Week 3 Lecture Internal Environmental Analysis-5

Page 1: Introduction

• Management Accounting: Focus on analyzing the internal environment.

• Course Week: Week 3

• Quote: "Just think of it as if you're reading a long text-message."

• Institution: The University of Newcastle, Australia

Page 2: Reference

• Video: I Still Call Australia Home

• Link: YouTube

Page 3: Agenda

1. Q&A session

2. Lecture

3. Exercises and presentations

Page 4: Recap

• Last Week Topics:

  • Analysis of Macro and Competitive Environments:

    • PESTEL

    • Porter’s 5 Forces

    • SWOT Analysis

  • Role of CFO in Strategic Planning

Page 5: Lecture Focus

• Current Focus: Analysing the Internal Environment

Page 6: Course Overview

• Balanced Scorecard and Performance Measurement:

  • Customer Perspective

  • Financial Perspective

  • Internal Process Perspective

  • Managing Working Capital

• Sessions Structure:

  • Session 2: Internal Environment Analysis

  • Session 3: Risk Analysis

  • Session 4: Developing Strategy

  • Sessions 5-12: Various strategy implementation aspects

Page 7: SWOT Analysis Overview

• Components:

  • Strengths

  • Weaknesses

  • Opportunities

  • Threats

• Focus: Understanding and analyzing internal and external influences on an organization.

Page 8: SWOT Definitions

• Strengths: Enhancements to competitiveness.

• Weaknesses: Factors that reduce competitiveness.

• Opportunities: Positive external factors.

• Threats: Negative external factors.

Page 9: Learning Objectives

1. Purpose of SWOT analysis and its link to the internal environment.

2. Sustainable competitive advantage definition.

3. Analyzing internal environment:

   • Resources for value creation.

   • Capabilities using the Value Chain framework.

   • Identifying strengths and weaknesses.

   • Core competencies using the VRIO framework.

Page 10: Shareholder Value Drivers

• Maximizing Value: Factors influencing an organization's ability to generate profit.

Page 11: Return on Equity (ROE)

• Formula: ROE = Profit / Total Assets

  • Components Explained:

    • Leverage

    • Profit Margin

    • Asset Turnover

Page 12: Competitive Advantage Factors

• Definition: A feature that makes an organization attractive compared to rivals.

• Sources: Superior performance and value for customers.

• Sustainability: Durability of competitive advantage based on resource imitativeness.

Page 13: Organization Performance

• Key Considerations: Profit from resources and capabilities depends on maintaining competitive advantage and its durability.

Page 14: Resource Types

• Tangible: Financial and physical resources.

• Intangible: Technological, reputation, culture.

• Human Resources: Skills, knowledge, and collaborative abilities.

• Value Chain Analysis Framework:

  1. Identify resources.

  2. Analyze capabilities with the Value Chain.

  3. Evaluate strengths and weaknesses.

  4. Determine core competencies.

Page 15: Resources Summary

• Types of Resources:

  • Tangible: Financial and Physical.

  • Intangible: Reputation and Culture.

  • Human: Skills and Know-how.

Page 16: Capabilities Defined

• Definition: An organization’s ability to deploy resources.

• Analysis Purpose: Evaluate quality and necessary capabilities for strategy execution.

Page 17: Value Chain Framework

• Definition: Combines all activities from raw materials to customer delivery.

• Grant et al. (2014): Activity analysis for strategy implementation.

Page 18: Value Chain Activities

• Primary Activities: Directly involved in providing goods/services.

  • Inbound logistics, Operations, Outbound logistics, Marketing/Sales, After-sales.

• Support Activities: Enhance primary activities.

  • Administrative, HR management, Technology development, Procurement.

Page 19: Competitive Advantage Through Value Chain

• Efficiency in Activities: Managing workflows can create competitive advantage.

• Capabilities per Functional Area: Operations, Marketing, Sales, R&D examples.

Page 20: Value Chain Analysis Questions

1. Value addition from customer perspective?

2. Costs that don’t add value?

3. How can the value chain deliver extra value?

Page 21: Example - IKEA

• Strategy: Flat-pack furniture reduces assembly costs, increasing competitiveness.

• Financial Impact: Lower production and delivery costs enhance pricing strategy.

Page 22: Example - Jet Star

• Cost Management: Excluding meals keeps ticket prices low, ensuring customers pay only for required services.

Page 23: Cost of Quality Analysis Example

• Scenario: Real Toys using COQ to improve design quality of a toy robot.

Page 24: Expected Savings Calculation

• Quality Cost Savings: Total potential savings calculated from reduced inspection and defect activities.

Page 25: Net Benefit of Preventive Quality Activity

• Outcome: Expected savings versus design engineering costs to identify net benefits.

Page 26: Internal vs External Perspectives in SWOT

• Internal Analysis Focus: Strengths and weaknesses of the organization.

• External Analysis Focus: Opportunities and threats in the broader environment.

Page 27: SWOT Definitions Reiterated

• Reinforcement of definitions for strengths, weaknesses, opportunities, and threats.

Page 28: Post-SWOT Analysis Considerations

• Action Items: Immediate vs future issues.

• Leveraging strengths against threats and opportunities.

Page 29: VRIO Framework

• Core Competencies Definition: Unique capabilities optimized for competitive advantage.

Page 30: Core Competencies Characterization

• Importance of unique capabilities that enhance competitiveness.

Page 31: Clarification of Resources vs Capabilities

• Understanding: Distinction between what a firm has (resources) and what it does (capabilities).

Page 32: Qantas Celebrations

• Links to videos celebrating milestones of Qantas.

Page 33: Summary of Internal Environment Analysis Framework

1. Resource identification.

2. Capability analysis with value chain.

3. Core competencies assessment.

Page 34: Summary of Learning Objectives

• Reiteration of expected knowledge and skills by this stage in the course.

Page 35: Capabilities in Qantas

• Outlined abilities related to organizational success.

Page 36: Strengths and Weaknesses of Qantas

• Listing: Key strengths and weaknesses in the organization.

Page 37: Core Competencies Assessment

• Evaluation of Qantas’s unique capabilities according to VRIO.

Page 38: Readings and Exercises

• Designated chapters for analysis on resources and competitive advantage.

Page 39: Q&A Session Roundup

Page 40: Questions Section

Page 41: Conclusion

• Thank You: Acknowledgment from The University of Newcastle.