[PPT]Chapter 1 The Nature of Strategic Management · Web viewArial Wingdings Times New Roman...
Transcript of [PPT]Chapter 1 The Nature of Strategic Management · Web viewArial Wingdings Times New Roman...
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Ch 4 -1
Chapter 4 The Internal Assessment
Strategic Management: Concepts & Cases
13th EditionFred David
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Ch 4 -2
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Ch 4 -3
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 -4
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 -5
Key Internal Forces
Distinctive Competencies:
Firm’s strengths that cannot be easily matched or imitated by competitors
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Ch 4 -6
Key Internal Forces
Distinctive Competencies:
Building competitive advantage involves taking advantage of distinctive competencies
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Internal Audit Process
Information gathered from:ManagementMarketingFinance/accountingProduction/operationsResearch & developmentManagement information systems
Parallels process of external audit
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Ch 4 -8
Internal Audit
Managers and employees from all areas provide informationA team of managers then selects 10 to 15 key organizational strengths and weaknesses to focus on
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Ch 4 -9
Internal Audit
Exemplifies complexity of relationships among functional areas of the business
Financial Ratio Analysis
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Ch 4 -10
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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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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Ch 4 -13
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 -14
MarketingMarketing 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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Finance/Accounting
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision
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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 -18
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 -19
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 -20
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 -21
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 -22
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 -23
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 -24
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 -25
Production/Operations
Production/Operations Functions
Process Capacity Inventory Workforce Quality
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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?
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Ch 4 -27
Production/Operations Audit
•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 These functions can be done internally or
externally
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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?
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Ch 4 -30
Research & Development Audit
•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 -31
Management Information Systems
Purpose
Improve performance of an enterprise by improving the quality of managerial decisions
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Ch 4 -32
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 -33
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 -34
Internal Factor Evaluation (IFE) Matrix
1. List key internal factors2. Assign a weight ranging from 0.0 to 1.03. Assign a 1 to 4 rating to each factor4. Multiply the weight times the rating5. Sum the weighted scores