Resource

Allocation Levels
 Allocation at
Corporate Level
Depends upon two factors.
Need for change in the existing pattern.
Extent of centralized control.
 Centralized Control

Low High
Low
Need for Change
High
Various Situations in
Resource Allocation
 Allocation at
Business Unit Level
• Depends upon two factors.
• Investment opportunities from its
environment.
• Strategic abilities to take up
opportunities.
PEST Analysis Model
 Political / Legal Factors
Stability of the govt.
Labor legislations.
Tax laws.
Foreign trade regulations.
Monopolies legislations.
Environmental protection laws.
 Economic Factors
Interest rates.
Business cycles.
Trends in GNP.
Money supply.
Inflation.
Unemployment.
Disposable income level.
Availability of fuel and cost.
 Socio-Cultural Factors
Changes in lifestyle.
Attitude towards work.
Prevalence of consumerism.
Population demographics.
Income distribution.
Social mobility.
Levels of education.
 Technological Factors
New discoveries and
development.
Levels of government spending
on research.
Speed of technology transfer.
Rates of obsolescence.
Michael Porter’s Model
 Threat of Entry
• Economies of scale, advantage to larger
players.
• Minimum level of capital.
• Access to channels of distribution.
• Cost advantage due to technology.
• Legislation governing entry into market.
• Level of differentiation of the product.
• Expected retaliation from the existing
firms.
 Bargaining Power
of Buyers
• The buyers are few and volumes are high.
• Alternative sources of supply are
available.
• The material cost makes up a substantial
part of the cost.
• Backward integration by buyers is not
difficult.
 Bargaining Power
of Suppliers
• The suppliers are few.
• Alternative sources are not available.
• Switching - one supplier to another is
difficult/expensive.
• Suppliers have strong brand image.
• Forward integration by the suppliers
is not difficult.
 Threat of Substitutes
The availability of substitute products can
almost act as a ceiling on the price at which
the product can be sold.
• Issues in evaluating the substitute products
are as under :-
• Whether the substitute product provide a
higher value than the product of the firm.
• Ease or difficulty for the consumer in
switching from the original product to the
substitute product.
 Extent of Rivalry
Competitive rivalry will be high in an
industry where the threat of entry is high,
both buyers and suppliers exercise tight
control and substitute products abound.
• Following factors are important :-
• Relative size of the players, If all are of equal
size, competition will be high.
• Stagnation, for a long time.
• High fixed cost, leading to a scramble to sell
the break even quantity.
• High exit barriers.
 Assessment of
Balance of Resources
The firm should consider whether the resources as
a whole are well balanced or not. Study of this
involves three factors, as under :-
Whether the activities carried out by various
business units are complementary to each other
or not (called portfolio analysis).
Whether the stock of skills well balanced or not.
Whether the resources are flexible and adaptable
to future needs or not.
 Allocation at
Business Unit Level
Depends upon two factors.
Investment opportunities from its
environment.
Strategic abilities to take up
opportunities.
 Analysis of Strategic Capabilities
Resource audit.
Resources available , and
those, that can be obtained when required.
Quality and quantity of resources.
Value chain analysis.
Aimed at identifying activities that are contributing
value to the firm.
Michael Porter’s model – activities are grouped in
primary and support activities.
Portfolio Analysis
BCG Matrix.
GE Spotlight Matrix.
 Value Chain Analysis
Primary Activities
Inbound logistics.
Operations.
Outbound logistics.
Marketing and sales.
Service.
 Value Chain Analysis
Support Activities
Procurement.
Technology development.
Human resources management.
Infrastructure.
 BCG Matrix
Market Share
Market Growth High Low
High
Low
v
 General Electric Stoplight Matrix
Business Strength
Attractiveness
High
Industry

Med
Low
 Flexibility Analysis
The resources be flexible enough to modify
strategy in the face of any uncertainty and
identify the areas which present uncertainty.
Then, identify the impact of an adverse
happening in the area presenting uncertainty.
Further, it is required to design tactical and
strategic changes the organization may have to
undertake to overcome the possible problems.
Finally, to find out how far the resources
available permit the changes required to meet the
situation.
 Identification of
Key Issues
The flexibility analysis should enable the
firm to identify its core competencies.
A core competency is an ability of the firm
that gives it an edge over its competitors.
The firm should match its competencies
with its strategy and arrive at a conclusion
on areas and activities for investment.
 Identification of
Opportunities
Study of the inputs and outputs of
various industries.
Import substitution.
Report of studies conducted by
institutions.
Revival of sick units
Generation of Ideas and Creativity
Creativity is the ability to create what does not already
exit. It is the ability to combine or synthesize the available
information and experience to see pattern and
possibilities.
Hurdles to Creative Ideas.
Creative ideas often calls for changing the way things
are being done at present. People are inherently averse
to change.
 People in the higher positions of power hate to admit
that there is a better way of doing things than what
they have been doing all along.
Trying out new methods is risky- managers always
want to avoid risk.
 Individual Creativity
Believe that all the objects,
procedures, and systems are
inadequate to meet our needs.
 Decide on the criteria or
specifications that the new idea we
now want to generate should meet.
Finally, go on generating ideas. The
focus while generating ideas should
only be on the quantity and not on
quality.
 Individual Creativity
Techniques
Attribute listing.
 Checklist.
 Black Box.
 Directed Dreaming.
 Group Creativity
Techniques
Brainstorming.
Delphi.
Nominal Group Technique.
Silent idea generation
Round-robin presentation.
Idea classification.
Voting and ranking.
Discussion of results.