitive products that involve large capital investment make imitation costly.

2.Factors that make imitation easy :

• Transparency :It is the speed with which competitors can understand the foundation of strategic advantage.
• Transferability :It is the ability of competitors to together resources and competitors ti imitation strategic advantage transfer of technology facilities limitation.
• Substitutable :If no substitutes for resources and competencies exit,strategic advantage is imitable.
  

Cost and imitation

Concept of strategic advantage and core competencies

Strategic advantage is competitive advantage.It is gaining advantage over competitors.It is based on internal strengths of the organization.
Combination of unique resources and core competencies determine strategic advantage.

1. Unique resources are valuable,rare,costly to imitate and non-subsistence's resources.They are the primary source of strategic advantage.
2. Core competencies are organization's well performed activities.They are capability factors central to organization's strategy.The organization does them well compared to other internal activities.They generally reside in people and other functions.Example of core competencies are :

• Speed in developing new products.First in the market.
• Skills in inter gating multiple technologies to manufacture high technology systems and network.
• Expertise in developing information communication technology system and networking.
• Low cost structure.
• Better capability in after- sales service.

Distinctive competency :It is something the organization does well relative to competitors.Core competencies can become distinctive competencies.
3)Unique resources and core competencies represent critical success factors for an organization.They help organization to excel in outperforming competitors.They are combined to gain strategic advantage.

General management factors

Management gets the jobs done through people to achieve objectives.The strengths.The strengths and weakness of general management are analysed in terms of :

• Effective system for strategic planing and management.
• Control,reward and incentive system for managers geared to the achievement of objectives.
• Entrepreneurial orientation and propensity for risk taking.
• Good report with stakeholders,such as government,society,employees,customers,supplies etc.
• Favorable corporate image and prestige.
• Development oriented organizational cultural,positive organizational climate.
• Political process used for consensus-building in organizational interest.Effective conflict management.
• Effective management of organizational change and development.
• Healthy organizational climate
  

Finance and accurding factors

Finance is concerning with acquisition,utilization and distribution of financial resources.Financial strengths and weaknesses are analysed in terms of the following capability factors :

• Strong financial performance.Availability of funds for growth.
• Access to financial resources;short term and long term;debt and equity.
• Amicable relationship with financial institutions.
• High level of credit worthiness,high credit rating.
• Efficient capital budgeting system and cost control system.
• Low cost of capital compared to competitors.
• High level of shareholder's confidence.
• High price earning ratio;consistency in dividend payout.
• Effective financial control system.
• Tax benefits due to various government policies and planing.
• Accounting system:recording,analysis,interpretation ,computerization.
• Profit planing and control.
  

Human resources factors

Human resources are strategic resources.Competent human resources need to be acquired,development,utilized and retained.Their strengths and weakness are analysed in terms of the following capability factors.

• Genuine concern for human resources management.
• Efficient and effective human resources management systems.
• The organization perceived as a fair and model employer.Effective incentive system.
• Excellent training and development opportunities.
• Congenial working environment.
• Highly satisfied and motivated workforce,effective incentive system.
• High level of organizational loyalty and commitment.
• Specialised skills of employees,important expertise.
• Low level of absenteeism and turnover.
• Safe and enabling working conditions.
• Harmonious labour relations.
  

Marketing factors

Marketing satisfaction needs of target customers to achieve objective.Its strengths and weakness are analyzed in terms of the following factors:

• First in the maker for new products.Variety and quality of products.Product life cycle management effectiveness.
• High market share.Effectiveness of segmentation.
• Low prices compared to those of similar products in the market;pricing flexibility.
• Price protection due to government policy.
• High quality customer service and relationship.
• Cost effective distribution system,control over channel.
• Effective promotion strategy and focused positioning.
• High profile advertising with creatively.
• Favourable company and product image .
• Effective marketing management information system.
• Adaptation to change in environment and customer needs.
  

Production/operation factors

Production transforms input into output.Its strengths and weakness are analyzed in terms of the following capability factors.:

• High level of capability utilization.Economics of scale.
• Favorable plant location close to row materials and markets.
  
• Rich planet portfolio.
• High degree of integration,both backward and forward.
• Reliable sources of supply.Amicable supplier relationships.Outsourcing.Ownership of raw material sources.
• Effective control of production costs.Low cost provider.
• Existence of good inventory control system.Just-in-time inventory management.
• State of the art technology.
• Strategic alliances through technical collaboration with reputed forms aboard.
• Total equality management.High quality provider.
• Proper maintenance with minimum of downtime.
• Information management in terms of accessibility,dissemination,use,security,and linkages with suppliers.
• Computerization and software development.
• Lower cost of operation.
  

Synergistic effects

Synergy means that the whole is great that the sum of parts.It makes 2+2=5.
Systems thinking result in synergy.It looks at the organization as a unified whole composed of interacting and interrelated subsystems.Functional activities,such as marketing,finance,operations,human resources and development are subsystems of an organization.Too much emphasis on a single activity reduces synergy.
Internal environment appraisal should consider organization in totality to see the "big picture"to achieve synergetic effects.Units become more productive together than endependently.

Synergistic effects emerge from :

• Cost saving :Cost economics to the organization.
• Elimination of duplication facilities.
• Effective use of available resources.

Synergetic effects are measured in terms of effects on functional activities.

• Marketing synergy :It occurs when existing,price,place,promotion support each other.Compatibility of existing product market with new product market.
• Production synergy :It occurs when new production use existing production facilities,technological skills and human resources capabilities.
• Research and development synergy :It occurs when existing R&D facilities can be used for development of new production.
• Financial synergy :It occurs when increased net revanue can be gained for a given level of investment or a decrease level of investment is required for a given level of earning.

The combination of organizational resources,Organizational behavior and strengths/weakness lead to synergistic effects.

Assess strengths and weaknesses

Assess strengths and weakness of key capability factors.
1)Assess strengths and weakness

The strengths and weaknesses of key capability factors are assessed .

• Strength is something the organization does well relative to competitors.
• Weakness is something the organization does poorly relative to competitors.

The contribution of each key capability factors in achieving objectives serves as the basis for assessing its strengths and weakness.Contribution can be assessed in terms of past result comparison with standards,and bench marketing with the performance of competitors.

• Unique resources are prime sources strengths.Well performed functional activities also provides strengths.

2)Locate strategic advantage :Strategic advantage is located.It is gaining advantage over competitors.It is a combination of :

• Unique resources :They are not possessed by competitors.
• Core competencies :They are indicated by well performed functional activities by the organization.They can result from innovation,special skills,information technology,low costs and better after sales service capabilities.They sustain strengths advantage.

3)Prepare strategic advantage profile:It is based on strategic advantage.It shows various areas of strengths and weakness of the organization.

Process of organizational analysis

Organizational analysis is a process.It consists of the following steps:

1. Identify key organizational capability factors :Capability is what an organization can be well.Capability factors of strategic importance are identified.They can be :

• Unique resources :They are valuable rare,costly to imitate and easily exploitable by the organization.They can be human,physical,financial and intellectual resources.Unique resources are identified.
• Functional capabilities :They exit in the functional activities performed.Key capability factors are identified in following function activities :

a)Financial capabilities :It can be in acquisition,utilization and distribution of funds,low cost of capital, high creditworthiness,effective financial control,tax benefits and amicable relationship etc.

b)Marketing capability :It can be high market share,low prices better quality,innovative products,distribution network,focus positioning etc.

c)Production capability :It can be high capacity utilization,economies of scale,new technology,rich peasants portfolio,total quality management,strategic alliance etc.

d)Human resources capability :It can be competent employees,specialized skills,continues development opportunities,motivated workforce,high loyalty,high relation of competent employees etc.

e)Research and development capacity :It can be pipeline of new products,competent researches,speedy adaptation technological change,adequate R&D budget etc.

Dynamics of internal environment

The dynamics internal environment consists of:

1. Organizational resources :They are bundle of tangible and intangible resources.Human,physical and financial resources ,tangible.Intellectual resources are intangible.
2. Organization behavior :It affects efficient use of resources.The factors are :management philosophy,shared values,quality of work life,organizational politics and use of power.
3. Strengths and weakness:The combination of organizational resources and organization behavior create strengths and weakness.Reduced strategic advantage.
4. Synergistic effects :They make 2+2=5.They measured ability to make good on a new product market entry.Synergistic effects emerge from cost saving.Elimination of duplicate facilities and effective use of resources.Its magnitude depends on compatibility of exiting product market with new product market.
5. Distinctive competency :Core competencies are organization's well performed activities.They become distinctive competencies when organization does them well compared to competitors.They can be result from innovation,special skills information technology,low costs,better services.
6. Organizational capabilities :Capability is what an organization can be well.It is skills at coordinating resources putting them to productive use.It is sum total of resources behavior,strengths,weaknesses,synergistic effects and distinctive competencies.It enable an organization to exploit opportunities and minimize threats.
   

Concept of organization analysis

Organizational analysis systematically evaluates the strengths and weakness of an organization.Strength is something an organization does well relative to competitors.Weakness is something an organization does relative to competitors.
Business strategy capabilities on strengths and overcomes weaknesses.
Organizational analysis is based on the scanning of the internal environment of an organization.It analyses resources and competencies.It analyses operations of the organization in terms of production,marketing,finance,human resource and development.Unique resources and core competencies are identified to locate strategic advantage.It aims for synergistic effects.

Resources
Carbonation's of resources provide strengths and weakness.The available resources in an organization can be :

• Human resources They consists of trained and experienced employees possessing competencies in term of special qualities.They have knowledge,skills,judgement,and adaptability.They have potential for development.They represent strategic resources.
• Physical resources :They consists of physically facilities,plant and equipment,production capacity,technology and ownership of natural resources.Their location determine their usefulness.
• Financial resources :They consist of capital cash,debtors,creditors and credit from financial institutions.
• Intellectual resources :They are knowledge based.They are intangible resources such as brands,patents,software,goodwill,learning organizations.They are also known as intellectual capital.They are intangible resources.

Unique resources provide value strategic advantage.They provide strengths.They possess following characteristics.

• Valuable :They provide value in the product to sustain strengths.They fulfill customer's needs better than competitors.
• Rare:They are better than competitor's resources competitors do not possess them.They are scarce and in short supply.
• Costly to imitate :They are difficult and costly for other to imitate.Competitors cannot easily copy or acquire them.Patents unique location,brand loyalty make resources imitable.
• Non substitution :The unique resources have no substitutes.The organization possessing them is able to exploit them for us its strategic advantage.

Unique resources are critical success factors for the organization.

Environmental threat and opportunity profile

Environment analysis results in a mass of information related to forces in the environment.They deal with events,trends,issues,and expectations.Structuring of environmental issues is necessary to make them meaning full for strategy formulation.
ETOP(Environmental Threat and Opportunity Profile) is a technique to structure environmental issues.ETOP involves:

• Dividing the environment into different sectors.Each sectors can be subdivided into sub sectors.
• Analyzing the impact of each sector and subsector on the organization.
• Describe the impact in the form of a statement.

Advantage of ETOP

1. It provides a clear of which sector and sub sectors have favourable impact on the organization.It helps interpret the result of environment analysis.
2. The organization can assess its competitive position.
3. Appropriate strategies can be formulated to take advantage of opportunities and counter the threat.
4. SWOT analysis (Strategic weakness,opportunities and threats.)
   

Analyzing markets

A market consists of all political customers having wants who posses ability and willingness to engage in exchange to satisfy their wants.Markets can be consumer market and institutional market sarisfied.It deals with.

1. Market power :It is the capacity of the organization to influence the behavior of competitors in the market.Such organizations tend to be the leaders in their chosen market segmenents.Market power is based on market share and market growth in chosen segment.

a) Market segmentation:A market is segmented to identify similarties and different between groups of customers.Market segmentation is the process of dividing the total market into large homegenous group of customers who share similarly needs and characteristics.The variable that can be used for consumer market segmentation can be :

• Geographic :Area,topography,climate,population dencity.
• Demographic :Age,gender,education,occupation,income,religion.
• psychographic :Life,style,personality,Buying motives.
• Behavioral :Benefits,loyality,occasions,status.

Organizations should understanad and meet the needs of customers in target segement to gain market power.

2)Market share is the share in total sales of a product during a given period in a specific market.It can be refer to industry,segment or area.Maket share can be measured in three ways:

• Overall market share :It is the sales of a specific organization expressed as percentage of total market.
• Served market share :It is the sales of a specific organization expresed as percentage of the total sales in served segments.
• Relative market share :It is the sales of a specific organization expresed as a percentage of the sales of its key competotor.Relative market share is the key sources,market share and profit.IT should be more than 100%to make a market leader.

3)Market growth :Market growth is an indication of market power.Market growth refors to all round annual growth rate in sales,market share and profits.It should be analyzed in relation to key competitors.
Opportunities in the environment and unique resources and competencies provide potencial for market growth.An organization must have high rate of market growth maintain and improve its competitive position.

Porter's five forces model

The environment analysis can be done through "five forces model".It is known as porter's diamonds.It helps to identify the sources of competition in an industry.
The forces of competition are :
1)potential entrants :The new entrants face barriers to entry.They need to overcome them to compete successfully.The barriers can be :

• Economics of scale :They require high investment to gain cost advantage.They can be in production or marketing.
• Capital requirements : Specialized technology requires high capital costs.So does scale of production and distribution.Globalization has advantages in this respect.
• Product differentiation :It can be in terms of physical factors,service,promotion,channel or image.Customers perceive the product superior in value compared to competing products.
• Access to distribution channels : Blocked access to established channels becomes a barrier to entry.Guaranteed distribution also blocks new entrants.
• Customers loyalty:High customers loyalty to brands serves as a barrier to entry.
• Retaliation :Expected retaliation by existing firms can be costly for new entrants.
• Experience :Experience provides established firms benefits terms of cost or loyalty.It makes entry difficult for a new entrant.
• Government action :Planets and trademark protection preferential trademark by government serve as a barrier to entry.

2)Substitutes :Substitutes are product of firms in other industries.They attract customers who switch products.

• Product for product substitution :One product is substitution for another product.
• Substitution of need :It is substitution of exec ting product by a new product.
• Generic substitution :It occurs when product compete for disposable income.

3)Buyer power :It is the ability of the buyer to forces down price.Buyer power is high in the following .

• Concentration of buyers:The buyers are large and buy in volume.For example,grocery relating chains.
• Large number of small supplies :Sellers are several and sources of supply are many product is standardized.
• High material cost:Material cost percentage is high in total cost.Buyers will shop around to get the best prices.
• Low cost of substitution :The cost threat of background integration by the buyer.
• Background integration :There is threat of background integration by the buyer.For example,acquisition of a supplies.

4)Supplier power :It is the ability to force price up Supplier power is high in the following circumstances.

• Concentration of suppliers :The supplier is large and sells in volume.
• High switching costs :Costs are high for buyer to switch suppliers.For example,item which is crucial to production process.
• Powerful brand :Supplier's brand is powerful and has repulsion.
• Fragmented buyers :The customers of the suppliers are fragmented.
• Few substitution :The substitutes are few for buyers to switch products.

5)Competitive rivalry :It is among firms with similar products and same customer group.

• Balance among competitors:Competitors are equal in size and capability.
• High exit barriers :It costs more get out of the industry than to stay in.
• Low switching costs :If the product is undifferentiated.
• High fix costs :High capital intensity leads to high fixed costs.
• Slow market growth :The maturity stage in product life cycle is characterized by slow growth in sales.There is competition to gain market share.
  

Potential entrants

The new entrants face barriers to entry.They need to overcome them to complete successfully.The barriers can be :

1. Economic of scale :They require high investment to again cost advantage.They can be in production or marketing.
2. Capital requirement :Specialized technology requires high capital cost.So does scale of production and distribution.Globalization has advantage in this respect.
3. Production differentiation :It can be terms of physical factors,service,promotion,channel or image.Customers perceive the product superior in value compered to competing products.
4. Access to distribution channels :Blocked access to established channels become a barrier to entry.Guaranteed distribution also blocked new entrants.
5. Customers loyalty :High customer loyalty to brands service as a barrier to entry.
6. Retaliation :Expected retaliation by exiting firms can be costly for new entrances.
7. Experience :Experience provides established firms benefits in terms of cost of loyalty.It makes entry difficult for a new entrant.
8. Government actions :Patent and trademark protection and preferential treatments by government serve as a barrier to entry of new entrants .So licensing requirements.
   

Techniques of environment analysis

The importance techniques environment analysis are :
1)Pest analysis :The pest analysis categories external environment farces into four main components.They are :
P=Political legal forces
E=Economic forces
S=Socio cultural
T=Technological forces
Pest analysis looks at the future impact of environmental.changes on organizations.The impact differs according to the nature of the specific organization.PEST analysis is concern with the analysis of external environmental forces.They are :

• Political legal :Political system,institution,philosophy.Legal framework.
• Economics :Economic system ,policies,conditions and groupings.
• social cultural :Demographic,institution,presser groups.social change and cultural factors.
• Technological :Level of technology,pace of change,technology transfer .
  

Select forecasting methods

Forecast is a systemic methods of obtaining an estimate of future.It is usually on past behavior.The methods of forecasting are :

1. Executive opinion :Executive give opinions,generally based on judgement,intuition and experience,about future environment.It is qualitative.
2. Sales forces composite :Each salesperson makes an estimate of future sales in his territory.The composite of estimates by all customers.
3. Customers evaluation :Customers are asked about there future buying intentions.Forecast in the consolidated future demand of all customers.
4. Surveys :Opinions of experts,customers and other are gathered about future environment.Questions are asked.
5. Opinion poll :Polls are conducted about opinions of stakeholder.Samples are used for opinions polls.Pooled opinions become forecast.
6. Delphi technique :Opinions of exports are pooled in varying stage.Feedback is used to develop new forecast.
7. Time series analysis :Information from time series of past in used to project the future.The assumption is that past pattern will continue in future.Trends can be found.
8. Regression modeling :Regression analysis is done to forecast future environment.Information from past in used to explore the future.
9. Econometric modeling :It consist of building sets of equations that describe a system and processing to fit the parameters statistically.Models of environment are simulated.
10. Scenario building :A time order sequence of events that have logical cause and effect relationship is contributed .The scenario is based on interrelationships among events.

Process of environmental scanning

The steps involved in environmental scanning are :

1)Identify relevant forces in the environment :Information is gathered about the following forces.

• External forces,consisting of political legal,economic,social cultural,technological factors.
• Internal forces,consisting of technological,human,financial and information resources,organizational competencies,and stakeholders expectations.

2)Determine sources of information :They are determine by top management.They can be :

• Spaying and surveillance of a legal and ethical nature.
• Personal experiences of managers,employees,salesperson.
• External sources such as banks,competitors,suppliers,customers,government.
• Special studies by exports,consultant's,researchers.
• Meetings,conferences,committees,speeches,interviews.
• Newspapers,journals,reports,books.
• Television and radio.
• Trade and industry publications.
• Government and university publication.
• Internal sources such as files,database,documents.
• Internet,website,and databases.