David- Sm14 Inppt04

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The InternalThe Internal

Assessment Assessment

Chapter Four



Chapter Objectives

1. Describe how to perform an internal strategic-

management auit.

!. Discuss the "esource-#ase $iew %"#$& in

strategic management.'. Discuss (e) interrelationships among the functional

areas of business.

*. Ientif) the basic functions or activities that ma(e

up management+ mar(eting+ finance,accounting

prouction,operations+ research an evelopment+

an management information s)stems.

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Chapter Objectives

. /plain how to etermine an prioriti0e a firms

internal strengths an wea(nesses.

2. /plain the importance of financial ratio anal)sis.

3. Discuss the nature an role of management

information s)stems in strategic management.

4. Develop an Internal Factor valuation %IF&

5atri/.6. /plain cost,benefit anal)sis value chain

anal)sis+ an benchmar(ing as strategic-

management tools.

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A Comprehensive 7trategic-

5anagement 5oel

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8e) Internal Forces

Distinctive competencies

A firms strengths that cannot be easil)

matche or imitate b) competitors

#uiling competitive avantages involves

ta(ing avantage of istinctive

competencies.

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The 9rocess of 9erforming an

Internal Auit

The internal audit "e:uires gathering an assimilating

information about the firms management+

mar(eting+ finance,accounting+

prouction,operations+ research an

evelopment %";D&+ an management

information s)stems operations

9rovies more opportunit) for participants to

unerstan how their jobs+ epartments+ an

ivisions fit into the whole organi0ation

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The "esource-#ase $iew %"#$&

The Resource-Based View (RBV)

approach

contens that internal resources are moreimportant for a firm than e/ternal factors in

achieving an sustaining competitive

avantage





9roponents of the "#$ conten that

organi0ational performance will primaril)

be etermine b) internal resources that

can be groupe into three all-

encompassing categories< ph)sical

resources+ human resources+ an

organi0ational resources





For a resource to be valuable+ it must be

either %1& rare+ %!& har to imitate+ or %'&

not easil) substitutable

These three characteristics of resources

enable a firm to implement strategies that

improve its efficienc) an effectiveness

an lea to a sustainable competitive

avantage




/ample Cultural 9roucts

Define

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Integrating 7trateg) an Culture

Organi0ational culture significantl) affects

business ecisions an thus must be

evaluate uring an internal strategic-

management auit.

If strategies can capitali0e on cultural

strengths+ such as a strong wor( ethic or

highl) ethical beliefs+ then managementoften can swiftl) an easil) implement

changes.




5anagement

The functions of management consist of

five basic activities< planning+ organi0ing+

motivating+ staffing+ an controlling.

These activities are important to assess in

strategic planning because an organi0ation

shoul continuall) capitali0e on its

management strengths an improve on itsmanagement wea(nesses.

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5anagement Auit Chec(list

of >uestions

1. Does the firm use strategic-management

concepts?

!. Are compan) objectives an goals

measurable an well communicate?

'. Do managers at all hierarchical levels plan

effectivel)?

*. Do managers elegate authorit) well?

. Is the organi0ations structure appropriate?

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5anagement Auit Chec(list

of >uestions %cont.&

2. Are job escriptions an job

specifications clear?

3. Is emplo)ee morale high?4. Are emplo)ee turnover an absenteeism

low?

6. Are organi0ational rewar an controlmechanisms effective?




5ar(eting

Marketing

the process of efining+ anticipating+ creating+

an fulfilling customers nees an wants for

proucts an services




Functions of 5ar(eting




5ar(eting

Customer analysis the e/amination an evaluation of consumer

nees+ esires+ an wants

involves aministering customer surve)s+

anal)0ing consumer information+ evaluating

mar(et positioning strategies+ eveloping

customer profiles+ an etermining optimal

mar(et segmentation strategies

essential in eveloping an effective mission

statement




Desirable Characteristics

of As Toa)




9rouct an 7ervice 9lanning

roduct and service planning

inclues activities such as test mar(eting@

prouct an bran positioning@ evising

warranties@ pac(aging@ etermining prouct

options+ features+ st)le+ an :ualit)@ eleting

ol proucts@ an proviing for customer

service important when a compan) is pursuing

prouct evelopment or iversification

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9ricing

Five major sta(eholers affect pricing

ecisions< consumers+ governments+

suppliers+ istributors+ an competitors

7ometimes an organi0ation will pursue a

forwar integration strateg) primaril) to

gain better control over prices charge to

consumers

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Distribution

Distri!ution

inclues warehousing+ istribution channels+

istribution coverage+ retail site locations+

sales territories+ inventor) levels an

location+ transportation carriers+ wholesaling+

an retailing

especiall) important when a firm is striving toimplement a mar(et evelopment or forwar

integration strateg)

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5ar(eting "esearch

Marketing research

the s)stematic gathering+ recoring+ an

anal)0ing of ata about problems relating to

the mar(eting of goos an services

can uncover critical strengths an

wea(nesses

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Cost,#enefit Anal)sis

Three steps are re:uire to perform a

cost,benefit anal)sis<

1.compute the total costs associate with aecision+

!.estimate the total benefits from the

ecision+'.compare the total costs with the total

benefits.

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5ar(eting Auit Chec(list

of >uestions

1. Are mar(ets segmente effectivel)?

!. Is the organi0ation positione well among

competitors?

'. as the firms mar(et share been increasing?

*. Are present channels of istribution reliable an

cost effective?

. Does the firm have an effective salesorgani0ation?

2. Does the firm conuct mar(et research?

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5ar(eting Auit Chec(list

of >uestions

3. Are prouct :ualit) an customer service goo?

4. Are the firms proucts an services price

appropriatel)?

6. Does the firm have an effective promotion+avertising+ an publicit) strateg)?

1=. Are mar(eting+ planning+ an bugeting effective?

11. Do the firms mar(eting managers have ae:uate

e/perience an training?

1!. Is the firms Internet presence e/cellent as

compare to rivals?




Finance,Accounting Functions

The functions of finance/accounting

comprise three ecisions<

1.the investment ecision!.the financing ecision

'.the ivien ecision





"nvestment decision

the allocation an reallocation of capital an

resources to projects+ proucts+ assets+ an

ivisions of an organi0ation

#inancing decision

etermines the best capital structure for the

firm an inclues e/amining various methosb) which the firm can raise capital





Dividend decisions

concern issues such as the percentage of

earnings pai to stoc(holers+ the stabilit) of

iviens pai over time+ an the repurchaseor issuance of stoc(

etermine the amount of funs that are

retaine in a firm compare to the amountpai out to stoc(holers




A 7ummar) of 8e)

Financial "atios

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A 7ummar) of 8e)

Financial "atios

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A 7ummar) of 8e)

Financial "atios

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1. ow has each ratio change over time?

!. ow oes each ratio compare to inustr)

norms?'. ow oes each ratio compare with (e)

competitors?

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Fi ,A i A i



Finance,Accounting Auit

Chec(list

1. Bhere is the firm financiall) strong an wea(

as inicate b) financial ratio anal)ses?

!. Can the firm raise neee short-term capital?

'. Can the firm raise neee long-term capital

through ebt an,or e:uit)?

*. Does the firm have sufficient wor(ing capital?

. Are capital bugeting proceures effective?

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Fi ,A ti A it



Finance,Accounting Auit

Chec(list

3. Are ivien pa)out policies

reasonable?

4. Does the firm have goo relations withits investors an stoc(holers?

6. Are the firms financial managers

e/perience an well traine?

1=.Is the firms ebt situation e/cellent?

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9rouction,Operations

*-'3

roduction$operations %unction

consists of all those activities that transforms

inputs into goos an services

9rouction,operations management

eals with inputs+ transformations+ an

outputs that var) across inustries an

mar(ets.

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Th # i F i %D i i &



The #asic Functions %Decisions&

Bithin 9rouction,Operations


I li ti f $ i 7t t i



Implications of $arious 7trategies

on 9rouction,Operations






"esearch an Development Auit

1. Does the firm have ";D facilities? Are the) ae:uate?

!. If outsie ";D firms are use+ are the) cost-effective?

'. Are the organi0ations ";D personnel well :ualifie?

*. Are ";D resources allocate effectivel)?. Are management information an computer s)stems

ae:uate?

2. Is communication between ";D an other

organi0ational units effective?3. Are present proucts technologicall) competitive?

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5 t I f ti



5anagement Information

7)stems

A management information s)stems purpose is

to improve the performance of an enterprise b)

improving the :ualit) of managerial ecisions

An effective information s)stem thus collects+coes+ stores+ s)nthesi0es+ an presents

information in such a manner that it answers

important operating an strategic :uestions

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5 t I f ti




7)stems Auit

1. Do all managers in the firm use the information

s)stem to ma(e ecisions?

!. Is there a chief information officer or irector of

information s)stems position in the firm?'. Are ata in the information s)stem upate

regularl)?

*. Do managers from all functional areas of the firm

contribute input to the information s)stem?

. Are there effective passwors for entr) into the

firms information s)stem?

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5 t I f ti




7)stems Auit

2. Are strategists of the firm familiar with the

information s)stems of rival firms?

3. Is the information s)stem user-frienl)?

4. Do all users of the information s)stem unerstanthe competitive avantages that information can

provie firms?

6. Are computer training wor(shops provie for

users of the information s)stem?

1=.Is the firms information s)stem continuall) being

improve in content- an user-frienliness?

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$alue Chain Anal)sis %$CA&

Value chain analysis (VC&) refers to the process whereb) a firm

etermines the costs associate with

organi0ational activities from purchasing rawmaterials to manufacturing prouct%s& to

mar(eting those proucts

aims to ientif) where low-cost avantages or

isavantages e/ist an)where along the value

chain from raw material to customer service

activities

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#enchmar(ing

Benchmarking

an anal)tical tool use to etermine whether

a firms value chain activities are competitive

compare to rivals an thus conucive towinning in the mar(etplace

entails measuring costs of value chain

activities across an inustr) to eterminebest practices


T f i $ l Ch i A ti iti i t



Transforming $alue Chain Activities into

7ustaine Competitive Avantage


The Internal Factor valuation



The Internal Factor valuation

%IF& 5atri/

1. Eist (e) internal factors as ientifie in the internal-auit

process

!. Assign a weight that ranges from =.= %not important& to

1.= %all-important& to each factor

'. Assign a 1-to-* rating to each factor to inicate whether

that factor represents a strength or wea(ness

*. 5ultipl) each factors weight b) its rating to etermine a

weighte score for each variable

. 7um the weighte scores for each variable to

etermine the total weighte score for the organi0ation


A 7 l I t l F t l ti



A 7ample Internal Factor valuation

5atri/ for a "etail Computer 7tore




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David- Sm14 Inppt04