Download - Chapter 4 The Internal Assessment
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Chapter 4 The Internal Assessment
Strategic Management:
Concepts & Cases11th EditionFred David
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How frequently should we verify strategies?
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Internal strengths/weaknesses External opportunities/threats Clear statement of mission
Nature of an Internal Audit
Basis for Objectives & Strategies
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Internal Audit
•Information from:•Management
•Marketing
•Finance/accounting
•Production/operations
•Research & Development
•Management Information Systems
Parallels process of external audit
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Resource Based View (RBV)
Approach to Competitive Advantage
Internal resources are more important than external factors
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Resource Based View (RBV)
Three All Encompassing Categories
1. Physical resources
2. Human resources
3. Organizational resources
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Resource Based View (RBV)
Empirical Indicators
Rare
Hard to imitate
Not easily substitutable
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Integrating Strategy & Culture
Pattern of behavior developed by an organization as it learns to cope with its problem of external adaptation and internal integration…is considered valid and taught to new members
Organizational Culture
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CulturalProducts
Values
Legends Beliefs
Heroes Rites
Symbols RitualsMyths
Integrating Strategy & Culture
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Management
Planning
Stage When Most ImportantFunction
Strategy Formulation
Organizing Strategy Implementation
Motivating Strategy Implementation
Staffing
Controlling
Strategy Implementation
Strategy Evaluation
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Marketing
Customer Needs/Wants for Products/Services
1. Defining
2. Anticipating
3. Creating
4. Fulfilling
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MarketingMarketing Functions
1. Customer analysis
2. Selling products/services
3. Product & service planning
4. Pricing
5. Distribution
6. Marketing research
7. Opportunity analysis
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Finance/AccountingFinance/Accounting Functions
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision
4. Financial analysis – Key financial ratios
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Production/Operations
Production/Operations Functions
Process Capacity Inventory Workforce Quality
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Research & Development
Research & Development Functions
Development of new products before competitors
Improving product quality Improving manufacturing processes to
reduce costs
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Management Information Systems
Information Systems CIO/CTO Security User-friendly E-commerce
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Managerial Questions 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 organization’s structure appropriate? Are job descriptions and specifications clear? Is employee morale high? Are employee turnover and absenteeism low? Are organizational reward and control mechanisms effective?
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Marketing Audit Checklist Are markets segmented effectively? Is the organization positioned well among competitors? Has the firm’s market share been increasing? Are present channels of distribution reliable and cost-effective? Does the firm have an effective sales organization? Does the firm conduct market research? Are product quality and customer service good? Are the firm’s products and services priced appropriately? Does the firm have an effective promotion, advertising, and
publicity strategy? Are marketing planning and budgeting effective? Do the firm’s marketing managers have adequate experience
and training?
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Accounting Audit Checklist Where is the firm financially 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? Are dividend payout policies reasonable? Does the firm have good relations with its investors
and stockholders? Are the firm’s financial managers experienced and
well trained?
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Accounting Ratios Liquidity ratios measure a firm’s ability to meet maturing short-term
obligations. Current ratio Quick (acid-test) ratio
Leverage ratios measure the extent to which a firm has been financed by debt.
Debt-to-total-assets ratio Debt-to-equity ratio Long-term debt-to-equity ratio Times-interest-earned (coverage) ratio
Activity ratios measure how effectively a firm is using its resources. Inventory turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period
Profitability ratios measure management’s overall effectiveness as shown by returns generated on sales and investment.
Gross profit margin Operating profit margin Net profit margin Return on total assets Return on stockholders’ equity Earnings per share Price-earnings ratio
Growth ratios measure the firm’s ability to maintain its economic position in the growth of the economy and industry.
Sales Net income Earnings per share Dividends per share
How has each ratio changed over time?
2. How does each ratio compare to industry norms?
3. How does each ratio compare with key competitors?
BNI
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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? Are quality-control policies and procedures
effective? Are facilities, resources, and markets strategically
located? Does the firm have technological competencies?
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R&D Audit Checklist of Questions Does the firm have R&D facilities? Are they
adequate? If outside R&D firms are used, are they cost effective? Are the organization’s R&D personnel well qualified? Are R&D resources allocated effectively? 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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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? Do managers from all functional areas of the firm contribute input to
the information system? Are there effective passwords for entry into the firm’s information
system? Are strategists of the firm familiar with the information systems of rival
firms? 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 of the information
system? Is the firm’s information system continually being improved in content
and user-friendliness?