2-Comprehensive Exam Guidance Abd Allah

من" العقدة أحل و امرى لى يسر و صدرى لى اشرح الهم" قولى يفقه لسانى

Template for answering the Comprehensive Exam

1- Introduction & Company profile:

Then start doing the ANALYSIS as follows:

2 -External Audit: assessing external environment STEPC

The main aim from this analysis is to end up with (Threats and Opportunities)

Political, Governmental, and Legal forces:

Political stability,

Government regulations & deregulations.

Changes in tax laws.

Level of government subsidies

Country to other countries relationships

Trading policies& Import-export regulations

Political conditions in foreign countries

Facilities for the entrance for new foreign investment,

Size of government budgets

The relations with other countries

Economic forces

Availability of credit and saving

Level of disposable income

Interest rates

Inflation rates

Unemployment

Stock Market trend

Foreign countries’ economic conditions

Monetary policies

investment laws and regulations,

The GDP and income level (which directly reflects on consumer spending power)

The currency depreciation or appreciation

Wages level


price elasticity of demand

Social, Cultural, Demographic, and Environmental forces:

Number of marriages, divorces, births, and deaths.

Social security programs

Per capita Income

Lifestyle

Traffic congestion

Trust in government

Average level of education

Population changes by race, age, and sex

Air pollution

size, structure, and regional distribution of the population

Cultural fear or freedom level

Cultural symbol (status)

What’s socially acceptable?

The attitudinal changes towards business ( product / services) produced

Technological forces

Internet availability and usage

E-commerce

The rate of development

The presence of skilled persons

Presence of technological capabilities.

Substitute might replace the organization’s product.

Competitors

The structure, bases and intensity of competition.

The existing major competitors and any competitive advantage.

The major strengths and relative position of each competitor.

The objectives, strategies and the level of profitability of each competitors.

The market share level.


THEN I WILL DO PORTER'S 5 FORCES ANALYSIS

3 -Internal Audit:

Copyright 2005 Prentice Hall Ch 3 -

The Five-Forces Model of CompetitionPotential development

of substitute products

Rivalry among competing firms

Bargaining power of suppliers

Potential entry of new competitors

Bargaining power of Buyers


The main aim from this analysis is to end up with: (Strengths and Weaknesses)

Here I want to analyze the internal functions of the company as follows mainly from the data given in the case:

-Management

I want to assess the management functions (Planning, organizing, motivating, staffing and controlling) I want to know

the overall management structure, polices..…

-Marketing

I want to know how the firm is doing its marketing functions (its customer segments, distribution of its products, its position, brand,

pricing, promotion………

-Financial analysisHere I am doing ratio analysis for maximum 2 years and compare them to evaluate the company's financial performance also I can compare them to the industry average if I have it. Very important to note that we will calculate the most important rations that will help us selecting strategies which I believe are the following ratios:

1) Liquidity Ratios:They measure the short term debt paying ability.

i.e: firm’s liquidity position.

Current Ratio = the total current assets/total current liabilities = (….. times) each 1$ of current liabilities is covered by (……) $ of current assets.Quick Ratio(Acid test ratio) = Cash+Marketable securities+Receivables/ Total current liabilitiesOR = Current Assets – Inventories / Current Liabilities = (…..times It’s a measure of immediate paying ability. It should be > 1 to be a good sign.


2) Assets Management Ratios: Inventory Turnover Ratio

= Sales / Average inventory = (…..times)

it indicates how many times the inventory turned over during the accounting period (year).

Fixed Assets Turnover Ratio = Sales / net fixed assets = (…time)each 1$ of fixed assets results in (…$) of salesit measures how efficiently the firm uses its plant & equipments.

Total Assets Turnover Ratio= Sales / Total Assets = (….time).

3) Debt Management Ratios (financial leverage):Determine the level of debt in the firm’s capital structure & measure how much debt the firm can take to finance its activities.

Total Debt To Total Assets Ratio = total debt (liabilities) / total assets = (…%) the creditors have supplied (…%) of the firms total financing.

4) Profitability Ratios:Show the combined effect of liquidity, asset management & debt

management on operating results

Profit Margin on Sales Ratio = Net Income / Net Sales (cash & credit)

= (…%) Each 1$ of net sales results on average in (…) cents of net

income. To be more realistic it’s better to use operating income

instead of net income.

If it’s lower than industry average it indicates;

Costs are too high Inefficient operations Heavy use of debt.


Return On Total Assets (ROA) ratio = net income / total assets = (…%) Each 1$ of total assets results in (…) cents of net income.

Return On Common Stockholder’s Equity (ROE) Ratio

= net income / common stockholder’s equity = (….%)

5) Market Value Ratios (the outsider’s view):Give management an indication of what investors think of the

company’s past performance and future prospects.

Price / earnings ratio = market price per share / earnings per share

(EPS) = (..Time). If the market price per share is > 12-15 time EPS, this

is over valued stock If it’s < 12-15 time EPS, this is under valued stock.

-Production and operation

Process, Capacity, Inventory, workforce and quality are the

functions of operation and production if we can extract from the

case anything that gives an indication about the company's

operations it will be a good thing.

-R&D

-MIS

BOTH OF THEM ARE INCLUDED IN THE INTERNAL ANALYSIS.

Hopefully we can extract from the case any strengths and

weaknesses concerning R&D and MIS and use them in our SWOT

analysis.


AFTER doing internal and external analysis, we will do:

SWOT and TOWS

HERE I have to be able to take strategic choices and select from the following types of strategies:

Vertical Integration Strategies (Gain Control Over: Distributors,

Suppliers, and Competitors)

1- Forward Integration(Gain Control Over ---Distributors, Retailers)

Guidelines

Current distributors – expensive or unreliable

Availability of quality distributors – limited

Firm competes in industry expected to grow markedly

Firm has both capital & HR to manage new business of distribution

Current distributors have high profit margins

2- Backward Integration (Ownership or Control -- Firm’s suppliers)

Guidelines


Current suppliers – expensive or unreliable

# of suppliers is small; # competitors is large

High growth in industry sector

Firm has both capital & HR to manage new business

Stable prices are important

Current suppliers have high profit margins

3- Horizontal Integration (Ownership or Control --Firm’s competitors)

Guidelines

Gain monopolistic characteristics w/o federal government challenge

Competes in growing industry

Increased economies of scale – major competitive advantages

Faltering due to lack of managerial expertise or need for particular resource

Intensive Strategies: Improve competitive position with existing

products

1- Market Penetration (Increased Market Share)

Present products/services & Present markets

Greater marketing efforts

Guidelines

Current markets not saturated

Usage rate of present customers can be increased significantly

Shares of competitors declining; industry sales increasing

Increased economies of scale provide major competitive advantage

2- Market Development (New Markets -- Present products/services to new

geographic areas)

Guidelines

New channels of distribution – reliable, inexpensive, good quality

Firm is successful at what it does

Untapped/unsaturated markets


Excess production capacity

Basic industry rapidly becoming global

3- Product Development(Increased Sales -- Improving present products/services,

Developing new products/services)

Guidelines

Products in maturity stage of life cycle

Industry characterized by rapid technological development

Competitors offer better-quality products @ comparable prices

Compete in high-growth industry

Strong R&D capabilities

Diversification Strategies (Less Popular -- More difficult to manage

diverse business activities)

1- Concentric Diversification (New & related products/services)

Guidelines

Compete in no/slow growth industry

New & related products increases sales of current products

New & related products offered at competitive prices

Current products—decline stage of product life cycle

Strong management team

2- Conglomerate Diversification(New & unrelated products/services)

Guidelines

Declining annual sales & profits

Capital & managerial ability to compete in new industry

Financial synergy between acquired and acquiring firms

Current markets for present products – saturated


3- Horizontal Diversification(New & unrelated products/services for current

customers)

Guidelines

Adding new products/services would significantly increase revenues

Highly competitive and/or no-growth industry; low margins & returns

Current distribution channels can be used

New products have counter cyclical sales patterns

Defensive Strategies

1- Retrenchment: (Regrouping , Cost & asset reduction to reverse declining sales &

profit)

Guidelines

Failed to meet objectives & goals consistency; has distinctive competencies

Firm is one of weaker competitors

Inefficiency, low profitability, poor employee morale, pressure for stockholders

Strategic managers have failed

Rapid growth in size; major internal reorganization necessary

2- Divestiture(Selling a division or part of an organization)

Guidelines

Retrenchment failed to attain improvements

Division needs more resources than are available

Division responsible for firm’s overall poor performance

Division is fit with organization

Large amount of cash is needed and cannot be raised through other sources

3- Liquidation: Selling , Company’s assets, in parts, for their tangible worth

Guidelines

Retrenchment & divestiture failed

Only alternative is bankruptcy


Minimize stockholder loss by selling firm’s assets

I will select 2 strategies and take into consideration my analysis especially the financial analysis to know if I am able to pursue specific strategy or not. The most expensive strategies are (Integration Strategies)


After I decide on my strategic choices I will select:

Means for Achieving Strategies

1- Joint Venture/Partnering -

Two or more companies form a temporary partnership or consortium for

purpose of capitalizing on some opportunity.

Why Joint Ventures Fail -

Managers who must collaborate daily; not involved in developing the venture

Benefits the company not the customers

Not supported equally by both partners

May begin to compete with one of the partners

Guidelines

Synergies between private and publicly held

Domestic with foreign firm, local management can reduce risk

Complementary distinctive competencies

Resources & risks where project is highly profitable (e.g. Alaska Pipeline)

Two or more smaller firms competing w/larger firm

Need to introduce new technology quickly

2- Mergers & Acquisitions

Provide improved capacity utilization

Better use of existing sales force

Reduce managerial staff

Gain economies of scale

Smooth out seasonal trends in sales

Gain new technology

Access to new suppliers, distributors, customers, products, creditors


3- First Mover Advantages

Benefits a firm may achieve by entering a new market or developing a new

product or service prior to rival firms.

Potential Advantages

Securing access to rare resources

Gaining new knowledge of key factors & issues

Carving out market share

Easy to defend position & costly for rival firms to overtake

4- Outsourcing

Companies taking over the functional operations of other firms

Benefits

Less expensive

Allows firm to focus on core business

Enables firm to provide better services

I do recommend not to stop here and just give general

recommendations we need to give an outlook about how will

we implement our strategies by going through the

organizational structure and functions with more

concentration on the Marketing part:

Selecting an organizational structureSelect one of the following 4 types:

FUNCTIONAL STRUCTURE:

The company rather being lead by an entrepreneur, he is replaced by as team of managers who have functional specializations. The entrepreneur must learn now to delegate his responsibilities; otherwise, the new structure will yield no benefit

ADVANTAGES

Centralized control of operations Promotes in-depth functional expertise Enhances operating efficiency where tasks are routine


DISADVANTAGES

Functional coordination problems Inter-functional rivalry Overspecialization and narrow viewpoints Hinders development of cross-functional experience Slower to respond in turbulent environments

DIVISIONAL STRUCTURE:

It occurs especially when the organization is managing diverse product line or when the organization is expanding to cover wider geographical areas

ADVANTAGES:

Decentralized decision making Each business is organized around products Puts profit/loss accountability on manager Facilitates rapid response to environmental changes Allows efficient management of a large number of units

DISADVANTAGES

May lead to costly duplication of functions Inter-divisional rivalry Corporate managers may lose in-depth understanding


MATRIX STRUCTURE

The matrix structure (some times called the matrix organization) it combines the functional and divisional structure. It is designed to gain the advantage and minimize the disadvantages of the functional and divisional structures.

The matrix is formed by using permanent cross functional teams to integrate functional expertise in support of a clear divisional focus on project, product or program.

The matrix structure in the multinational organizations offers a flexibility to deal with the regional differences as well as the multi products, programs or regional needs.

The matrix structure is the common solution for the organizations that pursues the growth strategies in a dynamic and complex environment

Functional & product form are combined simultaneously at the same level. Employee have 2 superior, functional superior & horizontal product manager

WHEN TO USE?

Scarce resources Ideas need to be cross fertilized across projects External environment is very complex and changeable

3. Distinct phase exist in the DEVELOPMENT OF matrix structure

1. Temporary cross functional task forces: Project manager is in charge as the key horizontal link

2. Product or brand management: The functional is still the primary organizational structure, product manager act as integrator of semi permanent product or brand.


3. Mature matrix: A true dual authority structure, functional & product structure are permanent

Human resources:

As most probably the case will be about a company that wants to invest in Egypt or Middle East, so, HRM has a big role here to answer the Question of (WHO WILL IMPLEMENT THE STRATEGY) mainly through the main HR functions and policies which are:

a. Preparation and selection: Review of the employees' job description, job specification and job performance standard to match the change of the organization.

b. Succession Planning: the preparation of the company succession plan will enable the organization to stand any future challenges.

C. Career Path and development: the preparation of the career path for the employees will help the stability and minimize the turnover of the employees.

d. Recruitment: designing a good recruitment process (Selection, interviews) with a high level of orientation to ensure the compatibility of the new recruited employees with the existing culture to achieve organizational objectives.

e. Training and development: on-the- job” training, Off-the-Job training and Provide career planning assistance for employees.

F. Incentive system will ensure the motivation of the employees to better performance (linking incentive to production)

g. Compensation Policies and protection: What employees get in exchange for their contribution to the organization maintains, retain productive workforce, achieve the org. objectives.

h. Managing workforce diversity ( if the organization is going internationally)


i. Enhance employee participation: in implementing our strategy, all employees from different organizational levels must make a meaningful contribution in decision-making .this will increase employee's involvement and enhance their working life balance.

j. Enhance employee organizational commitment: by increasing job involvement, which results in lower levels of absenteeism and turnover.

k. Implementing employee recognition programs: starting with personal attention and ending with appreciation for a job well done.

l. Develop effective staffing plans supporting the organizational strategies by allowing to fill job openings proactively (in terms of number and the quality of the workforce for the short and long term) VIP in case of international operations.( if the company is multinational)

Adding the culture perspective here will be a good point.

R&D

WHEN we select strategies such as product development and related diversifications require that the new products be successfully developed and that old ones be significantly improved and here R&D is essential

As we are MARKETING SPECIALIZATION so we need to excel in the marketing part as much as we can:

So…….

We can make a simple marketing overview as follows:

A- Selecting target segment:

Level of Market Targeting Segment

Mass (undifferentiated) marketingThe same offer with the a advantage of economic of scale

Segment (differentiated) marketingSeveral segment with offer for each

Concentrated (niche) marketingTarget Singles with a single marketing mix

Local marketingTailoring products for the local customer group needs

CustomizationTailoring products for the small group of people or specific individuals needs.


B-Positioning:

Positioning

Begin by the differentiating the company’s marketing offer that will deliver more value than the competitors thus gaining competitive advantage

1. Choose a broad poisoning for the product Become best at one of the three value disciplines. (Operational Excellence –

Product Leadership and Customer Intimacy) Achieve an adequate performance level in the other two disciplines. Keep improving one’s superior position in the chosen discipline so as not to

lose out to a competitor. Keep becoming more adequate in the other two disciplines, since

competitors keep raising customers’ expectations about what is adequate.

2. Choose a specific poisoning for the product Best quality Best performance Most reliable Most durable Safest Fastest Best value for the money Least expensive Most prestigious Best designed or styled Easiest to use Most convenient

3. Choose a value poisoning for the product More for More More for the Same The Same for Less Less for Much Less More for Less

C-Brand or Product strategies

1. Line extension: additional items in the same product under the same brand Advantage:

Saving cost Minimize risk in introducing new products

Disadvantage:

Brand dilution consumer confusion Cannibalization on original product


2. brand extension: launching new product under the same brand Advantage:

Saving high advertising cost and build brand name Give new products instant recognition and faster acceptance

Disadvantage:

consumer confusion about the brand image and may loose its positioning may harm consumer attitude toward other product under the same brand

3. multi branding: new brand name in the same product Advantage:

establish different features appeal to different buying motives

Disadvantage:

multi branding might gain only small market share need resources on building different brands

D-Pricing strategies

1. Market penetraion: set low prices to ensure high level of salesused when:

market is highly price sensitive low price simulate market growth production and distribution cost fall with in accumulated production

experience

2. Market skimming: initial prices are set high and gradually reduced to capture greet number of market segments

Used when:

sufficient number of buyers have a high current demand high price communicates the image of superior product

3. Product quality leadership : relative prices are set at a premium Used when:

brands perceived relative high quality

4. Early cash recovery : Used when:

Faced with problem of liquidity Belief that the product life is likely to be short

Can be delivered by:

Mass distribution


Rigorous credit control policy Special offers Discount to trigger immediate sales and prompt payment

5. Reflecting product differentiation : Used when:

Target different segments it different products

E-Promotion strategies

1. AdvertisingUsed when:

Build up long term image Cost efficient in reaching geographically dispersed buyers Trigger quick sales

Gives image of good value to the brand

2. Sales promotionUsed when:

Encourage trial or purchase Short run effect Boosting sagging sales

3. Public relationUsed when:

Building up good corporate image Heading off unfavorable rumors

4. Personal sellingUsed when:

Making sales Building customer relations preference, conviction and solicit action Build up buyers

5. Direct and interative marketingUsed when:

Targeted individual consumers Localized and customized used to reach well defined target segments


F-Distribution strategies

1. Identify major alternatives channelsNumber of intermediary:

Exclusive distribution selective distribution intensive distribution

2. Evaluting alternatives channelsBased on:

Channels cost Sales output Product complexity

3. Selecting channelsBased on:

Years on business Growth record Financial strength Service reputation

Inventory management

Manufacture focused Time based market focused

HOPEFULLY WE CAN REACH THIS STEP ISA

AT THE END WE NEED TO WRITE A GOOD CONCLUSION THAT MAINLY ANSWERS THE QUESTION GIVEN ABOUT THE CASE.

GOOD LUCK

Documents

2-Comprehensive Exam Guidance Abd Allah