copyright 2005 prentice hall1 bus 411 day 7. copyright 2005 prentice hall ch 4 -2 agenda finish...
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Copyright 2005 Prentice Hall Ch 4 -2
Agenda
Finish Discussion on Internal Assessment Strengths and weaknesses
Assignment #2 Due Assignment #3 has been assigned
E-mailed to you in WebCT Due Feb 14
Templates section in WebCT There are templates for every one of the analytical tools we
will use in this class Will become useful for Case Study portion
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Integrating Strategy & Culture
Pattern 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
Organizational Culture
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Integrating Strategy & Culture
Organizational Culture
Resistant to change
May represent
Strength
Weakness
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CulturalProducts
Values
Legends Beliefs
Heroes Rites
Symbols RitualsMyths
Integrating Strategy & Culture
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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
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Management
Functions of Management
1. Planning
2. Organizing
3. Motivating
4. Staffing
5. Controlling
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Management
Planning
Stage When Most ImportantFunction
Strategy Formulation
Organizing Strategy Implementation
Motivating Strategy Implementation
Staffing
Controlling
Strategy Implementation
Strategy Evaluation
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Management
Planning
Beginning of management process
Bridge between present & future
Improves likelihood of attaining desired results
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Planning
Forecasting
Establishing objectives
Devising strategies
Developing policies
Setting goals
Management
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Management
Organizing
Achieves coordinated effort
Defines task & authority relationships
Departmentalization
Delegation of authority
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Organizing
Organizational designJob specializationJob descriptions
Job specificationsSpan of control
Unity of commandCoordinationJob design
Job analysis
Management
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Management
Motivating
Influencing to accomplish specific objectives
Communication – major component
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Motivating
LeadershipCommunication
Work groupsJob enrichmentJob satisfactionNeeds fulfillment
Organizational changeMorale
Management
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Management
Staffing
Personnel management
Human resources management
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Staffing
Wage & salary admin.Employee benefits
InterviewingHiring
DischargingTraining
Management developmentAffirmative Action
EEOLabor relations
Management
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Management
Controlling
Establishing performance standards
Ensure actual operations conform to planned operations
Taking corrective actions
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Controlling
QualityFinancial
SalesInventoryExpense
Analysis of varianceRewardsSanctions
Management
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Management Audit Checklist
•Does the firm use strategic management concepts?•Are objectives/goals measurable? Well communicated?•Do managers at all levels plan effectively?
•Does the firm use strategic management concepts?•Are objectives/goals measurable? Well communicated?•Do managers at all levels plan effectively?
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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?
•Do managers delegate well?•Is the organization’s structure appropriate?•Are job descriptions clear?•Are job specifications clear?•Is employee morale high?
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Management Audit Checklist
•Is employee absenteeism low?•Is employee turnover low?•Are the reward mechanisms effective?•Are the organization’s control mechanisms effective?
•Is employee absenteeism low?•Is employee turnover low?•Are the reward mechanisms effective?•Are the organization’s control mechanisms effective?
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Marketing
Customer Needs/Wants for Products/Services
1. Defining
2. Anticipating
3. Creating
4. Fulfilling
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Marketing
Marketing Functions
1. Customer analysis
2. Selling products/services
3. Product & service planning
4. Pricing
5. Distribution
6. Marketing research
7. Opportunity analysis
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Customer Analysis
Customer surveys
Consumer information
Market positioning strategies
Customer profiles
Market segmentation strategies
Marketing
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AdvertisingSales
PromotionPublicity
Sales force managementCustomer relations
Dealer relations
Marketing
Selling Products/Services
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Test marketingBrand positioning
Devising warranteesPackaging
Product features/optionsProduct style
Quality
Marketing
Planning Product/Service
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Forward integrationDiscounts
Credit termsCondition of sale
MarkupsCosts
Unit pricing
Marketing
Pricing
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WarehousingChannelsCoverage
Retail site locationsSales territoriesInventory levelsTransportation
Marketing
Distribution
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Data collectionData input
Data analysisSupport business functions
Marketing
Marketing Research
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Assessing costs
Assessing benefits
Assessing risks
Cost/benefit/risk analysis
Marketing
Opportunity Analysis
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Marketing
Opportunity Analysis
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?
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Marketing
Opportunity Analysis
6. Does the firm conduct market research?
7. Are product quality & customer service good?
8. Are the firm’s products/services priced appropriately?
9. Does the firm have effective promotion, advertising, & publicity strategies?
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Marketing
Opportunity Analysis
10.Are the marketing planning & budgeting effective?
11.Do the firm’s marketing managers have adequate experience and training?
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Finance/Accounting
Determining financial strengths & weaknesses key to strategy formation
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Finance/Accounting
Finance/Accounting Functions
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision
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Financial ratios
Objective indicators Two uses
Trending over time Comparison to industry norms
http://www.netmba.com/finance/financial/ratios/ Industry norms are available through UMFK
electronic resources Business and Company Resource Center http://www.umfk.maine.edu/infoserv/library/
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Firm’s ability to meet its short-term obligations
Ratios
*Current ratio*Quick (or acid test) ratio
* Bigger is better
Basic Financial Ratios
Liquidity Ratios
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Extent of debt financing
Ratios
Debt-to-total assetsDebt-to-equity
Long-term debt-to-equity*Times-interest earned
Basic Financial Ratios
Leverage Ratios
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Effective use of firm’s resources
Ratios
Inventory-turnoverFixed assets turnoverTotal assets turnover
Accounts receivable turnoverAverage collection period
Basic Financial Ratios
Activity Ratios
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Effectiveness shown by returns on sales &
investment
Ratios
Gross profit marginOperating profit margin
Net profit marginReturn on total assets (ROA)
Basic Financial Ratios
Profitability Ratios
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Effectiveness shown by returns on sales &
investment
Ratios
Return on stockholders equity (ROE)
Earnings per sharePrice-earnings ratio
Basic Financial Ratios
Profitability Ratios(cont’d)
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Firm’s ability to maintain economic position
Ratios
SalesNet income
Earnings per shareDividends per share
Basic Financial Ratios
Growth Ratios
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Finance/Accounting Audit
•Where is the firm strong/weak indicated by financial ratio analysis?•Can the firm raise short-term capital as needed?•Can the firm raise long-term capital as needed through debt and/or equity?
•Where is the firm strong/weak indicated by financial ratio analysis?•Can the firm raise short-term capital as needed?•Can the firm raise long-term capital as needed through debt and/or equity?
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Finance/Accounting Audit
•Does the firm have sufficient working capital?•Are capital budgeting procedures effective?•Are dividend payout policies reasonable?•Are the firm’s financial managers experienced & well trained?
•Does the firm have sufficient working capital?•Are capital budgeting procedures effective?•Are dividend payout policies reasonable?•Are the firm’s financial managers experienced & well trained?
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Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
Workforce
Quality
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Facility designTechnology selection
Facility layoutProcess flow analysis
Facility locationLine balancingProcess control
Production/Operations
Process
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ForecastingFacilities planning
Aggregate planningScheduling
Capacity planningQueuing analysis
Production/Operations
Capacity
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Raw materialsWork in processFinished goods
Materials handling
Production/Operations
Inventory
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Job designWork measurement
Job enrichmentWork standards
Motivation techniques
Production/Operations
Workforce
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Quality controlSamplingTesting
Quality assuranceCost Control
Production/Operations
Quality
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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 suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment & machinery in good condition?•Are inventory-control policies and procedures effective?
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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?
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Research & Development
Research & Development Functions
Development of new products before competitors
Improving product quality
Improving manufacturing processes to reduce costs
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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
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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?
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Research & Development Audit
•Are MIS and computer systems adequate?•Is communication between R&D & other organizational units effective?•Are present products technologically competitive?
•Are MIS and computer systems adequate?•Is communication between R&D & other organizational units effective?•Are present products technologically competitive?
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Management Information Systems
Purpose
Improve performance of an enterprise by improving the quality of managerial decisions.
Copyright 2005 Prentice Hall Ch 4 -58
Management Information Systems
Information Systems CIO/CTO Security User-friendly E-commerce
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Management Information Systems Audit
•Do managers use the information system to make decisions?•Is there a CIO or Director of information systems position in the firm?•Is data updated regularly?
•Do managers use the information system to make decisions?•Is there a CIO or Director of information systems position in the firm?•Is data updated regularly?
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Management Information Systems Audit
•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 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?
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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?
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The IFE Matrix
A summary step in conducting an internal strategic-management audit is to construct an IFE Matrix. This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among these areas.
Intuitive judgments are required in developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted to mean this is an all-powerful technique.
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5 Steps to an IFE
1. 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.
2. 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.
3. 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).
4. Multiply each factor’s weight by its rating to determine a weighted score for each variable.
5. 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.
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IFE– Gateway Computers (2003)
Key Internal Factors Weight RatingWtd
Score
Strengths1. Several new senior executive with world-class skills and leadership experience
0.05 4 0.40
2. Continuous decline in operating costs and cost of goods sold
0.05 3 0.15
3. Well-known brand name 0.05 3 0.15
4. Consumer Reports (Sept 2002) recommended Gateway 500X as #1
0.10 4 0.40
5. As a direct seller, Gateway holds high brand recognition
0.05 3 0.15
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IFE– Gateway Computers (2003)
Key Internal Factors Weight RatingWtd
Score
Strengths (cont’d)6. Gateway is diversifying into non-PC products
0.10 3 0.30
7. Good relationship with its suppliers. 0.05 4 0.20
8. Economies of scale, the 6th largest PC maker I the world
0.05 4 0.20
9. Gateway retails stores excellent 0.05 3 0.15
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IFE– Gateway Computers (2003)
Key Internal Factors Weight RatingWtd
Score
Weaknesses1. High operating expense (22% of revenue vs. 10% for Dell)
0.05 3 0.15
2. Almost no budget for R&D vs. Dell’s 18% of revenue
0.10 1 0.05
3. Low return on assets ratio 0.025 1 0.10
4. No niche market 0.025 2 0.05