04 internal assmt

8/3/2019 04 Internal Assmt

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2001 Prentice Hall

Ch. 4-1

Strategic ManagementConcepts & Cases

8thedition

Fred R. David

Chapter 4:The Internal Assessment

PowerPoint Slides By:

Anthony F. Chelte

Western New England College


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Ch. 4-2

Comprehensive Strategic Management Model

Vision&

MissionStatements

Chapter 2

ExternalAudit

Chapter 3

InternalAudit

Chapter 4

Long-TermObjectives

Chapter 5

Generate,Evaluate,Select

Strategies

Chapter 6

ImplementStrategies:

Mgmt Issues

Chapter 7

ImplementStrategies:Marketing,Fin/Acct,R&D, CIS

Chapter 8

Measure &Evaluate

Performance

Chapter 9


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Ch. 4-3

Internal Assessment

Like a product or service, the planning

process itself must be managed andshaped, if it is to serve executives as avehicle for strategic decision-making

Robert Lenz


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Ch. 4-4

Internal Assessment (Contd)

Weak leadership can wreck the soundeststrategy.

Sun Zi


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Ch. 4-5


Internal Strategic Management Audit

Functional areas of the business

Strengths

Weaknesses


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Ch. 4-6


Internal Audit:

Focuses on developing objectivesand strategies to capitalize oninternal strengths and overcomeweaknesses


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Ch. 4-7


Distinctive Competencies

A firms strengths that cannot be easilymatched or imitated by competitors

Building competitive advantage involvestaking advantage of distinctive competencies

Strategies designed in part to improve on afirms weaknesses and turn to strengths


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Ch. 4-8


Internal Audit

Gather & assimilate information from:

Management Marketing

Finance/accounting

Production/operations Research & development

Management information systems


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Ch. 4-9


Internal Audit

Involvement in performing an internalstrategic-management audit providesvehicle for understanding nature and

effect of decisions in other functionalbusiness areas of the firm


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Ch. 4-10


Integrating Strategy and Culture

Organizational Culture

Pattern of behavior developed by anorganization as it learns to cope withits problem of external adaptation and

internal integrationis consideredvalid and taught to new members


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Ch. 4-11



Resistant to change

May represent a strength or weakness of firm

Cultural productsinclude:

Values, beliefs, rites, rituals,ceremonies, myths, stories, legends,sagas, language, symbols, heroes


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Can inhibit strategic management:

Miss changes in external environment becausethey are blinded by strongly held beliefs

When a culture has been effective in the past,natural tendency to stick with it in future, evenduring times of major strategic change


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Ch. 4-13


Management

Planning

Organizing

Motivating

Staffing Controlling


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Ch. 4-14


Planning

Stage of Strategic-Management ProcessWhen Most Important

Function

Strategy Formulation

OrganizingStrategy

Implementation

MotivatingStrategy

Implementation

Staffing

Controlling

StrategyImplementation

Strategy Evaluation


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Ch. 4-15


Planning

Forecasting

Establishing objectives

Devising strategies

Developing policies

Setting goals

Management


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Ch. 4-16


Organizing

Organizational designJob specializationJob descriptions

Job specificationsSpan of control

Unity of commandCoordinationJob designJob analysis

Management


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Ch. 4-17


Motivating

LeadershipCommunicationWork groups

Job enrichmentJob satisfaction

Needs fulfillmentOrganizational change

Morale

Management


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Ch. 4-18


Staffing

Wage & salary admin

Employee benefitsInterviewing

HiringFiring

TrainingManagementdevelopment

SafetyAffirmative action

EEOLabor relations

Career developmentDiscipline procedures

Management


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Ch. 4-19


Controlling

Quality controlFinancial control

Sales control

Inventory controlExpense controlAnalysis of variances

RewardsSanctions

Management


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Ch. 4-20


Management Audit Checklist

Does the firm use strategic-managementconcepts?

Are company objectives and goals measurableand well communicated?

Do managers at all hierarchical levels plan

effectively? Do managers delegate authority well?

Is the organizations structure appropriate?


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Management Audit Checklist (Contd)

Are job descriptions and job specifications

clear? Is employee morale high?

Are employee turnover and absenteeism low?

Are organizational reward and controlmechanisms effective?


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Ch. 4-22


Marketing

Customer analysis

Selling products/services Product and service planning

Pricing

Distribution Marketing research

Opportunity analysis


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Ch. 4-23


Customer analysis

Customer surveys

Consumer information

Market positioningstrategies

Customer profiles

Market segmentationstrategies

Marketing


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Ch. 4-24


SellingProducts/services

Advertising

Sales

Promotion

Publicity

Sales force

management

Customer relations

Dealer relations

Marketing


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Ch. 4-25


Product/serviceplanning

Test marketing

Brand positioning

Devising warrantees

Packaging

Product

features/options

Product style

Quality

Marketing


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Ch. 4-26


Pricing

Forward integration

Discounts

Credit terms

Condition of sale

Markups

Costs

Unit pricing

Marketing


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Ch. 4-27


Distribution

Warehousing

Channels

Coverage

Retail site locations

Sales territories

Inventory levels

Transportation

Marketing


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Ch. 4-28


Marketing research

Data collection

Data input

Data analysis

Support all business

functions

Marketing


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Ch. 4-29


Opportunityanalysis

Assessing costs

Assessing benefits

Assessing risks

Cost/benefit/risk

analysis

Marketing


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Ch. 4-30


Marketing Audit Checklist

Are markets segmented effectively?

Is the organization positioned well amongcompetitors?

Has the firms market share been increasing?

Are present channels of distribution reliableand cost effective?

Does the firm have an effective sales force?


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Marketing Audit Checklist (Contd)

Does the firm conduct market research?

Are product quality and customer servicegood?

Are the firm's products/services pricedappropriately?

Does the firm have an effective promotion,advertising, and publicity strategy?


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Marketing Audit Checklist (Contd)

Are marketing planning and budgeting

effective? Do the firms marketing mangers have

adequate experience and training?


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Finance/Accounting

Investment decision (Capital budgeting)

Financing decision

Dividend decision


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Liquidity ratios

Firms ability tomeet its short-termobligations

Ratios

Current ratio

Quick

(or acid-test)ratio

Financial ratios


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Leverage ratios

Extent of debt

financing

Ratios

Debt-to-total-assets

Debt-to-equity

Long-term debt-to-equity

Times-interest earned

Financial ratios


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Activity ratios

Effective use of firmsresources

Ratios

Inventory-turnover

Fixed assets turnover

Total assets turnover

Accounts receivable turnover

Average collection period

Financial ratios


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Profitabilityratios

Effectiveness shownby returns on salesand investment

Ratios

Gross profit margin

Operating profit margin

Net profit margin

Return on total assets (ROA)

Financial ratios


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Profitabilityratios

(continued)

Effectiveness shownby returns on salesand investment

Ratios

Return on stockholders equity(ROE)

Earnings per share

Price-earnings ratio

Financial ratios


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Growth ratios

Firms ability tomaintain economicposition

Ratios

Sales

Net income

Earnings per share

Dividends per share

Financial ratios


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Finance/Accounting Audit Checklist (Contd)

Where is the firm strong and weak as

indicated by financial ratio analysis? Can the firm raise needed short-term capital?

Can the firm raise needed long-term capitalthrough debt and/or equity?

Does the firm have sufficient working capital?

Are capital budgeting procedures effective?


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Finance/Accounting Audit Checklist

Are dividend payout policies reasonable? Does the firm have good relations with its

investors and stockholders?

Are the firms financial managers experiencedand well trained?


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Production/Operations

Process

Capacity

Inventory

Workforce

Quality

I l A


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Process

Design of facility

Choice of technology

Facility layout

Process flow analysis

Facility location

Line balancing

Process control


I l A


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Capacity

Forecasting

Facilities planning

Aggregate planning

Scheduling

Capacity planning

Queuing analysis


I t l A t


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Inventory

Raw material

Work in process

Finished goods

Materials handling


I t l A t ( d)


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Workforce

Job design

Work measurement

Job enrichment

Work standards

Motivation techniques


I t l A t (C d)


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Quality

Quality control

Sampling

Testing

Quality assurance

Cost control



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Production/Operations Audit Checklist

Are suppliers of raw materials, parts, and

subassemblies reliable and reasonable? Are facilities, equipment, machinery, and

offices in good condition?

Are inventory-control policies and procedures

effective?


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Production/Operations Audit Checklist(Contd)

Are quality-control policies and procedureseffective?

Are facilities, resources, and marketsstrategically located?

Does the firm have technologicalcompetencies?


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Research & Development

Development of new products before

competition

Improving product quality

Improving manufacturing processes to

reduce costs

I t l A t (C td)


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R&D budgets

Financing as manyprojects as possible

Use percentage-of-

sales method

Budgeting relative tocompetitors

Deciding how manysuccessful new

products are needed

Research & Development


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Research & Development Audit Checklist

Does the firm have R&D facilities? Are they

adequate? If outside R&D firms are used, are they cost

effective?

Are the organizations R&D personnel well

qualified?

Are R&D resources allocated effectively?


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Research & Development AuditChecklist (Contd)

Are management information and computer

systems adequate? Is communication between R&D and other

organizational units effective?

Are present products technologicallycompetitive?


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Computer Information Systems

Information Systems

CIO/CTO

Security

User-friendly

E-commerce


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Computer Information SystemsAudit Checklist

Do all managers in the firm use theinformation system to make decisions?

Is there a chief information officer or directorof information systems position in the firm?

Are data in the information system updatedregularly?


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Computer Information SystemsAudit Checklist (Contd)

Do managers from all functional areas of thefirm contribute input to the informationsystem?

Are there effective passwords for entry into

the firms information system? Are strategists of the firm familiar with the

information systems of rival firms?


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Computer Information SystemsAudit Checklist (Contd)

Is the information system user-friendly? Do all users of the information systemunderstand the competitive advantages thatinformation can provide firms?

Are computer training workshops provided forusers?

Is the firms system being improved?

C titi A l i P t Fi F M d l


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Competitive Analysis: Porters Five-Forces Model

Potential development

of substitute products

Rivalry amongcompeting firms

Bargaining powerof suppliers

Potential entry of newcompetitors

Bargaining powerof consumers

l l ( )


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Internal Analysis (IFE)

Five-Step Process:

List key internal factors (10-20)

Strengths & weaknesses

Assign weight to each (0 to 1.0)Sum of all weights = 1.0

I t l A l i (IFE) (C td)


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Internal Analysis (IFE) (Contd)

Five-Step Process: (Contd)

Assign 1-4 rating to each factor

Firms current strategies response to thefactor

Multiply each factors weight by itsrating

Produces a weighted score

I l A l i (IFE)


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Five-Step Process: (Contd)

Sum the weighted scores for each

Determines the total weighted scorefor the organization

Highest possible weighted score forthe organization is 4.0; the lowest,1.0. Average = 2.5


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.153.05Financial ratios

.153.05Reputation as family-friendly

.204.05Long-range planning

.153.05Minimal comps provided

.153.05Buffets at most facilities

.153.05Strong management team

.604.15Owns 1 mile on Las Vegas strip

.153.05Increasing free cash flows

.404.10Room occupancy rates over 95%

.204.05Largest casino company in world

Weighted

scoreRatingWeight

Circus Circus

Internal Strengths

Ci Ci


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2.751.0TOTAL (including Strengths)

.101.10Recent loss of joint ventures

.101.10Laughlin properties

.102.05Family reputation, not high rollers

.102.05Little diversification

.051.05Most properties located in Las Vegas

Weighted

scoreRatingWeight

Circus Circus

Internal Weaknesses

I t l A l i (IFE) (C d)


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Circus Circus (in the previousexample), has a total weighted

score of 2.75 indicating that thefirm is above average in its overallinternal strength

Key Terms & Concepts


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Key Terms & Concepts

Activity ratios Buying

Capital budgeting

Communication

Computer informationsystems

Controlling

Cost/benefit analysis

Cultural products

Customer analysis

Distinctivecompetencies

Distribution

Dividend decision

Financial ratio analysis Financing decisions

Functions offinance/accounting

Functions ofmanagement

Key Terms & Concepts (Contd)


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Functions of marketing Functions of

production/operations

Growth ratio

Human resourcemanagement

Internal audit

Internal Factor

Evaluation (IFE) Matrix Investment Decision

Leverage ratios Liquidity ratios

Marketing research

Motivating

Opportunity analysis

Organizational culture

Organizing

Personnel management

Planning

Pricing



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Product and serviceplanning

Production/operationsfunctions

Profitability ratios Research and

development

Selling Social responsibility

Staffing

Synergy

Test marketing

04 internal assmt

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