Coporate

Appraisal(Methods &Techniques) 10.2

it,should
undertake. For example, if the organisation is quite strong in
business
fieldof
marketing, it may concentrate on marketing activities, instead of
the manufacturingand marketing. In India, there are several companies
for
going
engagethemselves
in marketing the product produced by others. Several
which machines and Knitting machines are marketed under the brand
sofSewing
brands
ofthemarketing companies, whileethose machines are produced by others.
names
revenues of Voltas
Limited come from marketing of products of other
Major
companies. These suggest that companies take advantage of their marketing
strengthandabilities.
measures to overcome
Tugh corporate appralsal, he managers can adopt
weaknessessoftheorganisation. Ofcourse, the weakness should be identified
the decided how best itt could be remedied by allocating more resources.
firstand n
then
the
this, weakness may be changed into strength. If the organisation does not
By resource to convert the weakness into strength, it may try to
have adequate where it is like to suffer defeat. These type of activities
withdrawentirelythat area in long-term planning has
may have along-term plan. Role ofcorporate appraisal
corporate appraisal should
hendescribedby David Hussey as follows :"Thelong-term plans, and should
be one ofthe first steps in the process ofpreparing objectives areestablished
nrovide both the platform from which the corporate
and the baselines for the strategic plan. Attempting to plan without carrying out
the top floor ofbuilding without
this fundamental step is rather like trying to reach
highly dangerous and calls for
ISing the stairs or lift : the ascent is possible, but the company to adopt the
much more effort. Omission of the basic step may leadachievement ofits highest
restrict
Wrong strategy, to take decisions which at best
potential, and at worst lead on the road to ruin."
Proces of CorporateAppraisal
following certain sequence of
At the outset, there is a definite process
Cavites to make corporate appraisal. The strategist or the manager need to tap
be
the appraisal. The sources may
different types of information sources forinternal as well as external. Information
Taoal as well as written and it may also be
documents, financial statements,
vau De gathered from company files. personal opinions
aagement information system and other sources and also on
tO some extent.
strength and weaknesses of
Information will be gathered which is relevant to otherwise it will be very
environment;
organisation measured in terms of its factor can be considered as strength
or
dif icult
to suggestthe degree to whicha

1. David Hussey, Corporate Planning : Theory and Practice, London : Pergamon Press,
3. 1982, p.91
10.3 Business Environment :Policy &
weakness. For adopting criteria in respect of these, the external Strategic NMan g Co

quite helpful. For example, an organisation cannot say that its

is strong, unless, it is aware of the financial position of the
t fin inf
anci
field. Generally, the following process is adopted in corporatecompet
o r
apnraitors
aialti
() ldentification of Key Factors : The process starts withappr
the a is al :
corporatdeentsfteraeinga
of key factors that can be evaluated for determining corporst
and weaknesses. The appraisal should cover all
organisation. The factors that should be taken into aspects
consi
not be rigid and static. They may differ from organisation to dera
What is wanted is the manager or the strategist should orgaisati
tion nm

factors through critical and selective basis concerning identify the

the
The factors may be in the area of organisation structure and organisaia
I
pattern, personnel, finance, marketing, manufacturing, research
development, etc.
managemea
(ii) Identification of StrategicImportance of Factors: All the
as key factors need not have equal factors ideutie
strategic importance; some may k Met
very important; and some less important. These depend on te
organisation and its environment. Their relative importance camb
determined by finding out the contributions of each factor in t appr
achievement of certain key results. The key result areas are those whC andorgar-
are related to the objectives of the
which the relative importanceof factors company. Another method throy the
with critical success factors ((C`Fs), Wecan be measured is to relateteffec
had
The variousfactors can be studied earlier about C other
(ii) Assessing the Strengths & compared withof the requirements of CSs the e
key strategic factors may Weaknesses Keyfactors : Identificatiou
and wealknesses in lead to assessment of organisational strengts adva
any factor can be respect of these factors. Organisational strength d ts re
defined as its contribution towards the organisatios eval
objectives. Since, objectives are hierarchical, i.e., alower-levellobjerti
may contribute to a higher-level objective, afactor may not necessarn! roac
contribute directly to the achievement of overall objectives, butm
contribute indirectly by achieving lower-level objective. An organisatio
weakness factor can be defined as
on a
contribution
façtor in achieving the the negative
assessing the strength andorganisational
weakness is to objectives. way
Anotheranahsi
make acomparative
of these
factors with
organisational strengthsthose ofthe
and weaknesses, some
competitors.
assessment
For havebet
developed. techniques
 (Methods&
Appraisal &Techniques)
10.4
Preparationof,Strategic
Coporaie Advantages Profile : On the basis of the
assessment of organisational strengths and weaknesses, astrategic
profile
isprepared which shows the yarious strong areas of the organisation.
This profilecan show the strengths or weaknesses in terms of degree,
either in quantity like 1 to 5 for various factors or definition like very
strongto average. However, when both strength and weakness are taken
profile, the positive numbers can be used for strength and
inthe same
negative.numbers can be used for weakness, if quantitative measurement
is used.
: Advantage to Strategy : Technically,this is not part of
Relating Strategic.
corporate analysis, as this process is related to: strategic management and
not in the process of Corporate appraisal. However, the entire process
hecomes meaningless, unless these strengths are properly associated
desired
with the overall strategic management decisions to achieve the
goal.
Methods and Techniques used forCorporate Appraisal
The methods and techniques used for Corporate appraisal or organisational
performance evaluation of an
appraisal may be similar to those used for the perfornance evaluation
organisation. But, there is an important difference betweenemphasis is on assessing
the
and corporate appraisal. In evaluating performance, respect to its efficiency and
the current behaviour of the organisation with of a short-term nature. On the
Gectiveness, and such an assessment is generally
corporate appraisal is of a cemprehensive and long-term nature and
er nand, what the organisation
the emphasis is not just on current behaviour, but also on
to gain the capability to compete in the market, to take
do in order overcomne the threats, operating in
and
advantage
its relevant
of the available opportunities,
view the differences between performance
tenvironment. Keeping in methods andtechniques used are classified
evaluatiointo
n andlcorporate appraisal,1the
shall discuss about these
in detail:
roadly different parts and described. We
(2) Comparative Analysis; and
The analysis may be : (1) Internal Analysis;
) Comprehensive Analysis.
Analysis;(b) Quantitativeanalysis;
Int
and (c)e rnal Ianalysis may be (a) Value Chain
Qualitative analysis. Analysis; and
into (i) Financial
) Quantitative
Non-financial
analysis has been classified
lquantitative analysis. analysis; Industry Norms;
into Historical viz., Balanced
and Comparative analysis is classified analysis may be
two types,

SCOreBecardnchandmarkikeyng factor rating.

Comprehensive
 Business Environment : Policy Strategic
&
10.5

analysis of
1. INTERNAL ANALYSIS
an organisation deals with an
Ma
investigation
nage
Internal
strengths and weaknesses of the firm byfocusing on factors that are specific hety
it. On the other hand, Comparative analysis deals with an examination of the
into
and weaknesses of the firm in relation to its oWn past record
strengths
reference to its competitors.
(a) Value-Chain Analysis
Value-Chain method disaggregates the activities ofthe organisation into nine o
strategically relevant activities in order to understand behaviour costs in he
specific industry segment. These nine activities are grouped into primary activitis
and secondary activities. The former is concerned with the creation of product,
its marketing and provision of after-sales support, and the latter is Concerned
with supporting activities providing necessary infrastructure to primary activiis a
The activities primary are:
() In-bound logistics : Procurement, Storage and control of inputs. CO
(ii) Operations : Transformation of inputs into outputs.
(iüi) Out-bound logistics : Collection, Storage and Physical distribution of CO

outputs.
(iv) Marketing and Sales : Promotion, Channel
(v) Service: After-sales service.
management.
Secondary or supporting activities are
(i) Procurement :
Procurement of material inputs,plants machinery etc.
(i) Technology Development : Creating and
performance activities. improving the way for be
(iii) Human resources
of manpower; and management : Recruitment, Training and developmet
(iv) Firm
infrastructure
Planning, etc.
: General
Management,
This is called Porter Finance, Legal laffairs, Strateg
of assessing the 's Generic This method
value Chain.
strengths and weaknesses of an organisation onthe
basis of an
understanding
by Michael Porter of the series of
and he called it activities has been
introduced
We can observe
that the above cited value-chain.2
actívities that are required to be value-chain chainof
are inter-related tothe
doorstep of the customer. The profit undertaken to bring the
margin that an Organisation
product
finished earns depend

2. Michael E. Porter :
Competitive Advantage. New York, Free Press, 1985 p.
39.40
 Coporate
Appraisal (Methods & Techniques)
10.6 |
onhoweffectivelythe value-chain has been managed. The value-chain provides
asystematic view of the examination of all the activities performed by an
organjsationand how these activities
interact and are
companiescan provide
illustration of the role of inter-related.
value-chain.
For
Many
Ocompanies
provide a very good illustration of
value-chain. We
example, oil
know that the
sctivitiesof.an oil company consist mainly oftwo parts : the
whicharerelated| to oil-exploration, drilling, transport of crudeupstream activities
oil to the site of
rfining.The downstream
activities consists of
andalliedi products through distributors and petroltransporting and
stations. Mostmarketing of oil
of the integated
oilcompaniess perform all the upstream and downstream activities; but they often
in ternms of the capability they pOSsess in one or more activities in the value
oin Major global oil companies are highly integrated and cover the complete
pduc chain. ONGC is India's sole oil exploration and production company. IOC
into refining, transporting and marketing, and BPCL isstrong intransportation
viti and marketing, with marginalpresence into refining. Essar Oil and Reliance are
into refining, while IBP deals with marketing only. Obviously each of these
companies has a set of strengths and weaknesses contributing to their
organisationalcapability. Each has a defined strategic advantage and aspecific
ion d competitive advantage in the oil industry with respect to the others.
(b) Quantitative Analysis
Whatever may be the approach, in modern days,performance evaluation, if
done in quantitative measurement, willbe very popular and also considered more
Tealistic and reliable. Expressions in terms of numbers or in terms of financial
gures wI|l be more credulous in the assessment of strengths and weaknesses of
Organisation. Quantitative analysis are classified into two categories, Vz.,
bett Financial Analysis and Non-financial quantitative analysis.
1) Fnancial Analysis : Several traditional methods are used for evaluating
financial performance. Atechnique such as financial ratio analysis assesses the
can be
liquidity, aspects of any organisation. Itdata that
rate used for profitability,
analysing
leverage and activity
and weaknesses and provides valuable
nethy can be used strengths appraisal.
in organisation It has an added advantage in that the
existing accounting be used for generating
systems and procedures can appraisal.
information for organisational approach and effective corporate
serve the purpose of be taken
hais
Financial
appraisal, ratio analysis can realistically
only ifit is used with due care. The precautions which needto
sutticiently long-ten
idatnclaudeto realisingthe limitations of ratio analysis,
subjective
taking
analysis to results
by strategistsnarketing.
and extrapolate applying
ep
trends, in other areas as
technolsApart
upplogyementandinthegso on:
the financial. analysis with appraisal

techniques,such as, ratio analysis,

new from popular
traditional anddevised, There is the Economic Value-Added
techniques have also been
10.7
Business Environment : Policy &
(EVA) analysis. The EVAtechnique has been devised by SternSttrategic
of the U.S. which is used to determine the wealth of the
as the system of corporate management that defines company. in
Stewart &
EVA is MaCnoamgmpaenyn
wealth an
profitability
returns on capital above the cost of servicing the capital employed.
organisation creates for its owners and is expressed as the
rmsdefofinethae
teEVA
of the after-tax operating profits and the total cost of capital.
In other words,,EVA isthe representation ofthe simple idea
that an
dif erencg.
needs to earn more from abusiness than the cost of the
calculation of EVA offers a yardstick to an organisationcapital
to
invested in it. The
assess
organisaton
the required capability to take astrategic action whether it k
from such an action are likely to be and whether the potential retur
take it,. greater than the cost of capital required ta
(i) Non-Financial
advantage of expressingQuantitative Analysis: In
in terms of monetary units financial analysis, there is al
like rupees, dollars, etc. But,
everything cannot be measured in the
Certain things have to be expressed in organisation in terms of monetary units.
such as goodwillor employee physical terms. Quantification of intangibles
units, is not desirable. In thesemorale, though possible to be expressed in
be better suited and cases, non-financial monetary
helpful.
market ranking, rate of quantitative
These items are employee measures would
units used per period, advertising recall, total cycle time ofturnover, absenteeisn,
and so on. service call rate, number of
patents production, inventory
(c) Qualitative Analysis registered per periou
In the
corporate
more helpful, it will appraisal,
be better if though
qualitative the quantitative analysis is possible and awith
got its analysis. Most of the quantitative analysis is properly tempered
lim itat ions. strategists
jandudgement, intuitionof and also analysis is toknowbe thatbasedquantitative
Qualitative analysis has
through rational on informed opinion
For weaknesses the thinking.
example,
the tenor of qualitative organisatioonn
cannot be Many of the strengtis
the level of corporate culture, the alone is bestexpressed
expressi in quantitative terts
suited in the case of assessing
morale ability to
determining the among the absorb and assimilate knowledge o
should understa strengths
nd and empl oyees. These way
of the matters go a longstrategist
in

supplemented
method alone
in the
that
course qualitweaknesses
ativeand organisation. Theshouldbe
shouldby be adopted.analyses andquantitative
of
methodsthat only ane
andalso there is no rigidity
consideredreinforcedqualitatqual
which is that itative Quant
e measurement
iv'hard itat ive
and vice
can be
Supported
measurementversa. analyss
considered as analysis is soft as Generally,
qualitative analysis is simply based on compared to quantitative
maximum levelbasedso ason toemothumbers,
be used to the meanthat
This does not
imakeons theor fancy. faculties cal.
Mentaanalysis
l mucl
qualitative
 Appraisal(Methods &Techniques) 10.8
Corporate
understandable and also deep-rooted. At the same time, it can also be simple and
expression and prediction. In short, we can say that there is no
preciseinits method being superior over the other one; the analysis depends
questionof one
problem and the details of factors on hand and the strategist can adopt
'onthe
method which is
consideredthe best for that.
any (2)COMPARATIVE ANALYSIS
thatthe suim and substance of corporate appraisal is finding of the
Weknow weaknesses of the organisation in the context of environmental
strengthsand knowthat strengths and weaknesses of an organisation are
scanning. We should
tabsolute strengths and weaknesses; They are only comparative in the sense
thatthey are
compared with the strengths and weaknesses of the competitors in
competence of the firm orinability of the fim, they are only in
thefield. Either it is
the relative
sense with the competing organisation and they do not have any
absolutevalue. The relativity is based on the uniqueness and exclusivity of the
strengths, weaknesses, and distinctive competencies of an organisation in
cornerstone
comparison to its competitors. Thus, comparative analysis forms the
This
of the assessment of strengths and weaknesses of an organization. Analysis;
comparative analysis can be done in three ways, viz., (i) Historical
() Industry Norms; and (ii) Benchmarking.
) Historical Analysis
Historical analysis is the method by which we identify the strengths and
weaknesses of the organisation by comparing its present performance with its
analysis is a
OWn previous performances over a period of time. This historical with
progressed
good measure of how well or how badly an organisation has
performance
respect to its own past performance. Generally, we can see that the
year or tor
Of Companies is shown in terms of comparative figures over the lastpresentation
in the
G Sane period in the past year. Such a practice is standard
the-annual report of the
Dalance sheet and a profit and loss account in
on
Opanies. This is an evidence of howthe same organisation has performed
analysis regarding the past perfomance
ofor Common
of the company yearsan will reveal the durable strengths of the
a period ofSuch
overparameters.
the organisation which had
organisation also
and nagging weaknesses of
which have shown
contributedto good or bad performances respectively. Areas of strengths and
consistently good and effective performances are indicatorsyears areindicators
areas which have shown bad or ineffective performances over
of
weaknesses which require to be attended.
But, this type of historical analysis by comparing its ownperformance
areasof
of an
bad
organisation has some limitations.shouldFocusbe deeper
should not be on
to uncover the reasons for
perbadfoperformance,
rmance aalone. SOThethatanalysis
corrective measures could be taken. Secondly,
show dramatic
measurement of past performance on a small base could

improvements only
that could turn out to be illusory. Finally, this analysis is
10.9 Business Environment : Policy &Strategic
comparing its own past activities, andthis is not comparing its: Manageme
competitors. This limitation is overcome by other methods, viz.,activities wit h the
Cor

and Benchmarking which we shall study briefly. Industry Norms, are

(in) Industry Norms ben

with
The industry to which the business belongs is the most apt
comparison with regard to wide range of parameters. A
company choi ce fo
might chedk
orga
and
whether its cost structure is comparable to its competitors in the field. and
compare whether its budget spending on advertising is equal to its
company for purposes of comparison may choose similar type of rival. The
the ind ustry having similar relevant environment. This comparison wit in
competing company could throw more significant information on
companies and
unit
which to assess where one stands with respect to others. n the basis of dire
this context
concept of a strategicgroup is helpful here. What is meant by Fun
"Strategic groups are conceptually defined clusters of competitors Strategic grouns?
non
similar strategies and therefore compete more that shate
other firms in the same industry." For directly with one another than with
strategic group will be more helpful, as thecomparative analysis, the concept of
CO

type
and abilities with its rival which is organisation compares its activities
placed in simnilar
However, this method is also beset with certain circumstances. type
norms aim at averages and it may also
lead to
limitations. Generally, industry of tl
one's capability. Secondly, industry erroneous conclusions regarding
firm in the strategic group will norms are difficult toobtain and the competing 3)
use to their closely guard the information which could be of
information competitors. Hence,
of the competing firm gathering information and that too very secret of t
for the purpose of will be very difficult, for
making industry norus net
competitors activitiesanalysis. Of course,
can be obtained the general
information regarding Bala
documents which are available through Annual
in the public Reports or published (a)
thedetermining
areas of industry norms. Industry norms domain. These could be useu
strengths and of anmethod be very helpful in locating
will
(iii) Benchmarking weaknesses organisation. bala
mea
of Benchmarking isthe reference point mea
canbenchmarking is to find out
the
for purposes of purpose
compare itself with the
best
performers in the measuring. The
organisation
lve
company has been taken as thebest performer, In other area, and the performing ina
Benchmarking has been standard for making words, the bestmeasurennents
enough admit that interpreted follows : It is thecomparative
to as that
enough tolearn how tosomeone else is better at practice and of being humble wise
match and even sonmetat hit.ing,
surpass them being
3. Miller &Dess, Strategic \ear
4
Anerican Productivity &Management
Quality , York, McGraw-Hil . 1996, p.75
New
Centre, Basics of
Benchmarking.
 Appraisal(Methods & &Techniques) 10.10
Corporate
purpOsesof
comparison, there are three types of
ForPertformancebenchmarking; (b)
benchmarking
Process benchmarking;
: They
and (c) Strategic
benchrmarking.
(a)
are Performance benchmarking is to compare one's own performance
some other organisation for determining
how good one's own
of
organisation
withthat is. Process benchmarking is to compare the methods and practices;
Strategicbenchmarking
is to compare the long-term, significant decisions
andactions undertaken by other organisations to achieve their objectives.
andBenchmarking may be Internal Benchmar!:ing; Competitive benchmarking;
Functionalbenchmarking. Internal benchmarking is acomparison between
and departments of the same organisation. Competitive benchmarking is a
units or comparisonof one's own performance against the best competitors.
direct is a comparison of processes or functions against
Functional benchmarking
eorganisations within the same sector or technological area. There
non-competitive
type of benchmarking called Generic benchmarking. This is a
another in any
is
own processes against the best practices anywhere
comparison of one's
typeoforganisation.
different
benchmarking could be done at several levels using all the
Thus.
These willhelp in assessing the strengths and weaknesses
tpes of benchmarking. determining itscapability.
of theorganisation and also in
(9) Comprehensive Analysis
attempts to find out the strengths and weaknesses
Comprehensive Analysis capability ina better way than any other
determine its
ofthe organisation and
popular methods and techniques under this :They are
methods. There are two about these.
rating. Let us briefly study
Factors
Balanced Scorecard: and Key
(a) Balanced Scorecard
Kaplan and David P. Norton. The
Robert S. performance
This technique was proposedby to do away with the bias in system of
balanced scorecard method attempts tries to build a holistic
measures that
indices and
measures towards financial Scorecardis considered as a set of Itincludes
measurement. The Balanced comprehensive view of the business. andthe
processes,
gives top nanagers a fast but satisfaction, internaloperational measures
financial measures on customer
improvement activities -
Organisation's
that are
innovation and
performance.
95
They are:
the drivers of future fináncial performance measures.
Innovation and
four key (ii)
The balanced Scorecard identifies
business
perspective
perspectives areset
)
Customer
lesarfollows:
perspective (ii) Internal perspective. These
ning perspective; and (iv) Financial

that Drive
Scorecard - Measures
S. Balanced p.7i
Kaplan and Norton, Using the
Review
(Jan-Feb. 1992)

Performance", Harvard Business

 Business Environment : Policyy & Co
10.11
Strategic
() Customer Perspective : How do customers see us?)
(i) Internal business perspective : What must we excel at?» Manager So

(ii) Innovation and learning perspective: Can we continue to

create value?"
(iv) Financial perspective :"How dowe look at shareholders?»
improve aNA
Though each of these perspectives could be used
individsally,
use them in combination, as this will give deeper insights and a
it is
balanced beter
otherapsprowhewd
to strategy formulation. One perspective is not allowedItot
the strengths and weaknesses of an organisation are assessed.
outweigh
In fact, the balanced scorecard is a comprehensive strategic
system and it can be used for quantitative and qualitative managemer
analysis of
t
organisation. te
b) Key Factors Rating
This method is also a comprehensive
method, as it takes into account the
various factors affecting the organisational
financial aspect also. There can be several methodsfunctioning. This method take
example, the managerial personnel can be asked to defineto rate key factors. Fr
are affecting their working. Their answers how the various facto:
answers, the various factors can be may be recorded. On the basis of thes
classified into two groups, viz. thost
contributing favourably and those contributing
there may be one problem.
Managers may
unfavorably. Of course, in ts
performance, as something lying outside theirtendcontrol.
to blame others for their ba
information will be available for evaluating the Notwithstanding, Olu
weaknesses. Many systems have been possible areas of strengns a
and weakrnesses. evolved to assess organisational
Essentially these systems are based on strengts
number of key factors, each of which is rating, depending of
thoughtful penetrating questions.
and analysed on the basis of a series
Financial factors, Marketing The
questions may be classified ina
Iuformation Management factors,
Operational factors, Personnel factos
sub-divided into several factors and General factors. Eachcan
assessing he replies. sections, for purposesmanagement
of penetrating questions N
The type of
some samples andquestions
they areunder
not various heads are given below. These are
ou)
exhaustive.
 &Techniques) 10.12
I(Methods
Appraisal
CorporateFactors
Financial
SourceofFunds:
organisation's capital structure satisfactory?
the
organisation raise capital in the market?
the
Cani
2
Wheredoes
theeffective controllership rest?
ratio satisfactory as compared to other competitive
Is the debt-equity
organisations?
Doesthe financing
patterns cause the organisation to be dependent on
S outsiders?
surplus position healthy?
&Are the reserves and
7 Is the relationship with banks and
financialinstitutions cordial2
UsageofFunds:
opportunities available?
8 Are adequate investment
9 Howdoes the organisation compare with others so far as dividend record
is concerned?
with shareholders?
10. What type of relationship exists
Management of Funds:
budgetary
1. How effective or efficient the financial, accounting, and
systems?
the organisational needs?
12 Does the management control system satisfy
13. What trends the various financial ratios indicate?
14. Have they been satisfactory over the last few years?
analysis indicate?
1D. What strengths and weaknesses does the ratio
16. Has inflation been taken into account?
17. What is the status of ongoing projects?
lQ. Have there been time and cost overruns?
19. How far have the tax advantages accrued to the organisation?
For Marketing Factors :
Products or Services :
1, Does the organisation offer the requisite variety of products or services?
2. What is the level of product differentiation?
3. Does the product-mix satisfy market requirements?
4. Are there products which do not contributeto profitability?
S. What steps have been taken to phase out such products?
6. How do the products compare with others in the industry in terms of
quality, packaging, and so on?
10.13
Business Environment : Policy &
Pricing : Strategic
7. What are the pricing objectives
pursued?
8. Are they oriented towards profit
maximisation and sales
Man germeN
maximisation?
9. Does the pricing policy conform to market
requirements? revenue
10. Does the organisation avail of price protection and the
available to it?
Market Promotion: advantag
11. Does the organisation make use of available tools of r
12. What is the reaction of the market toyour products? market promotion!
13. Are the funds allocated for market promotion used
effectively?
14. What does market research indicate with
regard to promotion, puble
relation, etc.?
15. What is the market standing and image for the
16. How effective is the marketing
organisation?
information system?
For Operational Factors :
Production :
1. Is the plant capacity of the requisite level?
2. Do work system support efficiency and
3. What is the extent of vertical productivity?
integration?
4. Does it offer any advantages to the
5. Is the supply of factors of
organisation?
6.
production adequate?
Does the organisation have access to sources of material supply which
are not available to its
comnpetitors?
7. What is the efficiency and
effectiveness of the inventory control syst
R&D System
8. Does the organisation possess any distinct advantages with respectto
R&D?
9. Does it possess patent rights?
10. How far do technology
collaborations
In the above cited manner penetrating benefitshould
questions the organisation:
be framed inrelation
to personnel capability factors; Management capability factors and General
Management capability factors, etc.
With the help of the answers for the questions, the strategist will bein a
position to exactly pinpoint the strengths and weaknesses in each ofthe functional
areas. On this basis, organisational capacity and capability can be precisely
prepared
judged. Acomprehensive picture of the organisational capability can be
thrcugh structuring the process of
corporate appraisal.
 Appraisal(Methods & Techniques) 10.14
Corporate
Capability Profile
e
Corporate
corporate. appraisal, the results are structured in the form of
Afterr completingProfilee(CCP). This is a summarised statement which provides
Corporate Capability
overview of strengths and weaknesses in key result areas likely to affect
an operationss of the organisation. Information in this profile may be presented
future qualitativeeterms or quantitative terms. Ifthe information is presented in
eitherin terms, the strengths and weaknesses will have to be presented or
qualitative the degree of
describediinthe form ofnnarration. Such aprocedure will not show
and weaknesses. For instance, the organisation may reveal that it is
strengths
marketing area. But, it does not show how much strong it is in that area.
strongin problem.
quantitative presentation oofthe degree of strengths willsolvethe quantitative
Hence, into
qualitative narration or description is converted
The
measurement. Forthis purpose, all the
factors appraised are assigned degrees,
side
values along a scale. Such values may be on a five point scale with plus here
ie mentioned
side. Evidently, zero will denote the normal. It may be
and minus
to a factor are subjective depending on the perceptioD and
that values assigned depending
of appraiser. Such an exercise may run to several pages
judgement
upon the factors appraised. in Table 10.1. As indicated above, the
summarised CCP has been given
A
areas depends on the nature of the organisation and
classification of functional objectives of the organisation. It is
do and also the
the type of business they
appraiser to decide the classification of various functional
upto the strategist or the intelligent
sub-classification. This will be a laborious, as well as
areas and also ingenuity of the strategist.
and
exercise, demanding the highest skill convenient method to determine the relative
provides a
The preparation of CCP competitors.
priorities of an organisation vis-a-visits
10.15 Business Environment : Policy & Strategic
Table 10.1
Summarised Corporate Capability
Profile
Managenen
Factors Appraised Degree of Strengths or
Weaknesses
Weakness Normal
-5 Stre+5ngth
1. Fìnancial Factors :
Sources of funds and cost
Usage of funds
Management of funds
2. Marketing Factors .:
Product-related
Price-related
Promotion-related
Distribution-related
3. Operations Factors :
Production system
Operations and Control system
R&D system
4. Personnel Factors:
Personnel system
Quality & Motivation of personnel
Industrial relations
5. Information Management Factors:
Acquisition and retention of information
Processing andsynthesis of information
Retrieval and usage of information
Transmission and dissemination of information
Integrative, systemic and supportive.
6
General Management factors:
General Management System
External relationships
Organisational Climate
 Appraisal(Methods & Techniques) 10.16
Corporate
StrategicAdvantage Profile
Strategic Advantage
Profile (SAP) tries to find out organisational strengths
Iweaknesses inrelationto the Critical Success Factors, (CSFs) of the industry
that how a particular strength is relevant in specific business area.
and
segment; t is,
purpose, impact ofafactor should also be measured in the same way as
this
done for measuring strengths and weaknesses. Thus, SAP combines
Fort

has been
organisational strengths and weaknesses and impact of these factors in
onganisationalIsuccess. This can be done by addingone more column, i.e., Impact
columnnto Corporate Capability PProfile (CCP) columns, given under Table
Factor
10.1.
The Table 10.2 depicts the Strategic Advantage Profile of afim. For purposes
simplified.
ofillustration, the columns are abridged and
Table 10.2

Strategic Advantage Profile of Company 'ABC'

Level Scores
Degree
SAP Factors of of
Strengths Significance
Marketing Factors : 40
5
1. Competitive Position 21
Product mix 3
2.
28
Distribution Channel 4
3. 12
2 6
4. Promotional Efforts 05
1 5
5. Market Research 40
10
6. Price
Production Factors : 8 32
1. Locatioa 4
40
5
2. Capability Utilisation 32
3. Raw material availability
21
4. Cost Structure 3
7 14
3. Research and 2
Development
6. Technical Know-how 5 10 50

Fi1.nanceCapital
FactorsCost 4
28
16
2. Capital Structure 2
08
8
3, Financial Planning 1
8 32
4. Liquidity 4
30
10
3
6 Raising Funds from outside
3
& 24
Accounting procedures
10.17 Business Environment: Policy &
Strategic
Personnel Factors :
1. Quality of top management 2 10
Managme
20
2. Quality of other personnel E 4 8
3. Industrial Relations 5
32
8
4 40
Organisation structure 1
08
5. Corporate Image 4 8
32
Total Score
605
Note : Score of Strengths is on five-point
and 1 denoting the least. Level of scale with 5 denoting the hiehs
denoting the highest and 1 the least. significance is on ten-point scale with I
SAP, exhibited under Table 10.2 th
shows that the
advantages index is
605 1150 =0.526 or(Actual Score divided by MaximumCompany's Strategi: st
52.6 per cent. Possible Score), it
Combining SAP and ETOP
We had studied in detailin
Analysis and Chapter 3 about
ETOP. We know that ETOP Environmental Scanning, SWO
Opportunityto Profile of an organisation; andmeans
SWOT Environmental Threat a
approach find the strengths,
toan
analysis is a systemal
Weakness, Opportunities and Threats pertani:
organisation and its environment.
to bePreparation
of SAP and ETOP
pursued unless both are separately is not enough to identifythe stratg
Analysis and combined together. Combination of Corporat
Environment
objective of SWOT al analysis
analysis
is
is to SWOTa analysis. We know
that bast
organi
by the sational capabilities to avail
provide framework to reflectpresented
In fact, the opportunities or to
on
environment
relevance far as
in so . dimensions of overcome threats ha
analysis and
envi r
they relate to the
onment al envi ronmentorgani sat
capabilitiesional
conditions. Hence,
corporat
SWOT analysis providesanalysis should be interlinked.
various issues bearing on the logicala
alabundant
ternative strategies and finallybusiness framework
situation.
for
It
systematic
helps in
discussiond
generationd
the choice of the
whereby keyinformat ion about external and strategy. analysis
presenb
SWOTin structured fort
with internal external opportunities and internal environment
internal capabicanlities and threats can be
situations be matched Thus, compared
weaknesses. form sysstematicl
externalan
can be chosen on
of the basis of
these
So as to
organisation's
distinct
combinations of the following: patterns. These patternspatterns andstrateg
beinthe
for
may
 Appraisal(Methods &Techniques) 10.18
Cogporate
Opportunities and High Strengths
High
(1)
High
Opportunities: and Low Strengths
(2) High Strengths; and
High Threats and
() Strengths
HighThreats.and Low
Naturallyin all these situations, different strategies have to be used. For
instance,inthe case of first situation, i.e., high opportunity and high strengths,
a88ress0vegrowth strategy may be best suited. In the fourth situation defensive
strategylike
disinvestment may be suitable. Ifthe organisation cannot be placed
one otfthe above
four situations, there may be problems. In real business
any
in have several opportunities and also some serious threats.
world,the firms may
organisation may have some strong capabilities and also some major
The critical success factors. In such a condition, it is only
weaknessesin the light of
SWOT analysis which will help the strategist
to visualise the appropriate
the
strategy.
Review Questions

by Corporate Appraisal'? VWhat is its role in strategy

1. What exactly we mean
formulation?
Explain the processes involved in Corporate appraisal.
2.
methods and techniques used for corporate appraisal with special
3. Describe the
emphasis on Value-Chain' analysis. of Quantitative Analysis
How?
equally important as that
4. Qualitative Analysis is Norms' and Bench-marking". techniques?
the concepts of 'Industry
D. Explain way it is different from
other
Score-Card? In what
0. What is Balanced
Analyse this concept.
1. What is Key-factor rating?
What is Corporate Capacity Profile? Explain its significance.
should we combine SAP
and
0. Advantage Profile. Why
9. Explain and illustrate Strategic.
ETOP?
Topic for Practical Work may be familiar.
organisation with which you
(a) Prepare CCP and SAP for an