1. Ch 4 -1 Module 4 The Internal Assessment

2. Ch 4 -2

3. Ch 4 -3 “ Great spirits have always encountered violent opposition from mediocre minds.” – Albert Einstein Internal Assessment “ Weak leadership can wreck the soundest strategy.” – Sun Tzu

4. Ch 4 -4 Internal Audit Identify strengths and weaknesses in  Management  Marketing  Finance and accounting  Production and operations  Research and development  Management information systems

5. Ch 4 -5 Internal strengths/weaknesses External opportunities/threats Clear statement of mission Nature of an Internal Audit Basis for Objectives & Strategies

6. Ch 4 -6 Key Internal Forces Distinctive Competencies: Firm’s strengths that cannot be easily matched or imitated by competitors

7. Ch 4 -7 Key Internal Forces Distinctive Competencies: Building competitive advantage involves taking advantage of distinctive competencies

8. Ch 4 -8 Internal Audit Process Information gathered from:  Management  Marketing  Finance/accounting  Production/operations  Research & development  Management information systems Parallels process of external audit

9. Ch 4 -9 Internal Audit Involvement 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

10. Ch 4 -10

11. Ch 4 -11 Internal Audit Managers and employees from all areas provide information A team of managers then selects 10 to 15 key organizational strengths and weaknesses to focus on

12. Ch 4 -12 Internal Audit Exemplifies complexity of relationships among functional areas of the business Financial Ratio Analysis

13. Ch 4 -13 Resource Based View (RBV) Approach to Competitive Advantage Internal resources are more important than external factors

14. Ch 4 -14 Resource Based View (RBV) Three All-Encompassing Categories 1. Physical resources 2. Human resources 3. Organizational resources

15. Ch 4 -15 Resource Based View (RBV) Empirical Indicators Rare Hard to imitate Not easily substitutable

16. Ch 4 -16 Integrating Strategy & Culture P attern 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 feel Organizational Culture

17. Ch 4 -17 Integrating Strategy & Culture Organizational Culture Resistant to change May represent:  Strength  Weakness

18. Ch 4 -18 Cultural Products Values Legends Beliefs HeroesRites SymbolsRituals Myths Integrating Strategy & Culture

19. Ch 4 -19 Integrating Strategy & Culture Organizational Culture Can Inhibit Strategic Management Miss external changes due to strongly held beliefs Natural tendency to “hold the course” even during times of strategic change

20. Ch 4 -20 Management Functions of Management 1. Planning 2. Organizing 3. Motivating 4. Staffing 5. Controlling

21. Ch 4 -21 Management Planning Stage When Most Important Function Strategy Formulation Organizing Strategy Implementation Motivating Strategy Implementation Staffing Controlling Strategy Implementation Strategy Evaluation

22. Ch 4 -22 Management Planning Beginning of management process Bridge between present & future Improves likelihood of attaining desired results

23. Ch 4 -23 Planning Developing a mission Forecasting future events and trends Establishing objectives Choosing strategies to pursue Management

24. Ch 4 -24 Planning Synergy  Can develop through planning  Exists when everyone pulls together as a team that knows what it wants to achieve

25. Ch 4 -25 Management Organizing Achieves coordinated effort Defines task & authority relationships Determines who does what Determines who reports to whom

26. Ch 4 -26 Management Organizing  Breaking down tasks into jobs  Combining jobs to form departments  Delegating authority

27. Ch 4 -27 Management Motivating Influencing to accomplish specific objectives Four components include:  Leadership  Group dynamics  Communication  Organizational change

28. Ch 4 -28 Management Staffing Personnel management Human resource management

29. Ch 4 -29 Management Staffing Recruiting Interviewing Testing Selecting Orienting Training Developing Caring for Evaluating Rewarding Disciplining Promoting Transferring Demoting Dismissing

30. Ch 4 -30 Management Controlling Establishing performance standards Ensure actual operations conform to planned operations Taking corrective actions

31. Ch 4 -31 Management Controlling 1. Establish performance standards 2. Measure individual and organizational performance 3. Compare actual performance to planned performance standards 4. Take corrective action

32. Ch 4 -32 Management Audit Checklist Does the firm use strategic management concepts? Are objectives/goals measurable? Well communicated? Do managers at all levels plan effectively?

33. Ch 4 -33 Management Audit Checklist Do managers delegate well? Is the organization’s structure appropriate? Are job descriptions clear? Are job specifications clear? Is employee morale high?

34. Ch 4 -34 Management Audit Checklist Is employee absenteeism low? Is employee turnover low? Are the reward mechanisms effective? Are the organization’s control mechanisms effective?

35. Ch 4 -35 Marketing Customer Needs or Wants for Products and Services 1. Defining 2. Anticipating 3. Creating 4. Fulfilling

36. Ch 4 -36 Marketing Marketing Functions 1. Customer analysis 2. Selling products/services 3. Product & service planning 4. Pricing 5. Distribution 6. Marketing research 7. Opportunity analysis

37. Ch 4 -37 Customer Analysis Customer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategies Marketing

38. Ch 4 -38 Advertising Sales Promotion Publicity Personal Selling Sales force management Customer relations Dealer relations Marketing Selling Products/Services

39. Ch 4 -39

40. Ch 4 -40 Test marketing Brand positioning Devising warranties Packaging Product features/options Product style Quality Deleting old products Providing for customer service Marketing Product/Service Planning

41. Ch 4 -41 Consumers Governments Suppliers Distributors Competitors Marketing Pricing Major Stakeholders

42. Ch 4 -42 Warehousing Distribution channels Retail site locations Sales territories Inventory levels Transportation Wholesaling Retailing Marketing Distribution

43. Ch 4 -43 Gather data Record data Analyze data Marketing Marketing Research

44. Ch 4 -44 Assessing costs Assessing benefits Assessing risks Marketing Cost/Benefit Analysis

45. Ch 4 -45 Marketing Audit 1. Are markets segmented effectively? 2. Is the organization positioned well among competitors? 3. Has the firm’s market share been increasing? 4. Are the distribution channels reliable & cost effective? 5. Is the sales force effective?

46. Ch 4 -46 Marketing Audit 6. Does the firm conduct market research? 7. Are product quality & customer service good? 8. Are the firm’s products and services priced appropriately? 9. Does the firm have effective promotion, advertising, and publicity strategies?

47. Ch 4 -47 Marketing Audit 10. Are the marketing, planning, and budgeting effective? 11. Do the firm’s marketing managers have adequate experience and training? 12. Is the firm’s Internet presence excellent as compared to rivals?

48. Ch 4 -48 Finance/Accounting 1. Investment decision (Capital budgeting) 2. Financing decision 3. Dividend decision

49. Ch 4 -49 Firm’s ability to meet its short-term obligations Ratios Current ratio Quick (or acid test) ratio Basic Financial Ratios Liquidity Ratios

50. Ch 4 -50 Extent of debt financing Ratios Debt-to-total assets Debt-to-equity Long-term debt-to-equity Times-interest-earned Basic Financial Ratios Leverage Ratios

51. Ch 4 -51 Effective use of firm’s resources Ratios Inventory turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period Basic Financial Ratios Activity Ratios

52. Ch 4 -52 Effectiveness shown by returns on sales and investment Ratios Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Basic Financial Ratios Profitability Ratios

53. Ch 4 -53 Effectiveness shown by returns on sales & investment Ratios Return on stockholders’ equity (ROE) Earnings per share Price-earnings ratio Basic Financial Ratios Profitability Ratios (cont’d)

54. Ch 4 -54 Firm’s ability to maintain economic position Ratios Sales Net Income Earnings per share Dividends per share Basic Financial Ratios Growth Ratios

55. Ch 4 -55 Ratio Sales Net Income Earnings per share Dividends per share Annual percentage growth in Total sales Profits EPS Dividends per share Growth Ratios

56. Ch 4 -56

57. Ch 4 -57

58. Ch 4 -58

59. Ch 4 -59

60. Ch 4 -60 Finance/Accounting Audit 1. Where is the firm financially strong/weak as indicated by financial ratio analysis? 2. Can the firm raise needed short-term capital? 3. Can the firm raise needed long-term capital through debt and/or equity? 4. Does the firm have sufficient working capital? 5. Are capital budgeting procedures effective?

61. Ch 4 -61 Finance/Accounting Audit 6. Are dividend payout policies reasonable? 7. Does the firm have good relations with its investors and stockholders? 8. Are the firm’s financial managers experienced and well trained? 9. Is the firm’s debt situation excellent?

62. Ch 4 -62 Production/Operations Production/Operations Functions Process Capacity Inventory Workforce Quality

63. Ch 4 -63

64. Ch 4 -64 Production/Operations Audit Are suppliers of materials, parts, etc. reliable and reasonable? Are facilities, equipment, machinery, and offices in good condition? Are inventory-control policies and procedures effective? Are suppliers of materials, parts, etc. reliable and reasonable? Are facilities, equipment, machinery, and offices in good condition? Are inventory-control policies and procedures effective?

65. Ch 4 -65 Production/Operations Audit Are quality-control policies & procedures effective? Are facilities, resources, and markets strategically located? Does the firm have technological competencies? Are quality-control policies & procedures effective? Are facilities, resources, and markets strategically located? Does the firm have technological competencies?

66. Ch 4 -66 Research & Development Research & Development Functions Development of new products before competitors Improving product quality Improving manufacturing processes to reduce costs These functions can be done internally or externally

67. Ch 4 -67 Financing as many projects as possible Use percent-of-sales method Budgeting relative to competitors How many successful new products are needed Research & Development R&D Budgets

68. Ch 4 -68 Research & Development Audit Are 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? Are 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?

69. Ch 4 -69 Research & Development Audit Are MIS and computer systems adequate? Is communication between R&D and other organizational units effective? Are present products technologically competitive? Are MIS and computer systems adequate? Is communication between R&D and other organizational units effective? Are present products technologically competitive?

70. Ch 4 -70 Management Information Systems Purpose Improve performance of an enterprise by improving the quality of managerial decisions

71. Ch 4 -71 Management Information Systems Audit Do 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 firm’s information system?

72. Ch 4 -72 Management Information Systems Audit Are 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 firm’s system being improved?

73. Ch 4 -73 Value Chain Analysis The process whereby a firm determines the costs associated with:  Purchasing raw materials  Manufacturing products  Marketing products And compares them to the value chain of rival firms

74. Ch 4 -74 Value Chain Analysis Core competencies Distinctive competencies Benchmarking

75. Ch 4 -75 Transforming Value Chain Activities into Sustained Competitive Advantage Value Chain Activities Are Identified and Assessed Core Competencies Arise in Some Activities Some Core Competencies Evolve into Distinctive Competencies Some Distinctive Competencie s Yield Sustained Competitive Advantages

76. Ch 4 -76 Internal Factor Evaluation (IFE) Matrix 1. List key internal factors 2. Assign a weight ranging from 0.0 to 1.0 3. Assign a 1 to 4 rating to each factor 4. Multiply the weight times the rating 5. Sum the weighted scores