Question based on JNU SM Solved Assignment and other course
Answer:
A profile of strategic advantages (SAP) is a summary which provides an overview of the advantages and disadvantages in key areas likely to affect future operations of the firm. It is a tool for making a systematic evaluation of the strategic advantage factors which are significant for the company in its environment. The preparation of such a profile presupposes detailed analysis and diagnosis of the factors in each of the functional areas (Marketing, Production, Finance and Accounting, Personnel and Human Resources, R & D). The relevant data for the critical areas may go as a supplement to the profile. The following Strategic Advantage Profile relates to a food processing company in India. It started as a branch of a US corporation, later became a 100% subsidiary, and now has 40% shareholding of the foreign enterprise. Many Indian households are familiar with its consumer products: jelly, baking powder, custard powder, squash and soft drinks concentrate. However, not many know about its industrial products- caramel coloring, adhesives, starch binders and fillers.
Since the Strategic Advantage Profile is a summary statement of corporate capabilities, in summarizing the functional competencies a comparative view needs to be taken in the light of external conditions and the time horizon of projections. For example, while comparing the level of inventory holding, one may find it to be relatively higher than that of competing firms; as such it should be regarded as a weakness. But if the market demands show an increasing trend, apparent weakness should be considered strength.
In the preparation of SAP one must also reckon the probability of the strength or advantage continuing in future and how long it can be equally alert and may bridge the gap sooner or later. Or, complementary factors in some areas may be a drag on the company’s strength in other areas. A company may identify its relative strength in the personnel area with highly skilled workmen and technical staff manning the production department; however, its production facilities may be old and outdated. It is obvious that the technical competence in the personnel area can hardly be regarded as a potential strength unless the company removes the weakness of outdated production facilities. No doubt the company should recognize the importance of its unique capabilities and capitalize the distinctive advantages rather than spreading its resources thinly across a number of functional areas. At the same time, it must recognize the danger of relying on strengths in a particular area without simultaneously reckoning the capabilities in other interdependent units of activity. It is thus very well suggested that “a firm should develop a strategy over time which revolves around an area of distinctive advantages, develop slack resources, and these can evolve into new areas of strength when old ones falter.”
