CHAPTER 4.pdf

Chapter 4 The Internal Assessment Strategic Management: Concepts & Cases 13th Edition Fred David Copyright © 2011 Pearson Education, Inc. Ch 4 -1 Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. Ch 4 -2 Pu...

Chapter 4 The Internal Assessment Strategic Management: Concepts & Cases 13th Edition Fred David Copyright © 2011 Pearson Education, Inc. Ch 4 -1 Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. Ch 4 -2 Publishing as Prentice Hall Internal Assessment “Great spirits have always encountered violent opposition from mediocre minds.” – Albert Einstein “Weak leadership can wreck the soundest strategy.” – Sun Tzu Copyright © 2011 Pearson Education, Inc. Ch 4 -3 Publishing as Prentice Hall Internal Audit Identify strengths and weaknesses in ❑ Management ❑ Marketing ❑ Finance and accounting ❑ Production and operations ❑ Research and development ❑ Management information systems Copyright © 2011 Pearson Education, Inc. Ch 4 -4 Publishing as Prentice Hall Nature of an Internal Audit Basis for Objectives & Strategies Internal strengths/weaknesses External opportunities/threats Clear statement of mission Copyright © 2011 Pearson Education, Inc. Ch 4 -5 Publishing as Prentice Hall Key Internal Forces Distinctive Competencies: Firm’s strengths that cannot be easily matched or imitated by competitors Copyright © 2011 Pearson Education, Inc. Ch 4 -6 Publishing as Prentice Hall Key Internal Forces Distinctive Competencies: Building competitive advantage involves taking advantage of distinctive competencies Copyright © 2011 Pearson Education, Inc. Ch 4 -7 Publishing as Prentice Hall  Internal Audit Process Parallels process of external audit Information gathered from: ❑Management ❑Marketing ❑Finance/accounting ❑Production/operations ❑Research & development ❑Management information systems Copyright © 2011 Pearson Education, Inc. Ch 4 -8 Publishing as Prentice Hall Management Audit Checklist Does the firm use strategic management concepts? Are objectives/goals measurable? Well communicated? Do managers at all levels plan effectively? Copyright © 2011 Pearson Education, Inc. Ch 4 -9 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -10 Publishing as Prentice Hall Management Audit Checklist Is employee absenteeism low? Is employee turnover low? Are the reward mechanisms effective? Are the organization’s control mechanisms effective? Copyright © 2011 Pearson Education, Inc. Ch 4 -11 Publishing as Prentice Hall Marketing Marketing Functions 1. Customer analysis 2. Selling products/services 3. Product & service planning 4. Pricing 5. Distribution 6. Marketing research 7. Opportunity analysis Copyright © 2011 Pearson Education, Inc. Ch 4 -12 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -13 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -14 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -15 Publishing as Prentice Hall Finance/Accounting 1. Investment decision (Capital budgeting) 2. Financing decision 3. Dividend decision Copyright © 2011 Pearson Education, Inc. Ch 4 -16 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -17 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -18 Publishing as Prentice Hall Production/Operations Production/Operations Functions Process Capacity Inventory Workforce Quality Copyright © 2011 Pearson Education, Inc. Ch 4 -19 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -20 Publishing as Prentice Hall Production/Operations Audit Are quality-control policies & procedures effective? Are facilities, resources, and markets strategically located? Does the firm have technological competencies? Copyright © 2011 Pearson Education, Inc. Ch 4 -21 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 4 -22 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -23 Publishing as Prentice Hall Research & Development Audit Are MIS and computer systems adequate? Is communication between R&D and other organizational units effective? Are present products technologically competitive? Copyright © 2011 Pearson Education, Inc. Ch 4 -24 Publishing as Prentice Hall Management Information Systems Purpose Improve performance of an enterprise by improving the quality of managerial decisions Copyright © 2011 Pearson Education, Inc. Ch 4 -25 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -26 Publishing as Prentice Hall 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? Copyright © 2011 Pearson Education, Inc. Ch 4 -27 Publishing as Prentice Hall  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. Ch 4 -28 Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2011 Pearson Education, Inc. Ch 4 -29 Publishing as Prentice Hall