Internal Strategic Management Audit

Internal Strategic-Management Audit

• Objective: Gather and interpret information about the company's management, marketing, finance/accounting, production/operations, research and development, and management information systems.
• Purpose: Provide an understanding of how each department contributes to the overall organization.

Resource-Based View (RBV)

• Core principle: Internal resources are more crucial than external factors in achieving and sustaining competitive advantage.
• Key resource categories: Physical resources, human resources, and organizational resources.
• Resource criteria for value: Rare, hard to imitate, not easily substitutable.

Marketing

• Definition: The process of understanding and meeting customer needs and wants for products and services.
• Functions:
  • Customer analysis: evaluating consumer needs and desires through surveys, market positioning analysis, and customer profiling.
  • Product and service planning: activities like testing, positioning, warranties, packaging, quality control, and customer service.
  • Pricing: setting competitive prices considering consumer, government, supplier, distributor, and competitor influences.
  • Distribution : managing warehousing, channels, coverage, retail locations, inventory levels, transportation, and sales territories.
  • Marketing research: Gathering, recording, and analyzing data related to the marketing of goods and services.

Cost/Benefit Analysis

• Application: Assessing the costs, benefits, and risks associated with marketing decisions.
• Process:
  1. Calculate total costs.
  2. Estimate total benefits.
  3. Compare total costs with total benefits.

Finance/Accounting Functions

• Core decisions:
  • Investment: Allocating and reallocating capital and resources.
  • Financing: Determining the best capital structure for raising capital.
  • Dividend: Deciding the percentage of earnings paid to stockholders, the stability of dividends, and stock repurchase or issuance.

Production/Operations

• Definition: Activities transforming inputs into goods and services.
• Management focus: Inputs, transformations, outputs across industries and markets.

Research and Development (R&D)

• Purpose: Investing to develop superior products or services to achieve "first mover" or "late mover" advantages.
• Forms: Internal R&D and external R&D.

Benchmarking

• Definition: An analytical tool comparing a firm's value chain activities against competitors to identify best practices and areas for improvement.
• Process: Measuring costs of value chain activities across an industry.

Internal Factor Evaluation (IFE) Matrix

• Purpose: Evaluate the company's internal strengths and weaknesses.
• Steps:
  1. List key internal factors identified during the internal audit.
  2. Assign weights from 0.0 (not important) to 1.0 (most important).
  3. Assign ratings from 1 (major weakness) to 4 (major strength).
  4. Multiply each factor's weight by its rating to get a weighted score.
  5. Sum the weighted scores for each variable to get the total weighted score.
• Interpretation:
  • Total weighted score below 2.5 indicates a weak internal position.
  • Total weighted score above 2.5 suggests a strong internal position.

This quiz focuses on the Internal Strategic-Management Audit, highlighting the importance of internal resources in strategic planning. Understanding how different departments contribute to the organization is key to leveraging the Resource-Based View (RBV) for competitive advantage. Test your knowledge on management, marketing, and resource allocation.