2001 Prentice HallCh. 4-*Strategic Management Concepts & Cases 8th edition Fred R. DavidChapter 4:The Internal AssessmentPowerPoint Slides By:Anthony F. ChelteWestern New England College

2001 Prentice Hall

2001 Prentice HallCh. 4-*Comprehensive Strategic Management ModelVision & Mission Statements

Chapter 2

ExternalAudit

Chapter 3InternalAudit

Chapter 4Long-TermObjectives

Chapter 5Generate,Evaluate,SelectStrategies

Chapter 6ImplementStrategies:Mgmt Issues

Chapter 7ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8Measure &EvaluatePerformance

Chapter 9

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2001 Prentice HallCh. 4-*Internal AssessmentLike a product or service, the planning process itself must be managed and shaped, if it is to serve executives as a vehicle for strategic decision-making

Robert Lenz

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Weak leadership can wreck the soundest strategy.

Sun Zi

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Internal Strategic Management Audit

Functional areas of the businessStrengthsWeaknesses

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Internal Audit:

Focuses on developing objectives and strategies to capitalize on internal strengths and overcome weaknesses

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Distinctive Competencies

A firms strengths that cannot be easily matched or imitated by competitors

Building competitive advantage involves taking advantage of distinctive competencies

Strategies designed in part to improve on a firms weaknesses and turn to strengths

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Internal AuditGather & assimilate information from:ManagementMarketingFinance/accountingProduction/operationsResearch & developmentManagement information systems

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Internal Audit

Involvement in performing an internal strategic-management audit provides vehicle for understanding nature and effect of decisions in other functional business areas of the firm

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Integrating Strategy and Culture

Organizational Culture Pattern of behavior developed by an organization as it learns to cope with its problem of external adaptation and internal integrationis considered valid and taught to new members

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Organizational Culture

Resistant to changeMay represent a strength or weakness of firm

Cultural products include:Values, beliefs, rites, rituals,ceremonies, myths, stories, legends, sagas, language, symbols, heroes

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Organizational Culture

Can inhibit strategic management:

Miss changes in external environment because they are blinded by strongly held beliefs

When a culture has been effective in the past, natural tendency to stick with it in future, even during times of major strategic change

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Management

PlanningOrganizingMotivatingStaffingControlling

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)PlanningStage of Strategic- Management Process When Most ImportantFunctionStrategy FormulationOrganizingStrategy ImplementationMotivatingStrategy ImplementationStaffingControllingStrategy ImplementationStrategy Evaluation

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)PlanningForecasting

Establishing objectives

Devising strategies

Developing policies

Setting goalsManagement

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)OrganizingOrganizational designJob specializationJob descriptionsJob specificationsSpan of controlUnity of commandCoordinationJob designJob analysisManagement

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Motivating

LeadershipCommunicationWork groupsJob enrichmentJob satisfactionNeeds fulfillmentOrganizational changeMorale

Management

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Staffing

Wage & salary adminEmployee benefitsInterviewingHiringFiringTrainingManagement developmentSafetyAffirmative actionEEOLabor relationsCareer developmentDiscipline procedures

Management

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Controlling

Quality controlFinancial controlSales controlInventory controlExpense controlAnalysis of variancesRewardsSanctions

Management

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Management Audit Checklist

Does the firm use strategic-management concepts?Are company objectives and goals measurable and well communicated?Do managers at all hierarchical levels plan effectively?Do managers delegate authority well?Is the organizations structure appropriate?

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Management Audit Checklist (Contd)

Are job descriptions and job specifications clear?Is employee morale high?Are employee turnover and absenteeism low?Are organizational reward and control mechanisms effective?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Marketing

Customer analysisSelling products/servicesProduct and service planningPricingDistributionMarketing researchOpportunity analysis

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Customer analysisCustomer surveys

Consumer information

Market positioning strategies

Customer profiles

Market segmentation strategiesMarketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Selling Products/servicesAdvertising

Sales

Promotion

Publicity

Sales force management

Customer relations

Dealer relationsMarketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Product/service planningTest marketing

Brand positioning

Devising warrantees

Packaging

Product features/options

Product style

Quality

Marketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)PricingForward integration

Discounts

Credit terms

Condition of sale

Markups

Costs

Unit pricing

Marketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)DistributionWarehousing

Channels

Coverage

Retail site locations

Sales territories

Inventory levels

TransportationMarketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Marketing researchData collection

Data input

Data analysis

Support all business functions

Marketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Opportunity analysisAssessing costs

Assessing benefits

Assessing risks

Cost/benefit/risk analysisMarketing

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Marketing Audit Checklist

Are markets segmented effectively?Is the organization positioned well among competitors?Has the firms market share been increasing?Are present channels of distribution reliable and cost effective?Does the firm have an effective sales force?

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Marketing Audit Checklist (Contd)

Does the firm conduct market research?Are product quality and customer service good?Are the firm's products/services priced appropriately?Does the firm have an effective promotion, advertising, and publicity strategy?

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Marketing Audit Checklist (Contd)

Are marketing planning and budgeting effective?Do the firms marketing mangers have adequate experience and training?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Finance/Accounting

Investment decision (Capital budgeting)Financing decisionDividend decision

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Liquidity ratiosFirms ability to meet its short-term obligations

Ratios

Current ratio

Quick (or acid-test)ratio

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Leverage ratiosExtent of debt financing

Ratios

Debt-to-total-assets

Debt-to-equity

Long-term debt-to-equity

Times-interest earned

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Activity ratiosEffective use of firms resources

Ratios

Inventory-turnover

Fixed assets turnover

Total assets turnover

Accounts receivable turnover

Average collection period

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Profitability ratiosEffectiveness shown by returns on sales and investment

Ratios

Gross profit margin

Operating profit margin

Net profit margin

Return on total assets (ROA)

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Profitability ratios(continued)Effectiveness shown by returns on sales and investment

Ratios

Return on stockholders equity (ROE)

Earnings per share

Price-earnings ratio

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Growth ratiosFirms ability to maintain economic position

Ratios

Sales

Net income

Earnings per share

Dividends per share

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Finance/Accounting Audit Checklist (Contd)

Where is the firm strong and weak as indicated by financial ratio analysis?Can the firm raise needed short-term capital?Can the firm raise needed long-term capital through debt and/or equity?Does the firm have sufficient working capital?Are capital budgeting procedures effective?

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Finance/Accounting Audit Checklist

Are dividend payout policies reasonable?Does the firm have good relations with its investors and stockholders?Are the firms financial managers experienced and well trained?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Production/Operations

ProcessCapacityInventoryWorkforceQuality

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)ProcessDesign of facility

Choice of technology

Facility layout

Process flow analysis

Facility location

Line balancing

Process control

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)CapacityForecasting

Facilities planning

Aggregate planning

Scheduling

Capacity planning

Queuing analysisProduction/Operations

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)InventoryRaw material

Work in process

Finished goods

Materials handlingProduction/Operations

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)WorkforceJob design

Work measurement

Job enrichment

Work standards

Motivation techniquesProduction/Operations

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)QualityQuality control

Sampling

Testing

Quality assurance

Cost controlProduction/Operations

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Production/Operations Audit Checklist

Are suppliers of raw materials, parts, and subassemblies reliable and reasonable?Are facilities, equipment, machinery, and offices in good condition?Are inventory-control policies and procedures effective?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Production/Operations Audit Checklist (Contd)

Are quality-control policies and procedures effective?Are facilities, resources, and markets strategically located?Does the firm have technological competencies?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Research & Development

Development of new products before competitionImproving product qualityImproving manufacturing processes to reduce costs

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)R&D budgetsFinancing as many projects as possible

Use percentage-of-sales method

Budgeting relative to competitors

Deciding how many successful new products are needed

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Research & Development Audit Checklist

Does the firm have R&D facilities? Are they adequate?If outside R&D firms are used, are they cost effective?Are the organizations R&D personnel well qualified?Are R&D resources allocated effectively?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Research & Development Audit Checklist (Contd)

Are management information and computer systems adequate?Is communication between R&D and other organizational units effective?Are present products technologically competitive?

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2001 Prentice HallCh. 4-*Internal Assessment (Contd)Computer Information Systems

Information SystemsCIO/CTOSecurityUser-friendlyE-commerce

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Computer Information Systems Audit Checklist

Do all managers in the firm use the information system to make decisions?Is there a chief information officer or director of information systems position in the firm?Are data in the information system updated regularly?

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Computer Information Systems Audit Checklist (Contd)

Do managers from all functional areas of the firm contribute input to the information system?Are there effective passwords for entry into the firms information system?Are strategists of the firm familiar with the information systems of rival firms?

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Assessment (Contd)Computer Information Systems Audit Checklist (Contd)

Is the information system user-friendly?Do all users of the information system understand the competitive advantages that information can provide firms?Are computer training workshops provided for users?Is the firms system being improved?

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2001 Prentice HallCh. 4-*Competitive Analysis: Porters Five-Forces ModelPotential development of substitute productsRivalry among competing firmsBargaining power of suppliersPotential entry of new competitorsBargaining power of consumers

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2001 Prentice HallCh. 4-*Internal Analysis (IFE)Five-Step Process:

List key internal factors (10-20)Strengths & weaknesses

Assign weight to each (0 to 1.0)Sum of all weights = 1.0

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2001 Prentice HallCh. 4-*Internal Analysis (IFE) (Contd)Five-Step Process: (Contd)

Assign 1-4 rating to each factorFirms current strategies response to the factor

Multiply each factors weight by its ratingProduces a weighted score

2001 Prentice Hall

2001 Prentice HallCh. 4-*Internal Analysis (IFE) (Contd)Five-Step Process: (Contd)

Sum the weighted scores for eachDetermines the total weighted score for the organization

Highest possible weighted score for the organization is 4.0; the lowest, 1.0. Average = 2.5

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2001 Prentice HallCh. 4-*

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2001 Prentice HallCh. 4-*Internal Analysis (IFE) (Contd)

Circus Circus (in the previous example), has a total weighted score of 2.75 indicating that the firm is above average in its overall internal strength

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2001 Prentice HallCh. 4-*Key Terms & ConceptsActivity ratiosBuyingCapital budgetingCommunicationComputer information systemsControllingCost/benefit analysisCultural productsCustomer analysis

Distinctive competenciesDistributionDividend decisionFinancial ratio analysisFinancing decisionsFunctions of finance/accountingFunctions of management

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2001 Prentice HallCh. 4-*Key Terms & Concepts (Contd)Functions of marketingFunctions of production/operationsGrowth ratioHuman resource managementInternal auditInternal Factor Evaluation (IFE) MatrixInvestment Decision

Leverage ratiosLiquidity ratiosMarketing researchMotivatingOpportunity analysisOrganizational cultureOrganizingPersonnel managementPlanningPricing

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2001 Prentice HallCh. 4-*Key Terms & Concepts (Contd)Product and service planningProduction/operations functionsProfitability ratiosResearch and development

SellingSocial responsibilityStaffingSynergyTest marketing

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