David Sm13 Ppt 04

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Ch 4 -1

Chapter 4 The Internal Assessment

Strategic Management:

Concepts & Cases

13

th

_Edition

Fred David

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Ch 4 -3

Internal Audit



The purpose of internal audit is to

Identify strengths and weaknesses in



Management



Marketing



Finance and accounting



Production and operations



Research and development



Management information systems



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



Building competitive advantage involves

taking advantage of distinctive

competencies

Internal Audit Process

1- Information gathered from:



Management – Marketing -Finance/accounting



Production/operations –R &D - MIS

•Managers and employees from all

areas provide information

2- A team of managers then selects 10 to

15 key organizational strengths and

weaknesses to focus on

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Ch 4 -7

Resource Based View (RBV)

Approach to Competitive Advantage

-

Internal resources are more important than

external factors

- Three All-Encompassing Categories

•Physical resources

•Human resources

•Organizational resources

-Empirical Indicators

•Rare

•Hard to imitate

•Not easily substitutable

Management

Functions of Management

1. Planning

2. Organizing

3. Motivating

4. Staffing

5. Controlling

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Ch 4 -9

Management

Planning

Stage When Most

Important

Function

Strategy Formulation

Organizing

Strategy Implementation

Motivating

Strategy Implementation

Staffing

Controlling

Strategy Implementation

Strategy Evaluation

Management Audit Checklist



Does the firm use strategic management

concepts?



Are objectives/goals measurable? Well

communicated?



Do managers at all levels plan effectively?



Do managers delegate well?



Is the organization’s structure appropriate?

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Ch 4 -11



Are job specifications clear?



Is employee morale high?



Is employee absenteeism low?



Is employee turnover low?



Are the reward mechanisms effective?



Are the organization’s control

mechanisms effective?

Marketing

Customer Needs or Wants for Products

and Services

1. Defining

2. Anticipating

3. Creating

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Ch 4 -13

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?

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?

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 -15

Finance/Accounting

1. Investment decision (Capital

budgeting)

2. Financing decision

3. Dividend decision

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?

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Ch 4 -17

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?

Production/Operations

Production/Operations Functions



Process



Capacity



Inventory



Workforce



Quality

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Ch 4 -19

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 quality-control policies & procedures

effective?

•Are facilities, resources, and markets strategically

located?

•Does the firm have technological competencies?

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

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Ch 4 -21