david_sm13_ppt_04

Chapter 4 The Internal Assessment

Strategic Management: Concepts & Cases13th EditionFred David

Copyright 2005 Prentice Hall

Great spirits have always encountered violent opposition from mediocre minds. Albert EinsteinInternal Assessment Weak leadership can wreck the soundest strategy. Sun Tzu


Identify strengths and weaknesses inManagementMarketingFinance and accountingProduction and operationsResearch and developmentManagement information systems

Internal Audit


Internal strengths/weaknessesExternal opportunities/threatsClear statement of missionNature of an Internal AuditBasis for Objectives & Strategies


Key Internal ForcesDistinctive Competencies:Firms strengths that cannot be easily matched or imitated by competitors


Key Internal ForcesDistinctive Competencies:Building competitive advantage involves taking advantage of distinctive competencies


Internal Audit ProcessInformation gathered from:ManagementMarketingFinance/accountingProduction/operationsResearch & developmentManagement information systemsParallels process of external audit


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


Internal AuditManagers and employees from all areas provide informationA team of managers then selects 10 to 15 key organizational strengths and weaknesses to focus on


Internal AuditExemplifies complexity of relationships among functional areas of the businessFinancial Ratio Analysis


Resource Based View (RBV)Approach to Competitive AdvantageInternal resources are more important than external factors


Resource Based View (RBV)Three All-Encompassing CategoriesPhysical resourcesHuman resourcesOrganizational resources


Resource Based View (RBV)Empirical IndicatorsRareHard to imitateNot easily substitutable


Integrating Strategy & CulturePattern 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 as the correct way to perceive, think, and feelOrganizational Culture


Integrating Strategy & CultureOrganizational CultureResistant to changeMay represent:StrengthWeakness


CulturalProductsValuesLegendsBeliefsHeroesRitesSymbolsRitualsMythsIntegrating Strategy & Culture


Integrating Strategy & CultureOrganizational Culture Can Inhibit Strategic ManagementMiss external changes due to strongly held beliefsNatural tendency to hold the course even during times of strategic change


ManagementFunctions of ManagementPlanningOrganizingMotivatingStaffingControlling


ManagementPlanningStage When Most ImportantFunctionStrategy FormulationOrganizingStrategy ImplementationMotivatingStrategy ImplementationStaffingControllingStrategy ImplementationStrategy Evaluation


ManagementPlanningBeginning of management processBridge between present & futureImproves likelihood of attaining desired results


PlanningDeveloping a mission

Forecasting future events and trends

Establishing objectives

Choosing strategies to pursue

Management


PlanningSynergyCan develop through planningExists when everyone pulls together as a team that knows what it wants to achieve


ManagementOrganizingAchieves coordinated effortDefines task & authority relationshipsDetermines who does whatDetermines who reports to whom


Management

OrganizingBreaking down tasks into jobsCombining jobs to form departmentsDelegating authority


ManagementMotivatingInfluencing to accomplish specific objectivesFour components include:LeadershipGroup dynamicsCommunicationOrganizational change


ManagementStaffingPersonnel managementHuman resource management


RecruitingInterviewingTestingSelectingOrientingTrainingDevelopingCaring forEvaluatingRewardingDiscipliningPromotingTransferringDemotingDismissing

ManagementStaffing


ManagementControllingEstablishing performance standardsEnsure actual operations conform to planned operationsTaking corrective actions


ManagementControllingEstablish performance standardsMeasure individual and organizational performanceCompare actual performance to planned performance standardsTake corrective action


Management Audit Checklist

Does the firm use strategic management concepts?Are objectives/goals measurable? Well communicated?Do managers at all levels plan effectively?



Do managers delegate well?Is the organizations structure appropriate?Are job descriptions clear?Are job specifications clear?Is employee morale high?



Is employee absenteeism low?Is employee turnover low?Are the reward mechanisms effective?Are the organizations control mechanisms effective?


MarketingCustomer Needs or Wants for Products and ServicesDefiningAnticipatingCreatingFulfilling


MarketingMarketing FunctionsCustomer analysisSelling products/servicesProduct & service planningPricingDistributionMarketing researchOpportunity analysis


Customer AnalysisCustomer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategiesMarketing


AdvertisingSales PromotionPublicityPersonal SellingSales force managementCustomer relationsDealer relationsMarketing

Selling Products/Services


Test marketingBrand positioningDevising warrantiesPackagingProduct features/optionsProduct styleQualityDeleting old productsProviding for customer serviceMarketing

Product/Service Planning


ConsumersGovernmentsSuppliersDistributorsCompetitorsMarketing

PricingMajor Stakeholders


WarehousingDistribution channelsRetail site locationsSales territoriesInventory levelsTransportationWholesalingRetailingMarketing

Distribution


Gather data

Record data

Analyze dataMarketing

Marketing Research


Assessing costs

Assessing benefits

Assessing risksMarketing

Cost/Benefit Analysis


Marketing AuditAre markets segmented effectively?Is the organization positioned well among competitors?Has the firms market share been increasing?Are the distribution channels reliable & cost effective?Is the sales force effective?


Marketing AuditDoes the firm conduct market research?Are product quality & customer service good?Are the firms products and services priced appropriately?Does the firm have effective promotion, advertising, and publicity strategies?


Marketing AuditAre the marketing, planning, and budgeting effective?Do the firms marketing managers have adequate experience and training?Is the firms Internet presence excellent as compared to rivals?


Finance/AccountingInvestment decision (Capital budgeting)Financing decisionDividend decision


Firms ability to meet its short-term obligations

Ratios

Current ratioQuick (or acid test) ratioBasic Financial Ratios

Liquidity Ratios


Extent of debt financing

Ratios

Debt-to-total assetsDebt-to-equityLong-term debt-to-equityTimes-interest-earnedBasic Financial Ratios

Leverage Ratios


Effective use of firms resources

Ratios

Inventory turnoverFixed assets turnoverTotal assets turnoverAccounts receivable turnoverAverage collection periodBasic Financial Ratios

Activity Ratios


Effectiveness shown by returns on sales and investment

Ratios

Gross profit marginOperating profit marginNet profit marginReturn on total assets (ROA)

Basic Financial Ratios

Profitability Ratios


Effectiveness shown by returns on sales & investment

Ratios

Return on stockholders equity (ROE)Earnings per sharePrice-earnings ratioBasic Financial Ratios

Profitability Ratios (contd)


Firms ability to maintain economic position

Ratios

SalesNet IncomeEarnings per shareDividends per share

Basic Financial Ratios

Growth Ratios


Ratio

SalesNet Income

Earnings per share

Dividends per shareAnnual percentage growth inTotal sales

Profits

EPS

Dividends per shareGrowth Ratios


Finance/Accounting AuditWhere is the firm financially strong/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?


Finance/Accounting AuditAre dividend payout policies reasonable?Does the firm have good relations with its investors and stockholders?Are the firms financial managers experienced and well trained?Is the firms debt situation excellent?


Production/OperationsProduction/Operations FunctionsProcessCapacityInventoryWorkforceQuality


Production/Operations AuditAre suppliers of materials, parts, etc. reliable and reasonable?Are facilities, equipment, machinery, and offices in good condition?Are inventory-control policies and procedures effective?


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


Research & DevelopmentResearch & Development FunctionsDevelopment of new products before competitorsImproving product qualityImproving manufacturing processes to reduce costsThese functions can be done internally or externally


Financing as many projects as possible Use percent-of-sales method Budgeting relative to competitors How many successful new products are neededResearch & Development

R&D Budgets


Research & Development AuditAre the R&D facilities adequate?If R&D is outsourced, is it cost-effective?Are the R&D personnel well qualified?Are R&D resources allocated effectively?


Research & Development AuditAre MIS and computer systems adequate?Is communication between R&D and other organizational units effective?Are present products technologically competitive?


Management Information SystemsPurposeImprove performance of an enterprise by improving the quality of managerial decisions


Management Information Systems AuditDo all managers use the information system to make decisions?Is there a CIO or Director of Information Systems position in the firm?Are data updated regularly?Do managers from all functional areas contribute input to the information system?Are there effective passwords for entry into the firms information system?


Management Information Systems AuditAre strategists of the firm familiar with the information systems of rival firms?Is the information system user-friendly?Do all users understand the competitive advantages that information can provide?Are computer training workshops provided for users?Is the firms system being improved?


Value Chain AnalysisThe process whereby a firm determines the costs associated with: Purchasing raw materials Manufacturing productsMarketing products And compares them to the value chain of rival firms


Value Chain AnalysisCore competencies

Distinctive competencies

Benchmarking


Transforming Value Chain Activities into Sustained Competitive AdvantageValue Chain Activities Are Identified and AssessedCore Competencies Arise in Some ActivitiesSome Core Competencies Evolve into Distinctive CompetenciesSome Distinctive Competencies Yield Sustained Competitive Advantages


Internal Factor Evaluation (IFE) MatrixList key internal factorsAssign a weight ranging from 0.0 to 1.0Assign a 1 to 4 rating to each factorMultiply the weight times the ratingSum the weighted scores


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.


Figure 4-3 page 109Breakeven point = quantity of units that a firm must sell in order for total revenues to equal total costs

Documents

david_sm13_ppt_04