bsichapter3.ppt

Copyright 2005 Prentice HallCh 1 -*AgendaQuestion?Assignment 2 posted Due Feb 13 (changed from the 9th)EFE and CPM for McDonald'sAssignment 3 will be assigned soon and due right after Winter break Finish Discussion on The External AssessmentBegin Discussion on The Internal Assessment

Copyright 2005 Prentice Hall

Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 2 -*Chapter 2The Business Vision & Mission

Strategic Management: Concepts & Cases13th EditionFred David


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Steps to Determine if an Acceptable Profit Can Be EarnedIdentify key aspects or elements of each competitive forceEvaluate how strong and important each element is for the firmDecide whether the collective strength of the elements is worth the firm entering or staying in the industry


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*The Five-Forces ModelRivalry among competing firmsMost powerful of the five forcesFocus on competitive advantage of strategies over other firms


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Conditions that Cause High Rivalry Among Competing FirmsHigh number of competing firmsSimilar size of firms competingSimilar capability of firms competingFalling demand for the industrys productsFalling product/service prices in the industry


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Conditions that Cause High Rivalry Among Competing FirmsConsumers can switch brands easilyBarriers to leaving the market are highBarriers to entering the market are lowFixed costs are high among firms competingThe product is perishable


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Conditions that Cause High Rivalry Among Competing FirmsRivals have excess capacityConsumer demand is fallingRivals have excess inventoryRivals sell similar products/servicesMergers are common in the industry


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*The Five-Forces Model

Potential Entry of New CompetitorsBarriers to entry are importantQuality, pricing, and marketing can overcome barriers


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*The Five-Forces ModelPotential development of substitute productsPressure increases when:Prices of substitutes decreaseConsumers switching costs decrease


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*The Five-Forces ModelBargaining Power of Suppliers is increased when there are:Large numbers of suppliersFew substitutesCosts of switching raw materials is highBackward integration is gaining control or ownership of suppliers


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*The Five-Forces Model

Bargaining power of consumersCustomers being concentrated or buying in volume affects intensity of competitionConsumer power is higher where products are standard or undifferentiated


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Conditions Where Consumers GainBargaining PowerIf buyers can inexpensively switchIf buyers are particularly importantIf sellers are struggling in the face of falling consumer demandIf buyers are informed about sellers products, prices, and costsIf buyers have discretion in whether and when they purchase the product


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Sources of External Information: Unpublished SourcesCustomer surveysMarket researchSpeeches at professional or shareholder meetingsTelevision programsInterviews and conversations with stakeholders


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Sources of External Information: Published SourcesPeriodicalsJournalsReportsGovernment documentsAbstractsBooksDirectoriesNewspapersManuals


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Sources of External Information: Web Siteshttp://www.marketwatch.com/ http://moneycentral.msn.comhttp://finance.yahoo.comhttp://www.bloomberg.com/markets/ https://us.etrade.com/e/t/invest/marketswww.hoovers.comUMFK Databases


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Forecasting Tools and TechniquesForecasts are educated assumptions about future trends and eventsQuantitative techniques most appropriate when historical data is available and there is a constant relationshipQualitative techniques


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Industry Analysis: The External Factor Evaluation (EFE) MatrixEconomicSocialCulturalDemographicEnvironmentalPoliticalGovernmentalTechnologicalCompetitiveLegal


Copyright 2005 Prentice HallCh 3 -*5 Steps (Page 80 & 81)List key external factors10-20 (balanced 5&5 10&10)Opportunities then threatsAssign weights from 0.0 to 1.0 based on importanceSum of all weights across all factors = 1Assign a rating from 1 to 4 for all factors where4 = the firms response is superior3 = the firms response is above avg2 = the firms response is average1 = the firms response is poor Multiply the rating by the weightSum the weighted scores


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -* Total weighted score of 4.0Organization response is outstanding to threats and weaknessesIndustry Analysis EFE Total weighted score of 1.0Firms strategies not capitalizing on opportunities or avoiding threats Average is 2.5


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Industry Analysis: Competitive Profile Matrix (CPM)Identifies firms major competitors and their strengths & weaknesses in relation to a sample firms strategic positions

Critical success factors include internal and external issues


Copyright 2005 Prentice HallCh 3 -*Steps to a CPMIdentify Critical Success Factors (CSF) Broad issuesInternal and external (5 of each is a good mix) Assign a weight to each CSFMust add up to 1Assign a rating for your firm and each of your competitors4 = major strength3 = minor strength2 = minor weakness1 = major weaknessMultiply weight by ratingSum the weighted ratings and compare


Copyright 2005 Prentice HallCh 3 -*

GatewayAppleDellCSFsWtRatingWtd ScoreRatingWtd ScoreRatingWtd ScoreMarket share0.1530.4520.3040.60Inventory sys0.0820.1620.1640.32Fin position0.1020.2030.3030.30Prod. Quality0.0830.2440.3230.24Cons. Loyalty0.0230.0630.0640.08Sales Distr0.1030.3020.2030.30Global Exp.0.1530.4520.3040.60Org. Structure0.0530.1530.1530.15


Copyright 2005 Prentice HallCh 3 -*

GatewayAppleDellCSFs (contd)WtRatingWtd ScoreRatingWtd ScoreRatingWtd ScoreProd. Capacity0.0430.1230.1230.12E-commerce0.1030.3030.3030.30Customer Serv0.1030.3020.2040.40Price competitive0.0240.0810.0230.06Mgt. experience0.0120.0240.0420.02

Total1.002.832.473.49


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 3 -*Industry Analysis CPM Just because one firm receives a 3.2 rating and another receives a 2.8 rating, it does not follow that the first firm is 20 percent better than the second. Important


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* Great spirits have always encountered violent opposition from mediocre minds. Albert EinsteinInternal Assessment Weak leadership can wreck the soundest strategy. Sun Tzu


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Internal AuditIdentify strengths and weaknesses inManagementMarketingFinance and accountingProduction and operationsResearch and developmentManagement information systems


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Internal strengths/weaknessesExternal opportunities/threatsClear statement of missionNature of an Internal AuditBasis for Objectives & Strategies


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Key Internal ForcesDistinctive Competencies:Building competitive advantage involves taking advantage of distinctive competencies


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Internal Audit ProcessInformation gathered from:ManagementMarketingFinance/accountingProduction/operationsResearch & developmentManagement information systemsParallels process of external audit


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 2 -* The biggest levers youve got to change a company are strategy, structure, and culture. If I could pick two, Id pick strategy and culture. Wayne Leonard, CEO, Entergy


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementPlanningStage When Most ImportantFunctionStrategy FormulationOrganizingStrategy ImplementationMotivatingStrategy ImplementationStaffingControllingStrategy ImplementationStrategy Evaluation


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementPlanning the only constant is changeBeginning of management processBridge between present & futureImproves likelihood of attaining desired results


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*PlanningDeveloping a mission

Forecasting future events and trends

Establishing objectives

Choosing strategies to pursue

Management


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementOrganizingAchieves coordinated effortDefines task & authority relationshipsDetermines who does whatDetermines who reports to whom


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Management

OrganizingBreaking down tasks into jobsCombining jobs to form departmentsDelegating authority


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementMotivatingInfluencing to accomplish specific objectivesFour components include:LeadershipGroup dynamicsCommunicationOrganizational change


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementStaffingRecruitingInterviewingTestingSelectingOrientingTrainingDevelopingCaring forEvaluatingRewardingDiscipliningPromotingTransferringDemotingDismissing


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementControllingEstablishing performance standardsEnsure actual operations conform to planned operationsTaking corrective actions


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ManagementControllingEstablish performance standardsMeasure individual and organizational performanceCompare actual performance to planned performance standardsTake corrective action


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*MarketingMarketing FunctionsCustomer analysisSelling products/servicesProduct & service planningPricingDistributionMarketing researchOpportunity analysis


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Customer AnalysisCustomer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategiesMarketing


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*AdvertisingSales PromotionPublicityPersonal SellingSales force managementCustomer relationsDealer relationsMarketing

Selling Products/Services


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Test marketingBrand positioningDevising warrantiesPackagingProduct features/optionsProduct styleQualityDeleting old productsProviding for customer serviceMarketing

Product/Service Planning


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*ConsumersGovernmentsSuppliersDistributorsCompetitorsMarketing

PricingMajor Stakeholders


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*WarehousingDistribution channelsRetail site locationsSales territoriesInventory levelsTransportationWholesalingRetailingMarketing

Distribution


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Gather data

Record data

Analyze dataMarketing

Marketing Research


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Assessing costs

Assessing benefits

Assessing risksMarketing

Cost/Benefit Analysis


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2005 Prentice HallCh 3 -*Financial ratiosObjective indicatorsTwo usesTrending over timeComparison to industry norms and Competitors Websites with definitions and exampleshttp://www.netmba.com/finance/financial/ratios/http://cpaclass.com/fsa/ratio-01a.htm http://www.va-interactive.com/inbusiness/editorial/finance/ibt/ratio_analysis.html Industry norms are available through UMFK electronic resourcesBusiness and Company Resource CenterBusiness Source Premier Valueline

Ratios.xlt


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* Firms ability to meet its short-term obligations

Ratios

Current ratioQuick (or acid test) ratioBasic Financial Ratios

Liquidity Ratios


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* Extent of debt financing

Ratios

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

Leverage Ratios


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* Effective use of firms resources

Ratios

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

Activity Ratios


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* 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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* Effectiveness shown by returns on sales & investment

Ratios

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

Profitability Ratios (contd)


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -* Firms ability to maintain economic position

Ratios

SalesNet IncomeEarnings per shareDividends per share

Basic Financial Ratios

Growth Ratios


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Ratio

SalesNet Income

Earnings per share

Dividends per shareAnnual percentage growth inTotal sales

Profits

EPS

Dividends per shareGrowth Ratios


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Production/Operations AuditAre quality-control policies & procedures effective?Are facilities, resources, and markets strategically located?Does the firm have technological competencies?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Research & DevelopmentResearch & Development FunctionsDevelopment of new products before competitorsImproving product qualityImproving manufacturing processes to reduce costsThese functions can be done internally or externally


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Research & Development AuditAre MIS and computer systems adequate?Is communication between R&D and other organizational units effective?Are present products technologically competitive?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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?


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*Value Chain AnalysisCore competencies

Distinctive competencies

Benchmarking


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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


Copyright 2011 Pearson Education, Inc. Publishing as Prentice HallCh 4 -*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.


******These are clickable links in slideshow mode.*********************************************************Figure 4-3 page 109*Breakeven point = quantity of units that a firm must sell in order for total revenues to equal total costs********

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bsichapter3.ppt