Chapter 4 - July 2015

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Ch 4-1Copyright © 2009 Pearson Education, Inc.Publishing as Prentice Hall

Chapter 4

The Internal Assessment

Strategic Management:Concepts & Cases

13th Edition

Fred David

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“ Great spirits hae al!ays encountered

iolent opposition "ro# #ediocre #inds.$

% Albert Einstein

Internal Assessment

“ &ea' leadership can !rec' the soundest

strategy.$ % Sun Tzu

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at!re o" an Internal A!dit

% Strengths

% Weaknesses

Functional Areas of Business

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#e$ Internal Forces

F!nctional %!siness Areas:

Vary by organizationDivisions have differing strengths &eaknesses

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#e$ Internal Forces

Distinctive Competencies:

Fir!"s strengths that cannot be easily!atched or i!itated by co!#etitors

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#e$ Internal Forces


Building co!#etitive advantage involvestaking advantage of distinctiveco!#etencies

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#e$ Internal Forces


Strategies designed to i!#rove on afir!"s eaknesses and turn to strengths

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Internal A!dit

$%nfor!ation fro!

$Management$Mareting

$Finance'acco!nting

$(rod!ction'operations

$)esearch & development

$Management in"ormation s$stems

'arallels #rocess of e(ternal audit

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Ch 4-9

Copyright © 2009 Pearson Education, Inc.

Publishing as Prentice Hall

Internal A!dit

)oordination & understanding a!ong!anagers fro! all functional areas

*ey to +rganizational Success

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Ch 4-10



Internal A!dit

,u!ber and co!#le(ity increasesrelative to organization size

Functional -elationshi#s

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Ch 4-11



Internal A!dit

E(e!#lifies co!#le(ity of relationshi#sa!ong functional areas of the business

Financial -atio Analysis

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Ch 4-12



)eso!rce %ased *ie+ ,)%*-

A##roach to )o!#etitive Advantage

%nternal resources are !ore i!#ortantthan e(ternal factors

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Ch 4-13




Three All.Enco!#assing )ategories

/0 'hysical resources10 2u!an resources

30 +rganizational resources

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Ch 4-14




E!#irical %ndicators

-are 2ard to i!itate

,ot easily substitutable

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Ch 4-15



Integrating Strateg$ & C!lt!re

Pattern o" behaior deeloped by an

organi(ation as it learns to cope !ith its

proble# o" e)ternal adaptation and

internal integration . . . is considered alid

and taught to ne! #e#bers

+rganizational )ulture

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Ch 4-16




+rganizational )ulture

-esistant to change 4ay re#resent

Strength

Weakness

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Ch 4-17




+rganizational )ulture )an %nhibitStrategic 4anage!ent

4iss e(ternal changes due to stronglyheld beliefs

,atural tendency to 5hold the course6

even during ti!es of strategic change

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Ch 4-18



70S0 Versus Foreign )ultures

*o success"ully co#pete in !orld #ar'ets,

+.. #anagers #ust obtain a better

'no!ledge o" historical, cultural, and religious"orces that #otiate and drie people in other

countries.

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Ch 4-19



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Ch 4-20



Management A!dit Checlist

$Does the fir! use strategic !anage!entconce#ts8$ Are ob9ectives:goals !easurable8 Well

co!!unicated8$Do !anagers at all levels #laneffectively8

$Does the fir! use strategic !anage!entconce#ts8$ Are ob9ectives:goals !easurable8 Well

co!!unicated8$Do !anagers at all levels #laneffectively8

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Ch 4-21




$Do !anagers delegate ell8$%s the organization"s structurea##ro#riate8

$ Are 9ob descri#tions clear8$ Are 9ob s#ecifications clear8$%s e!#loyee !orale high8

$Do !anagers delegate ell8$%s the organization"s structurea##ro#riate8

$ Are 9ob descri#tions clear8$ Are 9ob s#ecifications clear8$%s e!#loyee !orale high8

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Ch 4-22




$%s e!#loyee absenteeis! lo8$%s e!#loyee turnover lo8$ Are the reard !echanis!s effective8

$ Are the organization"s control!echanis!s effective8

$%s e!#loyee absenteeis! lo8$%s e!#loyee turnover lo8$ Are the reard !echanis!s effective8

$ Are the organization"s control!echanis!s effective8

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Ch 4-23



Mareting

4arketing Functions1. C!stomer anal$sis

/. Selling prod!cts'services

3. (rod!ct & service planning

4. (ricing

0. Distri!tion

2. Mareting research

. pport!nit$ anal$sis

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Ch 4-24



C!stomer

Anal$sis

)usto!er surveys

)onsu!er infor!ation

4arket #ositioningstrategies

)usto!er #rofiles

4arket seg!entationstrategies

Mareting

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Ch 4-25



AdvertisingSales

'ro!otion'ublicity

Sales force !anage!ent)usto!er relations

Dealer relations

Mareting

Selling

(rod!cts'Services

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Ch 4-26



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Ch 4-27



Test !arketingBrand #ositioning

Devising arrantees'ackaging

'roduct features:o#tions'roduct style

;uality

Mareting

(lanning

(rod!ct'Service

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Ch 4-28



Forard integrationDiscounts

)redit ter!s)ondition of sale

4arku#s)osts

7nit #ricing

Mareting

(ricing

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Ch 4-29



Warehousing)hannels

)overage-etail site locations

Sales territories%nventory levelsTrans#ortation

Mareting

Distri!tion

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Ch 4-30



Data collectionData in#ut

Data analysisSu##ort business functions

Mareting

Mareting )esearch

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Ch 4-31



Assessing costs

Assessing benefits

Assessing risks

)ost:benefit:risk analysis

Mareting

pport!nit$

Anal$sis

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Ch 4-32



Mareting

Audit )hecklist1. Are marets segmented e""ectivel$5

/. Is the organi6ation positioned +ell among

competitors53. 7as the "irm8s maret share een

increasing5

4. Are the distri!tion channels reliale &cost e""ective5

0. Is the sales "orce e""ective5

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Ch 4-33



Mareting

Audit )hecklist2. Does the "irm cond!ct maret research5

. Are prod!ct 9!alit$ & c!stomer service

good5. Are the "irm8s prod!cts'services priced

appropriatel$5

;. Does the "irm have e""ective promotion<advertising< and p!licit$ strategies5

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Ch 4-34



Mareting

Audit )hecklist

1=.Are the mareting< planning< and

!dgeting e""ective511.Do the "irm8s mareting managers have

ade9!ate e>perience and training5

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Ch 4-35



Finance'Acco!nting

Deter!ining financial strengths &

eaknesses key to strategyfor!ation

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Ch 4-36



Finance'Acco!nting

Finance:Accounting Functions

1. Investment decision ,Capital !dgeting-

/. Financing decision

3. Dividend decision

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Ch 4-37



Firm’s ability to meet itsshort-term obligations

)atios

)urrent ratio

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Ch 4-38



Extent of debt financing

)atios

Debt.to.total.assetsDebt.to.e>uity

?ong.ter! debt.to.e>uityTi!es.interest.earned

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Ch 4-39



Effective use of firm’sresources

)atios

%nventory turnover

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Ch 4-40



Effectiveness shown by

returns on sales &

investment

)atios

@ross #rofit !argin

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Ch 4-41



Effectiveness shown by

returns on sales &

investment

)atios

-eturn on stockholders" e>uityuity=Earnings #er share'rice.earnings ratio

%asic Financial )atios

(ro"itailit$ )atios

,cont8d-

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Ch 4-42



Firm’s ability to maintain

economic position

)atios

Sales,et inco!e

Earnings #er shareDividends #er share

%asic Financial )atios

@ro+th )atios

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Ch 4-43



Natural EnvironmentPerspectiveEU Countries Impose Curbs on Use of Chemicals Tough ne las start in 1

7se of so!e 3C che!icals need to be docu!ented

)ease using /C of the !ost dangerous che!icals

E7 countries need to cut e!issions

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Ch 4-44



Finance'Acco!nting A!dit

$Does the fir! have sufficient orkingca#ital8$ Are ca#ital budgeting #rocedures

effective8$ Are dividend #ayout #olicies reasonable8$ Are the fir!"s financial !anagerse(#erienced & ell trained8

$Does the fir! have sufficient orkingca#ital8$ Are ca#ital budgeting #rocedures

effective8$ Are dividend #ayout #olicies reasonable8$ Are the fir!"s financial !anagerse(#erienced & ell trained8

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Ch 4-45



Finance'Acco!nting A!dit

Effective Financial Analysis -e>uires/0 Analysis of ho the ratios have

changed over ti!e

10 2o the ratios co!#are to industrynor!s

30 2o the ratios co!#are ith keyco!#etitors

Effective Financial Analysis -e>uires/0 Analysis of ho the ratios have

changed over ti!e

10 2o the ratios co!#are to industrynor!s30 2o the ratios co!#are ith key

co!#etitors

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Ch 4-46



(rod!ction'perations

'roduction:+#erations Functions

(rocess

Capacit$

Inventor$

or"orce

B!alit$

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Ch 4-47



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Ch 4-48



Global Perspective Auto Industry Work Week and Hourly Pay ariation

@er!any 0

70S0 330G

)anada 1G0/HIa#an 1H03

France 1J03

S0 *orea /01

4e(ico 30

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Ch 4-49



Facility designTechnology selection

Facility layout'rocess flo analysis

Facility location?ine balancing'rocess control


(rocess

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Ch 4-50



ForecastingFacilities #lanning

Aggregate #lanningScheduling

)a#acity #lanning;ueuing analysis


Capacit$

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Ch 4-51



-a !aterials

Work in #rocessFinished goods

4aterials handling


Inventor$

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Ch 4-52



Iob design

Work !easure!entIob enrich!entWork standards

4otivation techni>ues


or"orce

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Ch 4-53



;uality control

Sa!#lingTesting;uality assurance

)ost control


B!alit$

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Ch 4-54



(rod!ction'perations A!dit

$ Are su##liers of !aterialsC #artsC etc0reliable and reasonable8$ Are facilitiesC e>ui#!entC and !achinery

in good condition8$ Are inventory.control #olicies and#rocedures effective8

$ Are su##liers of !aterialsC #artsC etc0reliable and reasonable8$ Are facilitiesC e>ui#!entC and !achinery

in good condition8$ Are inventory.control #olicies and#rocedures effective8

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Ch 4-55



(rod!ction'perations A!dit

$ Are >uality.control #olicies & #rocedureseffective8$ Are facilitiesC resourcesC and !arkets

strategically located8$Does the fir! have technologicalco!#etencies8

$ Are >uality.control #olicies & #rocedureseffective8$ Are facilitiesC resourcesC and !arkets

strategically located8$Does the fir! have technologicalco!#etencies8

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Ch 4-56



)esearch & Development

-esearch & Develo#!ent Functions

Development o" ne+ prod!cts e"ore

competitors

Improving prod!ct 9!alit$

Improving man!"act!ring processes to

red!ce costs

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Ch 4-57



Financing as !any#ro9ects as #ossible

7se #ercent.of.sales!ethod

Budgeting relative toco!#etitors

2o !any successfulne #roducts are

needed

)esearch & Development

)&D %!dgets

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Ch 4-58



)esearch & Development A!dit

$ Are the -&D facilities ade>uate8$%f -&D is outsourcedC is it cost.effective8$ Are the -&D #ersonnel ell >ualified8

$ Are -&D resources allocated effectively8

$ Are the -&D facilities ade>uate8$%f -&D is outsourcedC is it cost.effective8$ Are the -&D #ersonnel ell >ualified8

$ Are -&D resources allocated effectively8

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Ch 4-59



)esearch & Development A!dit

$ Are 4%S and co!#uter syste!sade>uate8$%s co!!unication beteen -&D and

other organizational units effective8$ Are #resent #roducts technologicallyco!#etitive8

$ Are 4%S and co!#uter syste!sade>uate8$%s co!!unication beteen -&D and

other organizational units effective8$ Are #resent #roducts technologicallyco!#etitive8

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Ch 4-60



Management In"ormation

S$stems

'ur#ose

Improve per"ormance o" an enterprise $improving the 9!alit$ o" managerial

decisions

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Ch 4-61




S$stems

%nfor!ation Syste!s

)%+:)T+

Security 7ser.friendly

E.co!!erce

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Ch 4-62




S$stems A!dit

$Do !anagers use the infor!ation syste!to !ake decisions8$%s there a )%+ or Director of %nfor!ationSyste!s #osition in the fir!8$%s data u#dated regularly8

$Do !anagers use the infor!ation syste!to !ake decisions8$%s there a )%+ or Director of %nfor!ation

Syste!s #osition in the fir!8$%s data u#dated regularly8

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Ch 4-63




S$stems A!dit

$Do !anagers fro! all functional areascontribute in#ut to the infor!ation syste!8$ Are there effective #assords for entryinto the fir!"s infor!ation syste!8$ Are strategists of the fir! fa!iliar ith theinfor!ation syste!s of rival fir!s8

$Do !anagers fro! all functional areascontribute in#ut to the infor!ation syste!8$ Are there effective #assords for entry

into the fir!"s infor!ation syste!8$ Are strategists of the fir! fa!iliar ith theinfor!ation syste!s of rival fir!s8

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Ch 4-64




S$stems A!dit

$%s the infor!ation syste! user.friendly8$Do all users understand the co!#etitiveadvantages that infor!ation can #rovide8

$ Are co!#uter training orksho#s #rovidedfor users8$%s the fir!"s syste! being i!#roved8

$%s the infor!ation syste! user.friendly8$Do all users understand the co!#etitiveadvantages that infor!ation can #rovide8

$ Are co!#uter training orksho#s #rovidedfor users8$%s the fir!"s syste! being i!#roved8

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Ch 4-65



Chapter 4 - July 2015

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