Internal Assessment PDF

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brewsa external conditions are accessible to all firms , while internal resources are unique to each company CHAPTER 4: INTERNAL ASSESSMENT Resourced-Based View (RBV) Internal resources are more important for a firm than - - external factors in achieving and sustaining competitive advantage. primary within the are the company resources drivers of success Organizational performance will primarily be determined by internal resources that can be grouped into three categories: tangible assets ○ Physical resources: plant and equipment, ex. strategic location may have an operational location, technology, raw materials, and edge over its competitors machines cone of the most valuable assets) well ○ Human resources: employees, training, contribute to how a company can innovate experience, intelligence, knowledge, skills, respond to challenges and abilities or ○ Organizational resources: firm structure, involves how the is structured (e g company processes & planning processes, information systems, Internal Assessment ·. intangible assets patents, trademarks, copyrights, databases, “Great spirits have always encountered violent opposition from and so on. intangible assets mediocre minds.” innovative ideas face resistance from Resources are what actually helps a firm exploit – Albert Einstein people who - understand do ex launch new from competition opportunities and neutralize threats. protect not · agree , tem products economic downturns support or or - A firm's internal resources (mix, type, amount, and “Weak leadership can wreck the soundest strategy.” nature) should be prioritized in devising strategies for – Sun Tzu importance of strong leadership - imitating competitors instead of sustainable competitive advantage. , to fail its invest it great plan , poor leadership potential develop maximize resources and Internal Audit ex. a company that is Involves developing and exploiting a firm's unique know for innovation must resources and capabilities, and continually Identify strengths and weaknesses in keep investing in research and development maintaining and strengthening those resources. ○ Management Advantageous for a firm to pursue a strategy that is ○ Marketing not currently being implemented by any competing ○ Finance and accounting firm. thus firm unique value a can create ○ Production and operations Sustainable competitive advantage is achieved when ○ Research and development other firms cannot duplicate a particular strategy. - - ○ Management information systems Empirical indicators For a resource to be valuable, it must be: - Nature of an Internal Audit ○ Rare: Rare resources give firms a establishing established with the intention of capitalizing Basis for Objectives & Strategies strengths and overcoming weaknesses competitive advantage, while common - Internal strengths/weaknesses resources aid economic prosperity but do not - - material sustain an advantage. luxury ex - brand that uses a rare that else External opportunities/threats - no one can access ○ Hard to imitate: Difficult-to-imitate resources Clear statement of mission provide stronger competitive advantages - Google's innovation is hard for than those easily copied. ex. strategies are designed to improve on a firm's copy exactly competitors to Key Internal Forces Distinctive Competencies: heaknessesturningthemintostrengthais , ○ Not easily substitutable: Resources without viable substitutes help firms maintain - Firm’s strengths that cannot be easily matched or- their competitive advantage, though still to need imitated by competitors substitutes can create new advantages for be aware substitutes difficult competitors for competitors. replace resources are to may arise Building competitive advantage involves taking something with else - advantage of distinctive competencies - - These characteristics enable a firm to implement things) (doing things right) (doing the right strategies that improve its efficiency and effectiveness Internal Audit Process and lead to a sustainable competitive advantage. Parallels process of external audit Emphasizes that neither internal nor external factors both are important alone are consistently more important for competitive Information gathered from: ex firm needs to recognize advantage; understanding the interaction between the · external market trends while Performing an internal audit ○ · Management using its internal strengths requires gathering assimilating, to respond to those changes two is key. ○ Marketing , · and evaluating information about the firms operations ○· Finance/accounting Since both internal and external factors constantly ○ ⑨ Production/operations change, strategists must adapt by identifying positive - Strategic Management interactive ○ ⑧ Research & development shifts and mitigating negative ones to maintain highly - - process ○ ⑲ Management information systems competitive advantage. Strategic management's core challenge is ensuring a firm's survival amidst these Compared to external audits, this provides more - changes. - Success requires that opportunity for participants to understand how their manages and employees jobs, departments, and divisions fit into the whole aligning firms organizational Integrating Strategy and Culture provid - a culture work together to - organization — perform better when they understand with its strategic goals ideas and information key to ensuring that strategies are - how their work affects other areas and activities of the - Organizational culture successfully implemented and sustained firm. "a pattern of behavior that has been developed by an organization as it learns to cope with its problem of “Communication may be the most word in management” (market conditions) collaboration) (e 9 team ·. - external adaptation and internal integration, and that has worked well enough to be considered valid and to Process of Gaining Competitive Advantage in a Firm create be taught to new members as the correct way to 1 11 identifywhatthecompany i sworkn improving these asaas thecompany something does t a Weaknesses → Strengths → Distinctive Competencies → use these outperform competitors and perceive, think, and feel." - toappch taksandaes emphasizes : - to succeed Competitive Advantage ○ importance of matching external with internal - factors in making strategic decisions. Financial ratio analysis exemplifies the complexity of - (what the company stands for) (traditions) relationships among the functional areas of business. Cultural products: values, beliefs, rites, rituals, (narratives that define history & values) ratio could be result of ceremonies, myths, stories, legends, sagas, a declining return on investment or profit margin : expressions Cunique company's identity) that embody the ineffective marketing , poor management policies , research and development errors , language, metaphors, symbols, heroes, and heroines. or weak management information system  (tools) an answer of "no" can indicate ○ levers that strategists can use to influence Management Audit Checklist potential weakness and direct strategy formulation, Does the firm use strategic management concepts? implementation, and evaluation activities. Are objectives/goals measurable? Well Culture affects strengths and weaknesses, and communicated? aligning it with strategy is essential for success in - Do managers at all levels plan effectively? strategic management. easier to implement strategies successfully Do managers delegate well? A supportive culture aids strategy implementation, if has ex. a company acultureofinnovationis Is the organization’s structure appropriate? strategies focused on while misaligned culture creates confusion and challenges. Are job descriptions clear? growth or technology The relationship between culture and strategy is Are job specifications clear? crucial to success, and understanding the firm as a Is employee morale high? sociocultural system helps strategists align strategies Is employee absenteeism low? with cultural strengths and address challenges. - Is employee turnover low? Management Planning Organizing Leading Are the reward mechanisms effective? , , , Controlling (POLC Functions of management Are the organization’s control mechanisms effective? start of the process Stratation 1. Planning preparing for the future ; cornerstone formulation of yet effective neglected strategy by managers Marketing · helps avoid waste conserve and resources , make a. essential bridge between the present and the - process of defining, anticipating, creating, and fulfilling , fair profits investment in future that increases the likelihood of upfront success - · forecasting establishing objectives achieving desired results. delising customers’ needs and wants for products and services. , , · all managers should be a involved in planning , alongside strategies developing polic , employees fosters synergy cohesive b. process by which one determines whether to Marketing Functions · team can achieve more together attempt a task, works out the most effective ↑ evaluating customer needs through surveys and way of reaching desired objectives, and 1. Customer analysis profiling prepares to overcome unexpected difficulties critical for market penetration strategy activities like advertising and personal selling underpins other : with adequate resources. 2. Selling products/services critical for market penetration 3 sequential activities 2. Organizing ult authority relationships product development & diversification involves test marketing positioning and 3. Product & service planning in a structure of task and , , breakingdowntest fundamental to determining product features specialization) ensuring that an a. achieve coordinated effort by defining task · better control gain 4. Pricing distributors competitors · and organization operates to influenced by consumers govts suppliers , , and authority relationships. , over prices charged , efficiently and forwardintegration consumers effectively aligning , strategy (market development a determining who does what and who reports ·seldirecting an 5. resources and channels and retail locations to reach responsibilities b. Distribution covers warehousing , , customers with the overall effectively strategy to whom. job specialization job descriptions specifications org , design , , & , to inform systematic and analysis of gathering control unity span of command coordination, etc. 6. Marketing research , , Stratation 3. Motivating efforts toward shaping human behavior marketing strategies to benefits evaluate objectives strategies costs vs marketing 7. Opportunity analysis assessing. a. process of influencing people to accomplish , - not succeed if not decisions employees are motivated -T specific objectives. obsatisfaction , employee morale , change org , , needs fulfillment b. Motivation explains why some people work Marketing Audit hard and others do not. comprise of 4 elevating visions and performance one of the most critical aspects of management 1. Are markets segmented effectively? components : c. leadership, group dynamics, communication, and organizational change 2. Is the organization positioned well among HR managers become actively involved strategic- management competitors? 4. Staffing more in process important to identify strengths and weaknesses 3. Has the firm’s market share been increasing? a. also called personnel management or human resource management 4. Are the distribution channels reliable & cost effective? b. includes activities such as recruiting, 5. Is the sales force effective? interviewing, testing, selecting, orienting, 6. Does the firm conduct market research? training, developing, caring for, evaluating, 7. Are product quality & customer service good? rewarding, disciplining, promoting, transferring, demoting, and dismissing 8. Are the firm’s products and services priced employees, as well as managing union appropriately? relations. 9. Does the firm have effective promotion, advertising, strategy 5. Controlling and publicity strategies? Evaluation a. includes all of those activities undertaken to 10. Are the marketing, planning, and budgeting effective? ensure that actual operations conform to 11. Do the firm’s marketing managers have adequate planned operations. experience and training? b. Controlling consists of four basic steps: 12. Is the firm’s Internet presence excellent as compared i. Establishing performance standards I to rivals? ii. Measuring individual and factors like liquidity leverage profitability etc. organizational performance Finance/Accounting influence strategic feasibility , , , Financial condition iii. Comparing actual performance to considered the single best measure of a firm's competitive analysis financial ratio common position and overall attractiveness to investors - planned performance standards method to assess org , strengths a weaknesses iv. Taking corrective actions 1. Investment decision (Capital budgeting) allocates and assets resources to projects determines the optimal capital structure and methods to raise functions 2. Financing decision funds , considering both short-and long-term goals addresses earnings distribution to shareholders balancing retained 3. Dividend decision , earnings and payout Finance/Accounting Audit Checklist 1. Where is the firm financially strong/weak as indicated by financial ratio analysis?