1. Strategic Management Framework
Develop
Mission & Vision
Perform
Situational
Analysis
Product
Leadership
Set Objectives
& Craft Strategies
Feedback
Value
Customer
Operational
Intimacy
Excellence
Implement
Strategy
Assess Value Creation
& Provide Feedback

2. The Internal Audit Process
Step 1- Assessment of Performance
Financial &
Non-financial measure
Step 2- Analysis of value chain activities
Step 4- Determine Strength & Weaknesses
Evaluate activities
In the Value chain
Evaluate linkage
between organization and
Supply chain partners
Apply test of
Competitive relevance
Use strength/weaknesses
To inform strategic choice
Refer to the New Balance Profile
Step 3- Understanding Core Competencies
Identify special skills
or capabilities

3. Assessment Tools for Stage 1
Revenue analysis Growth rate, source of revenues
Earnings analysis Growth rate of profits, source of profits
Return on Equity After tax profit for each $ of stockholder investment
Change in market share Cause-effect for changes
Employee turnover Ability to retain talent
Employee & customer Degree of satisfaction, commitment,
surveys loyalty
All of these metric can be done relative to your peer group, thus analog metrics.
Historical data is required, but trends must also be forecasted.
Best-in-Class metrics
Supplemental Reading Figure 6.7

4. The Value Chain Primary Infrastructure Human Resources Secondary
Technology & Development
Procurement
Profit
Margin
Note that Value is measured by Margin $’s
Items in the chain can vary by company depending on the type of business. The model on page 84 of the Wheelen/Hunger text is different than Porter’s. These are guidelines as to where value is usually created. As in the Starbucks case study the key is to gain insight as to where value is created and craft the value chain accordingly.
Important to compare the value chain of partners, potential acquisitions, competitors
Provide example of how PC makers tried to get into networking.
Identify the concept of value leverage. It’s important to weight the value propositions according to importance as perceived by the customer. I.e. test SW example
Marketing
&
Sales
Inbound
Logistics
Outbound
Logistics
Operations
Primary
Service
M.E. Porter-Competitive Advantage Wheelen/Hunger p. 86 Figure 4-3

5. Barriers to Entry Economies of Scale Cost due to larger size
Product differentiation Customer loyalty to brand
Capital requirements Too expensive to enter
Disadvantages other than size Learning and experience curve
Distribution channels Access to sales channels
Regulation and/or licensing Special approvals needed
Look at the value chain on page 86 figure Evaluate each category relative to the above barriers.
Supplemental Reading Figure 5.2 & 7.2
Source: M.E. Poter The Competitive Advantage of Nations

6. Areas of Distinctive Competence Commonly Found
Quality
Service
Location
Filling a special niche
Flexibility and adaptability
Strong consumer orientation
Reputation and image
Personnel
Refer to the Kultur example Profile
Don’t underestimate any of these
Develop plans to sustain competence
Sustaining is the difference between opportunistic actions and strategic actions.
Supplemental reading Figure 6.1

7. Resource Allocation Helpful metrics to assess resource allocation;
FOM = Margin $’s over three years
Development cost ($)
Refer to “Giving up Your Best Customer” Profile
Best –in –Class metrics
Assessment can be done by organizational area, i.e. for some
products/services, marketing may be the dominant expense.

8. Culture Are the company values practiced? -Employee surveys
Are we organized efficiently for the task at hand? – There are tradeoffs to all org structures, prioritize the issue matrix.
Are we setting aggressive yet realistic expectations? Analog metrics can provide insight.
Often difficult to upper management to assess
Sometimes outsourced to a 3rd party for objectivity
HR usually owns
Any org structure has trade-offs. Org structures need to focus on strategic priorities
Often internal audit requires external metrics.