Establishing Organizational

Directions
Chapter 3
 Organizational directions
• Organizational directions is the internal
environment of the organization which
enables a firm to decide about it can do,
there is attempt to understand the internal
environment of an organization in terms of
the organizational resources and behaviour,
strengths and weakness, synergistic effects,
competencies, organizational capability,
strategic advantage.
Dynamics of internal environment
STRATEGIC ADVANTAGE

ORGANISATIONAL CAPABILITIES

COMPETENCIES

SYNERGISTIC EFFECTS

STRENGTHS & WEAKNESSES

ORGANISATIONAL ORGANISATIONAL
RESOURCES BEHAVIOUR
 Organisational Resources
A firm possess a bundle of resources like:-
• Physical resources- technology, plant and equipment,
geographical location, access to raw materials
• Human resources- training, experience, judgement,
intelligence, relationships
• Organisational resources-formal systems and structure,
informal relations among groups
• Four characteristics of organisational resources
1. Valuable 2. rare 3.costly to imitate 4. nonsubstitutable.
 Organisational Behaviour
• Organisational Behaviour is the manifestation of
the various forces and influences operating in the
internal environment of an organisation that
create the ability for, or place constraints on the
usage of resources
• Forces that influence the organisational
behaviour- quality of leadership, management
philosophy, shared values and culture, quality of
work environment, organisational climate,
organisational politics, and use of power.
 Strengths and Weakness
• Strengths is an inherent capability which an
organisation can use to gain strategic
advantage.
• Weakness on the other hand is an inherent
limitation or constraint which creates strategic
disadvantage for an organisation
 Synergistic Effects
• When two strong points in a particular
functional area add up to something more
than double the strengths. Likewise, two
weaknesses acting in tandem result in more
than double the damage. In effect, what we
have is a situation where attributes do not
add, but combine to produce an enhance or
reduced impact such a phenomenon is known
as synergy.
 Competencies
• Competencies are special qualities possessed
by an organisation that makes them withstand
the pressure of competition in the market
place.
• When a specific ability is possessed by a
particular organisation exclusively or relatively
in large measure it is called distinctive
competence or core competencies
 Organisational Capability
• Organisational Capability is the inherent
capacity or potential of an organisation to use
its strengths and overcome the weaknesses to
exploit the opportunities and threats in its
external environment
• Organisational capabilities is understood with
a feasible approach to appraising the
organisation is to start with the factors and
influences operating within organisation.
 Different Organisational Capabilities
Financial capability-
• Access to financial resources
• amicable relationship with financial institutions
• High level of credit worthiness
• Efficient capital budgeting system
• Low cost of capital as compared to competitors
• High level of shareholder’s confidence
• Effective management control system
• Tax benefits due to various Govt. Policies
 Marketing capabilities
• Wide variety of products
• Better quality of products
• Sharply focused positioning
• Low prices as compared to those of similar products in
the market
• Price protection due to Govt. Policies
• High quality customer service
• Effective distribution system
• Effective sales promotion
• High profile advertising
• Favourable company and product image
• Effective marketing management information system.
 Operational Capabilities
• High level of capacity utilisation
• Favourable plant location
• High degree of vertical integration
• Reliable sources of supply
• Effective control of operational cost
• Existence of good inventory control system
• Availability of high calibre R&D
• Technical collaboration with reputed firms abroad
.
 Personnel Capabilities
• Genuine concern for human resources management
and development
• Efficient and effective personnel systems
• The organisation perceived as a fair and model
employer
• Excellent training opportunities and facilities
• Congenial working environment
• Highly satisfied and motivated workforce
• High level of organisational loyalty
• Low level of absenteeism
• Safe and salutary working conditions
Information Management Capabilities
• Ease and convenience of access to information sources
• Widespread use of computerised information system
• Availability and operability of hi-tech equipment
• Positive attitude to sharing and disseminating
information
• Wide coverage and networking of computer system
• Presence of foolproof information security systems
• Presence of buyers and suppliers conversant with IT
applications
• Top management understanding of, & support to, IT
and its application within organisation
 General Management Capabilities
• Effective system of corporate planning
• Control, reward and incentive system for top
management to the achievement of objectives
• Entrepreneurial orientation and high propensity of risk
taking
• Good rapport with the Govt. And bureaucracy
• Favourable corporate image
• Commonly being perceived as a good organisation to
work for
• Development oriented organisational culture
• Political processes used for consensus building in
organisational interest
• Effective management of organisational change
 Strategic Advantage
• Strategic advantages is the outcome of the
organisational capabilities. They are the results of
the organisational activities leading to rewards in
terms of financial parameters such as profit or
shareholders value , non financial parameters
such as market share or reputation of the
organisation.
• Profitability could be used measure the strategic
advantage , higher the profit higher the
profitability.
 Methods and techniques used for
analysis organisational appraisal or
Internal analysis
directions
• VRIO framework
• Value chain analysis
• Quantitative analysis- financial and non-financial analysis
• Qualitative analysis
Comparative analysis
• Historical analysis
• Industry analysis
• Benchmarking
Comprehensive analysis
• Key factor rating
• Business intelligence systems
• Balanced scorecards
Strategic Pyramid
Value and Business or Corporate Ethics
• Personal value refer to a conception of what an
individual or group regards as desirable.eg:- teacher
and parents have embedded them
• A value is a view of life and a judgement of what is
desirable, which is very much a part of a person’s
personality and a group’s morale.
• Eg:- labour welfare, service mindedness, higher
customer satisfaction.
• Within an organisation values are imparted by founder
or any higher authority of the organisation keeping in
mind the best interest of the society and man kind.
 Factors of consideration in corporate
ethics
• A business should aim to have fair dealing with
everyone dealing with it.
• Ethics should be fixed for everyone working in the
organisation at any level and their implementation
should be linked with the reward punishment system
• Any violation of ethics should be detected at the
earliest and remedial measures taken immediately.
• Business should be based on broad guidelines of what
should be done and what should be avoided.
• The ethics should be based on the perception of what
is right.
 Sources of ethics
• Religion
• Culture
• Law
IMPORTANCE OF CORPORTATE ETICS
• Corresponds to basic human needs
• Credibility in the public
• Credibility with the employees
• Better decision making
• Profitability
• Protection of the society
• Stop business malpractices
• Improves consumers’ confidence
• Survival of the business
• Healthy competition
 Social Responsibility
• Social Responsibility is an ethical framework
and suggests that a company or organisation
is obligated to act for the benefit of society at
large, it is the duty of everyone to perform as
to maintain a balance between the economy
and the ecosystem
Importance of Social Responsibility
• Improving the company’s Brand
• Engaging customers
• Retaining top talent
• Helping companies stand out from the
competition
• Eg:- the coca cola company’s global commitment
to enable the economic empowerment of 5
million women entrepreneurs across the
company’s value chain by 2020