Method of Analysis and Diagnosing Corporate Capabilities: Functional Area Profile and Resource Deployment Matrix, Strategic Advantage Profile
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.
The principal purpose of analysis for strategic planning is to identify the major opportunities and threats a business unit faces in the future and to identify the skills around which it can develop a strategic intelligence plan to exploit the opportunities and negotiate around the threats. Hofer and Schendel felt that the major weakness with the General Electric business screen was that it didn’t effectively depict the positions of new businesses that are just starting to grow in new industries. They suggested in 1975 that changes in basic competitive positions are easier to accomplish at certain stages in the evolution of an industry than others. The Boston Consulting Group also alluded to this with their assumption that market growth was related to life cycle and was used as the one axis on their matrix. The competitive position / market evolution matrix was developed in the late 1970s by Charles W. Hofer and Dan Schendel.
This method takes into account the key factors affecting organizational functioning. Information regarding the key factors is generally collected after a series of meetings discussions and surveys. Answers in each functional area are being closely examined with a view to rate the key factors. The relative impact of each factor (favorable or unfavorable) on a particular result is also examined using mathematical models.
Hofer and Schendel have developed this technique to make a comparative analysis of a firm’s own resources deployment position and focus of efforts with those of competitors. First the technique requires the preparation of a matrix of functional areas with common features. For e.g. focus of financial outlay, physical resources, organizational systems and technological capability.
Second a matrix is prepared showing deployment of resources and focus of effort over a period of time. This profile shows how key functional areas stand in relation to each other and as compared to the competitors with regard to deployment of resources and the focus of efforts in each functional area.
The matrix can be shown thus: The matrix gives data pertaining to resources deployment in various functional areas over a period of time. It also shows how the focus of efforts has changed within a time frame. Strategies can draw their own conclusions based on past experience, current trends and future expectations. They can find out whether the firm is able to strengthen the areas of advantage or dissipate its energies over a period of time. While drawing comparisons it is advisable to compare firms, which are in the same phrase of product life cycle
Strategic Advantage Profile
Every firm has strategic advantages and disadvantages. For example, large firms have financial strength but they tend to move slowly, compared to smaller firms, and often cannot react to changes quickly. No firm is equally strong in all its functions. In other words, every firm has strengths as well as weaknesses.
Strategists must be aware of the strategic advantages or strengths of the firm to be able to choose the best opportunity for the firm. On the other hand they must regularly analyse their strategic disadvantages or weaknesses in order to face environmental threats effectively
The Strategist should look to see if the firm is stronger in these factors than its competitors. When a firm is strong in the market, it has a strategic advantage in launching new products or services and increasing market share of present products and services.