Vision

Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

Strategic formulation

Key Internal Forces

Functional Business Areas:

Vary by organization

Divisions have differing strengths & weaknesses

Key Internal Forces

Distinctive Competencies:

Firm’s strengths that cannot be easily matched or imitated by competitors

Building competitive advantage involves taking advantage of distinctive competencies

Strategies designed to improve on a firm’s weaknesses and turn to strengths

Give Examples ?

Internal Audit

•Information from:•Management

•Marketing

•Finance/accounting

•Production/operations

•Research & Development

•Management information Systems

Parallels process of external audit

Management: Functions of Management

Planning

Stage When Most ImportantFunction

Strategy Formulation

Organizing Strategy Implementation

Motivating Strategy Implementation

Staffing

Controlling

Strategy Implementation

Strategy Evaluation

Planning

Forecasting

Establishing objectives

Devising strategies

Developing policies

Setting goals

Beginning of management process

Bridge between present & future

Improves likelihood of attaining desired results

Organizing

Organizational designJob specializationJob descriptions

Job specificationsSpan of control

Unity of commandCoordinationJob design

Job analysis

Achieves coordinated effort

Defines task & authority relationships

Departmentalization

Delegation of authority

Motivating

LeadershipCommunication

Work groupsJob enrichmentJob satisfactionNeeds fulfillment

Organizational changeMorale

Management: Motivation Influencing to accomplish specific objectives

Communication – major component

Staffing

Wage & salary admin.Employee benefits

InterviewingHiring

DischargingTraining

Management developmentAffirmative Action

EEOLabor relations

Management: Staffing Personnel management

Human resources management

Controlling

QualityFinancial

SalesInventoryExpense

Analysis of varianceRewardsSanctions

Establishing performance standards

Ensure actual operations conform to planned operations

Taking corrective actions

Management Audit Checklist: a yes is a strength a no is a weakness for all the checklists

•Does the firm use strategic management concepts?•Are objectives/goals measurable? Well communicated?•Do managers at all levels plan effectively? Do managers delegate well?

•Does the firm use strategic management concepts?•Are objectives/goals measurable? Well communicated?•Do managers at all levels plan effectively? Do managers delegate well?

Management Audit Checklist

•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 organization’s control mechanisms effective?

•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 organization’s control mechanisms effective?

MarketingOpportunity Analysis: yes is strength ,no is a weakness

1. Are markets segmented effectively?

2. Has the firm’s market share been increasing?

3. Are the distribution channels reliable & cost effective?

4. Does the firm conduct market research?5. Are product quality & customer service good?6. Do the firm’s marketing managers have

adequate experience and training?

Finance/Accounting Audit

•Can the firm raise short-term capital as needed?•Can the firm raise long-term capital as needed through debt and/or equity?• Does the firm have sufficient working capital?• Are the firm’s financial managers experienced & well trained?

•Can the firm raise short-term capital as needed?•Can the firm raise long-term capital as needed through debt and/or equity?• Does the firm have sufficient working capital?• Are the firm’s financial managers experienced & well trained?

Production/Operations Audit

•Are suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment & machinery in good condition?•Are inventory-control policies and procedures effective?• Are quality-control policies & procedures effective?

•Are suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment & machinery in good condition?•Are inventory-control policies and procedures effective?• Are quality-control policies & procedures effective?

Research & Development Audit

• Are the R&D facilities adequate?•Are MIS and computer systems adequate?•Is communication between R&D & other organizational units effective?•Are present products technologically competitive?

• Are the R&D facilities adequate?•Are MIS and computer systems adequate?•Is communication between R&D & other organizational units effective?•Are present products technologically competitive?

Management Information Systems

• Areas of interest to MIS:– Information Systems – Security– User-friendly– E-commerce

Purpose: Improve performance of an enterprise by improving the quality of managerial decisions.

Management Information Systems Audit

•Do managers use the information system to make decisions?•Is 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?•Are strategists of the firm familiar with the information systems of rival firms?

•Do managers use the information system to make decisions?•Is 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?•Are strategists of the firm familiar with the information systems of rival firms?

Management Information Systems Audit

•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?

•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?

VCA • Value Chain Analysis refers to the process whereby a firm

determines the costs associated with organizational activities from purchasing raw materials to manufacturing products to marketing those products.

• All firms should use value chain analysis to develop and nurture a core competence and develop this competence into a distinctive competence.– 1. A core competence is a value chain activity that a firm performs

especially well. – 2. When a core competence evolves into a major competitive

advantage, it is called a distinctive competence. • Firms determine whether its value chain activities are competitive

compared to rivals. This entails measuring the costs of value chain activities across an industry to determine “best practices” among competing firms for the purpose of duplicating or improving upon those best practices.

• How can the industry value chain (value system) affect the organisational value chain? Suppliers, distributors

Value chain Analysis

• Determines cost associated with organisation activities

• Can help a firm to Identify strengths and weaknesses. VCA An example is provided in Figure 4-3. Figure 4-4 illustrates this process.

VCA example

VCA example• Place the following in the appropriate part of the value chain;

i.e. primary and support activities

• A All staff are trained to the highest industry standards.• B. The hotel management team focus on goals set out in their

strategic plan.• C. All golf course fairways are trimmed and watered daily.• D. Fresh fruit and vegetables are delivered and prepared every day.• E. The hotel has an advanced room reservation system. • F. Fen Side is promoted through magazines targeted at the weathly

and influential.• G. The whole experience is based upon high quality, professional

service at every stage.• H. Limousines are available to take guests to airports as they finish

their stay.• I. Fen Side has a series of contracts with suppliers of meat and fish

Internal factor evaluation (IFE) • List key internal factors as identified in the internal-

audit process. Use a total from ten to twenty internal factors including both strengths and weaknesses.

• Assign a weight ranging from 0 (not important) to 1.0 (very important). The weight indicates the relative importance of the factor to being successful in the firm’s industry. The sum of all the weights must equal 1.0.

• Assign a 1-4 rating to each factor to indicate whether that factor represents a major weakness (1), minor weakness (2), minor strength (3), or major strength (4).

• Multiply each factor’s weight by its rating to determine a weighted score for each variable.

• Sum the weighted scores for each variable to determine the total weighted score for the organization.

• Total weighted scores of below 2.5 indicate an internally weak organization.

IEM Dell• Briefly analyse the IEM for dell: do you

agree with the findings.

• SM is both an art and a science: discuss how science, giving examples, can be used in accessing the current internal and external status of an organisation