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Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 4 -1 Chapter 4 The Internal...
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Transcript of Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 4 -1 Chapter 4 The Internal...
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 4 -1
Chapter 4 The Internal Assessment
Strategic Management: Concepts & Cases
13th Edition
Fred David
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 4 -2
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Ch 4 -3
“Great spirits have always encountered violent opposition from mediocre minds.” – Albert Einstein
Internal Assessment
“Weak leadership can wreck the soundest strategy.” – Sun Tzu
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Ch 4 -4
Internal Audit
Identify strengths and weaknesses in Management Marketing Finance and accounting Production and operations Research and development Management information systems
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Ch 4 -5
Internal strengths/weaknesses External opportunities/threats Clear statement of mission
Nature of an Internal Audit
Basis for Objectives & Strategies
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Ch 4 -6
Key Internal Forces
Distinctive Competencies:
Firm’s strengths that cannot be easily matched or imitated by competitors
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Ch 4 -7
Key Internal Forces
Distinctive Competencies:
Building competitive advantage involves taking advantage of distinctive competencies
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Ch 4 -8
Internal Audit Process
Information gathered from:Management
Marketing
Finance/accounting
Production/operations
Research & development
Management information systems
Parallels process of external audit
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Ch 4 -9
Internal Audit
Involvement in performing an internal strategic-management audit provides a vehicle for understanding the nature and effect of decisions in other functional business areas of the firm
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Ch 4 -10
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Ch 4 -11
Internal Audit
Managers and employees from all areas provide information
A team of managers then selects 10 to 15 key organizational strengths and weaknesses to focus on
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Ch 4 -12
Internal Audit
Exemplifies complexity of relationships among functional areas of the business
Financial Ratio Analysis
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Ch 4 -13
Resource Based View (RBV)
Approach to Competitive Advantage
Internal resources are more important than external factors
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Ch 4 -14
Resource Based View (RBV)
Three All-Encompassing Categories
1. Physical resources
2. Human resources
3. Organizational resources
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Ch 4 -15
Resource Based View (RBV)
Empirical Indicators
Rare
Hard to imitate
Not easily substitutable
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Ch 4 -16
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 as the correct way to perceive, think, and feel
Organizational Culture
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Ch 4 -17
Integrating Strategy & Culture
Organizational Culture
Resistant to change
May represent:
Strength
Weakness
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Ch 4 -18
CulturalProducts
Values
Legends Beliefs
Heroes Rites
Symbols RitualsMyths
Integrating Strategy & Culture
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Ch 4 -19
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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Ch 4 -20
Management
Functions of Management
1. Planning
2. Organizing
3. Motivating
4. Staffing
5. Controlling
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Ch 4 -21
Management
Planning
Stage When Most ImportantFunction
Strategy Formulation
Organizing Strategy Implementation
Motivating Strategy Implementation
Staffing
Controlling
Strategy Implementation
Strategy Evaluation
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Ch 4 -22
Management
Planning
Beginning of management process
Bridge between present & future
Improves likelihood of attaining desired results
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Ch 4 -23
Planning
Developing a mission
Forecasting future events and trends
Establishing objectives
Choosing strategies to pursue
Management
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Ch 4 -24
Planning
Synergy Can develop through planning Exists when everyone pulls
together as a team that knows what it wants to achieve
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Ch 4 -25
Management
Organizing
Achieves coordinated effort
Defines task & authority relationships
Determines who does what
Determines who reports to whom
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Ch 4 -26
Management
Organizing Breaking down tasks into jobs Combining jobs to form
departments Delegating authority
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Ch 4 -27
Management
Motivating
Influencing to accomplish specific objectives
Four components include:
Leadership
Group dynamics
Communication
Organizational change
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Ch 4 -28
Management
Staffing
Personnel management
Human resource management
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Ch 4 -29
ManagementStaffing Recruiting Interviewing Testing Selecting Orienting Training Developing Caring for
Evaluating Rewarding Disciplining Promoting Transferring Demoting Dismissing
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Ch 4 -30
Management
Controlling
Establishing performance standards
Ensure actual operations conform to planned operations
Taking corrective actions
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Ch 4 -31
Management
Controlling
1. Establish performance standards
2. Measure individual and organizational performance
3. Compare actual performance to planned performance standards
4. Take corrective action
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Ch 4 -32
Management Audit Checklist
Does the firm use strategic management concepts?
Are objectives/goals measurable? Well communicated?
Do managers at all levels plan effectively?
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Ch 4 -33
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?
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Ch 4 -34
Management Audit Checklist
Is employee absenteeism low? Is employee turnover low? Are the reward mechanisms effective? Are the organization’s control
mechanisms effective?
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Ch 4 -35
Marketing
Customer Needs or Wants for Products and Services
1. Defining
2. Anticipating
3. Creating
4. Fulfilling
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Ch 4 -36
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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Ch 4 -37
Customer Analysis
Customer surveys
Consumer information
Market positioning strategies
Customer profiles
Market segmentation strategies
Marketing
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Ch 4 -38
AdvertisingSales Promotion
PublicityPersonal Selling
Sales force managementCustomer relations
Dealer relations
Marketing
Selling Products/Services
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Ch 4 -39
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Ch 4 -40
Test marketingBrand positioning
Devising warrantiesPackaging
Product features/optionsProduct style
QualityDeleting old products
Providing for customer service
Marketing
Product/Service Planning
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Ch 4 -41
ConsumersGovernments
SuppliersDistributorsCompetitors
Marketing
Pricing
Major Stakeholders
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Ch 4 -42
WarehousingDistribution channelsRetail site locations
Sales territoriesInventory levelsTransportationWholesaling
Retailing
Marketing
Distribution
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Ch 4 -43
Gather data
Record data
Analyze data
Marketing
Marketing Research
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Ch 4 -44
Assessing costs
Assessing benefits
Assessing risks
Marketing
Cost/Benefit Analysis
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Ch 4 -45
Marketing Audit
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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Ch 4 -46
Marketing Audit
6. Does the firm conduct market research?
7. Are product quality & customer service good?
8. Are the firm’s products and services priced appropriately?
9. Does the firm have effective promotion, advertising, and publicity strategies?
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Ch 4 -47
Marketing Audit
10.Are the marketing, planning, and budgeting effective?
11.Do the firm’s marketing managers have adequate experience and training?
12. Is the firm’s Internet presence excellent as compared to rivals?
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Ch 4 -48
Finance/Accounting
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision
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Ch 4 -49
Firm’s ability to meet its short-term obligations
Ratios
Current ratioQuick (or acid test) ratio
Basic Financial Ratios
Liquidity Ratios
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Ch 4 -50
Extent of debt financing
Ratios
Debt-to-total assetsDebt-to-equity
Long-term debt-to-equityTimes-interest-earned
Basic Financial Ratios
Leverage Ratios
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Ch 4 -51
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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Ch 4 -52
Effectiveness shown by returns on sales and
investment
Ratios
Gross profit marginOperating profit margin
Net profit marginReturn on total assets (ROA)
Basic Financial Ratios
Profitability Ratios
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Ch 4 -53
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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Ch 4 -54
Firm’s ability to maintain economic
position
Ratios
SalesNet Income
Earnings per shareDividends per share
Basic Financial Ratios
Growth Ratios
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Ch 4 -55
Ratio
Sales
Net Income
Earnings per share
Dividends per share
Annual percentage growth in
Total sales
Profits
EPS
Dividends per share
Growth Ratios
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Ch 4 -56
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Ch 4 -57
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Ch 4 -58
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Ch 4 -59
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Ch 4 -60
Finance/Accounting Audit
1. Where is the firm financially strong/weak as indicated by financial ratio analysis?
2. Can the firm raise needed short-term capital?
3. Can the firm raise needed long-term capital through debt and/or equity?
4. Does the firm have sufficient working capital?
5. Are capital budgeting procedures effective?
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Ch 4 -61
Finance/Accounting Audit
6. Are dividend payout policies reasonable?
7. Does the firm have good relations with its investors and stockholders?
8. Are the firm’s financial managers experienced and well trained?
9. Is the firm’s debt situation excellent?
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Ch 4 -62
Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
Workforce
Quality
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Ch 4 -63
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Ch 4 -64
Production/Operations Audit
•Are suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment, machinery, and offices in good condition?•Are inventory-control policies and procedures effective?
•Are suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment, machinery, and offices in good condition?•Are inventory-control policies and procedures effective?
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Ch 4 -65
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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Ch 4 -66
Research & Development
Research & Development Functions
Development of new products before competitors
Improving product quality
Improving manufacturing processes to reduce costs
These functions can be done internally or externally
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Ch 4 -67
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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Ch 4 -68
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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Ch 4 -69
Research & Development Audit
•Are MIS and computer systems adequate?•Is communication between R&D and other organizational units effective?•Are present products technologically competitive?
•Are MIS and computer systems adequate?•Is communication between R&D and other organizational units effective?•Are present products technologically competitive?
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Ch 4 -70
Management Information Systems
Purpose
Improve performance of an enterprise by improving the quality of managerial decisions
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Ch 4 -71
Management Information Systems Audit Do all managers use the information system
to make decisions? Is there a CIO or Director of Information
Systems position in the firm? Are 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?
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Ch 4 -72
Management Information Systems Audit Are strategists of the firm familiar with the
information systems of rival firms? 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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Ch 4 -73
Value Chain Analysis
The process whereby a firm determines the costs associated with: Purchasing raw materials Manufacturing products Marketing products
And compares them to the value chain of rival firms
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Ch 4 -74
Value Chain Analysis
Core competencies
Distinctive competencies
Benchmarking
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Ch 4 -75
Transforming Value Chain Activities into Sustained Competitive Advantage
Value Chain
Activities Are
Identified and
Assessed
Value Chain
Activities Are
Identified and
Assessed
Core Competencies Arise in Some
Activities
Core Competencies Arise in Some
Activities
Some Core Competencies
Evolve into Distinctive
Competencies
Some Core Competencies
Evolve into Distinctive
Competencies
Some Distinctive
Competencies Yield
Sustained Competitive Advantages
Some Distinctive
Competencies Yield
Sustained Competitive Advantages
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Ch 4 -76
Internal Factor Evaluation (IFE) Matrix
1. List key internal factors
2. Assign a weight ranging from 0.0 to 1.0
3. Assign a 1 to 4 rating to each factor
4. Multiply the weight times the rating
5. Sum the weighted scores
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 4 -77
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