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.
Functional area profile and resource development matrix:
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:
SAP tries to find out organizational strengths and weaknesses in relation to certain critical success factors (advantage factors or competence factors) within a particular industry. Many industries have relatively small but extremely important set of factors that are essential for successfully gaining and maintaining competitive advantages. Known as critical success factors (CSFs) they have significant bearing on the overall growth of a firm within the industry. Research has identified four major sources of CSFs in general:
Industry characteristics: CSFs are often industry specific. CSFs supermarket chains include inventory turnover, product mix, sales promotion and pricing. In the airline industry CSFs would be somewhat different i.e. fuel efficiency, load factors, excellent reservation systems etc. No one set of CSFs applies to all industries. As industries change, CSFs would also change.
Competitive positions: CSFs vary with a firm’s position relative to its rivals in the field. Now a days old rivals Coke and Pepsi are discovering there is more money in water than colored water. Things are warming up in the Rs 1000 crore bottled drinking water market and competitors including Parle’s Ramesh Chauhan (Bisleri Brand) face the threat of a white wash in the days ahead. Every competitive move by the big players poses innumerable problems to smaller firms ( price concessions , changing size of bottle, promotional offers etc become CSFs) putting a big question mark on their survival in the market place how so ever well established they might be.
General environment: Changes in many of the dimensions of the general environment i.e. political /legal socio cultural, demographic, technological, macroeconomic, global etc – can affect how CSFs emerge. For example imposing tax on exports of software companies not giving tax exemptions to R&D expenditure of pharmaceutical and biotechnology firms would always come in the way of growth and expansion plans of local as well as multinational players in these fields.
Organizational development: Internal developments too take the center stage and give rise to new CSFs. For example if several key executives of an investment banking arm quit to form a competing spin off firm rebuilding the executive team would become a key issue for the original firm.
Source: Strategic Management