internal assessment strat 1.docx

8/18/2019 Internal assessment Strat 1.docx

1/13

Chapter Objectives

1. Describe how to perform an internal strategic-management audit.

2. Discuss the Resource-Based iew !RB" in strategic management.

#. Discuss $e% interrelationships among the functional areas of business.

&. 'dentif% the basic functions or activities that ma$e up management(mar$eting( )nance*accounting production*operations( research and

development( and management information s%stems.

+. ,plain how to determine and prioritie a )rm/s internal strengths and

wea$nesses.

0. ,plain the importance of )nancial ratio anal%sis.

. Discuss the nature and role of management information s%stems in strategic

management.

. Develop an 'nternal 3actor ,valuation !'3," 4atri.

5. ,plain cost*bene)t anal%sis value chain anal%sis( and benchmar$ing as

strategic-management tools.

6e% 'nternal 3orces

Distinctive competencies

7 )rm/s strengths that cannot be easil% matched or imitated b%

competitors

Building competitive advantages involves ta$ing advantage of distinctive

competencies.


2/13

8he 9rocess of 9erforming an 'nternal 7udit

The internal audit

Re:uires gathering and assimilating information about the )rm/s

management( mar$eting( )nance*accounting( production*operations(

research and development !R;D"( and management information

s%stems operations

9rovides more opportunit% for participants to understand how their

jobs( departments( and divisions )t into the whole organiation

8he Resource-Based iew !RB"

The Resource-Based View (RBV) approach

contends that internal resources are more important for a )rm than

eternal factors in achieving and sustaining competitive advantage

9roponents of the RB contend that organiational performance will primaril%

be determined b% internal resources that can be grouped into three all-

encompassing categories< physical resources, human resources, and

organizational resources

Physical resources include all plant and e:uipment( location( technolog%(

raw materials( machines human resources include all emplo%ees(

training(eperience( intelligence( $nowledge( s$ills( abilities= and

organizational resources include )rm structure( planning processes(

information s%stems( patents( trademar$s( cop%rights( databases( and so on.

3or a resource to be valuable( it must be either !1" rare( !2" hard to imitate( or

!#" not easil% substitutable

8hese three characteristics of resources enable a )rm to implement

strategies that improve its e>cienc% and e?ectiveness and lead to a

sustainable competitive advantage

!"ample #ultural Products De$ned


3/13

'ntegrating @trateg% and Culture

Organiational culture signi)cantl% a?ects business decisions and thus must

be evaluated during an internal strategic-management audit.

'f strategies can capitalie on cultural strengths( such as a strong wor$ ethic

or highl% ethical beliefs( then management often can swiftl% and easil%

implement changes.

4anagement

8he functions of management consist of )ve basic activities< planning(

organiing( motivating( sta>ng( and controlling.

8hese activities are important to assess in strategic planning because an

organiation should continuall% capitalie on its management strengths and

improve on its management wea$nesses.

8he Basic 3unctions of 4anagement


4/13

4anagement 7udit Chec$list of Auestions

1. Does the )rm use strategic-management concepts

2. 7re compan% objectives and goals measurable and well communicated

#. Do managers at all hierarchical levels plan e?ectivel%

&. Do managers delegate authorit% well

+. 's the organiation/s structure appropriate

0. 7re job descriptions and job speci)cations clear

. 's emplo%ee morale high

. 7re emplo%ee turnover and absenteeism low

5. 7re organiational reward and control mechanisms e?ective

4ar$eting

%ar&eting

the process of de)ning( anticipating( creating( and ful)lling customers/needs and wants for products and services


5/13

#ustomer analysis

the eamination and evaluation of consumer needs( desires( and wants

involves administering customer surve%s( anal%ing consumer

information( evaluating mar$et positioning strategies( developing

customer pro)les( and determining optimal mar$et segmentation

strategies

essential in developing an e?ective mission statement

Desirable Characteristics of 7ds 8oda%


6/13

9roduct and @ervice 9lanning

Product and service planning

includes activities such as test mar$eting= product and brand

positioning= devising warranties= pac$aging= determining product

options( features( st%le( and :ualit%= deleting old products= and

providing for customer service

important when a compan% is pursuing product development or

diversi)cation

9ricing

3ive major sta$eholders a?ect pricing decisions< consumers( governments(suppliers( distributors( and competitors

@ometimes an organiation will pursue a forward integration strateg%

primaril% to gain better control over prices charged to consumers

Distri'ution

includes warehousing( distribution channels( distribution coverage(

retail site locations( sales territories( inventor% levels and location(

transportation carriers( wholesaling( and retailing

especiall% important when a )rm is striving to implement a mar$et

development or forward integration strateg%

4ar$eting Research

%ar&eting research

the s%stematic gathering( recording( and anal%ing of data about

problems relating to the mar$eting of goods and services

can uncover critical strengths and wea$nesses


7/13

Cost*Bene)t 7nal%sis

8hree steps are re:uired to perform a cost*bene)t anal%sis<

1. compute the total costs associated with a decision(

2. estimate the total bene)ts from the decision(

#. compare the total costs with the total bene)ts.

4ar$eting 7udit Chec$list of Auestions

1. 7re mar$ets segmented e?ectivel%

2. 's the organiation positioned well among competitors

#. as the )rm/s mar$et share been increasing

&. 7re present channels of distribution reliable and cost e?ective

+. Does the )rm have an e?ective sales organiation

0. Does the )rm conduct mar$et research

. 7re product :ualit% and customer service good

. 7re the )rm/s products and services priced appropriatel%

5. Does the )rm have an e?ective promotion( advertising( and publicit%

strateg%

1.7re mar$eting( planning( and budgeting e?ective

11.Do the )rm/s mar$eting managers have ade:uate eperience and training

12.'s the )rm/s 'nternet presence ecellent as compared to rivals

3inance*7ccounting 3unctions

8he functions of nance/accounting comprise three decisions<

1. the investment decision

2. the )nancing decision

#. the dividend decision


nvestment decision

the allocation and reallocation of capital and resources to projects(

products( assets( and divisions of an organiation

inancing decision

determines the best capital structure for the )rm and includes

eamining various methods b% which the )rm can raise capital

Dividend decisions


8/13

concern issues such as the percentage of earnings paid to

stoc$holders( the stabilit% of dividends paid over time( and the

repurchase or issuance of stoc$

determine the amount of funds that are retained in a )rm compared to

the amount paid out to stoc$holders

7 @ummar% of 6e% 3inancial Ratios


9/13


1. ow has each ratio changed over time

2. ow does each ratio compare to industr% norms

#. ow does each ratio compare with $e% competitors

3inance*7ccounting 7udit Chec$list

1. Ehere is the )rm )nanciall% strong and wea$ as indicated b% )nancial ratio

anal%ses

2. Can the )rm raise needed short-term capital

#. Can the )rm raise needed long-term capital through debt and*or e:uit%

&. Does the )rm have su>cient wor$ing capital

+. 7re capital budgeting procedures e?ective

0. 7re dividend pa%out policies reasonable

. Does the )rm have good relations with its investors and stoc$holders

. 7re the )rm/s )nancial managers eperienced and well trained

5. 's the )rm/s debt situation ecellent

9roduction*Operations


10/13

Production*operations +unction

consists of all those activities that transforms inputs into goods and

services

9roduction*operations management deals with inputs( transformations( and

outputs that var% across industries and mar$ets.

8he Basic 3unctions !Decisions" Eithin 9roduction*Operations

'mplications of arious @trategies on 9roduction*Operations

9roduction*Operations 7udit Chec$list

1. 7re supplies of raw materials( parts( and subassemblies reliable and

reasonable

2. 7re facilities( e:uipment( machiner%( and o>ces in good condition

#. 7re inventor%-control policies and procedures e?ective

&. 7re :ualit%-control policies and procedures e?ective


11/13

+. 7re facilities( resources( and mar$ets strategicall% located

0. Does the )rm have technological competencies

Research and Development 7udit

1. Does the )rm have R;D facilities 7re the% ade:uate

2. 'f outside R;D )rms are used( are the% cost-e?ective

#. 7re the organiation/s R;D personnel well :uali)ed

&. 7re R;D resources allocated e?ectivel%

+. 7re management information and computer s%stems ade:uate

0. 's communication between R;D and other organiational units e?ective

. 7re present products technologicall% competitive

4anagement 'nformation @%stems

7 management information s%stem/s purpose is to improve the performanceof an enterprise b% improving the :ualit% of managerial decisions

7n e?ective information s%stem thus collects( codes( stores( s%nthesies( and

presents information in such a manner that it answers important operating

and strategic :uestions

4anagement 'nformation @%stems 7udit

1. Do all managers in the )rm use the information s%stem to ma$e decisions

2. 's there a chief information o>cer or director of information s%stems position

in the )rm

#. 7re data in the information s%stem updated regularl%

&. Do managers from all functional areas of the )rm contribute input to the

information s%stem

+. 7re there e?ective passwords for entr% into the )rm/s information s%stem

0. 7re strategists of the )rm familiar with the information s%stems of rival )rms

. 's the information s%stem user-friendl%

. Do all users of the information s%stem understand the competitive

advantages that information can provide )rms5. 7re computer training wor$shops provided for users of the information

s%stem

1.'s the )rm/s information s%stem continuall% being improved in content- and

user-friendliness

alue Chain 7nal%sis !C7"

Value chain analysis (V#)


12/13

refers to the process whereb% a )rm determines the costs associated

with organiational activities from purchasing raw materials to

manufacturing product!s" to mar$eting those products

aims to identif% where low-cost advantages or disadvantages eist

an%where along the value chain from raw material to customer service

activities

Benchmar$ing

Benchmar&ing

an anal%tical tool used to determine whether a )rm/s value chain

activities are competitive compared to rivals and thus conducive to

winning in the mar$etplace

entails measuring costs of value chain activities across an industr% to

determine Fbest practicesG

8ransforming alue Chain 7ctivities into @ustained Competitive 7dvantage

8he 'nternal 3actor ,valuation !'3," 4atri

1. Hist $e% internal factors as identi)ed in the internal-audit process

2. 7ssign a weight that ranges from . !not important" to 1. !all-important" to

each factor

#. 7ssign a 1-to-& rating to each factor to indicate whether that factorrepresents a strength or wea$ness

&. 4ultipl% each factor/s weight b% its rating to determine a weighted score for

each variable

+. @um the weighted scores for each variable to determine the total weighted

score for the organiation


13/13

internal assessment strat 1.docx

Documents