Posted: September 4th, 2022

strategic Decision Making

 

Week 3 – Overview & Learning Objectives

Week 3 – Overview & Learning ObjectivesAttached Files:

  •  Chapter 3-The External Assessment.pptx Chapter 3-The External Assessment.pptx – Alternative Formats (1.082 MB)
  •  Chapter 4-The Internal Assessment.pptx Chapter 4-The Internal Assessment.pptx – Alternative Formats (939.806 KB)

Assigned Readings:Chapter 3. The External AssessmentChapter 4. The Internal AssessmentOverview:The external assessment uses an external audit that identifies and evaluates trends and events beyond the firm’s control. The focus is on the five external forces that shape the business environment (a) economic, (b) social, (c) political, (d) technological, and (e) competitive. The internal assessment examines how the company performs in all areas such as marketing, finance/accounting, overall management, IT, and production and operations.Chapter 3 The External AssessmentLearning Objectives:

  1. Describe the nature and purpose of an external assessment in formulating strategies.
  2. Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive.
  3. Explain Porter’s Five Forces Model and its relevance in formulating strategies.
  4. Describe key sources of information used for locating vital external information.
  5. Discuss forecasting tools and techniques.
  6. Explain how to develop and use an External Factor Evaluation (E F E) Matrix.
  7. Explain how to develop and use a Competitive Profile Matrix.

Chapter 4 The Internal Assessment  Learning Objectives:

  1. Describe the nature and role of an internal assessment in formulating strategies.
  2. Discuss why organizational culture is so important in formulating strategies.
  3. Identify the basic functions (activities) that make up management and their relevance in formulating strategies.
  4. Identify the basic functions of marketing and their relevance in formulating strategies.
  5. Discuss the nature and role of finance and accounting in formulating strategies.
  6. Discuss the nature and role of production/operations in formulating strategies.
  7. Discuss the nature and role of research and development (R&D) in formulating strategies.
  8. Discuss the nature and role of management information systems (MIS) in formulating strategies.
  9. Explain value chain analysis and its relevance in formulating strategies.
  10. Develop and use an Internal Factor Evaluation (IFE) Matrix.

 

Discussion Forum Week 3

Discussion Forum Week 3Go to Chapter 3  and do Exercise 3B “Develop a Competitive Profile Matrix” for Coca-Cola.  Develop an analysis of  Coca-Cola utilizing this matrix in two to three pages.  Then go to the end of Chapter 4 and do Exercise 4A “Perform a Financial Ratio Analysis for Coca-Cola” Step 1.  After developing an analysis of  Coca-Cola (two to three pages) and after completing the financial ratio analysis (one page minimum), submit them in the Discussion Forum for this week.  Reply to at least two other students (200- word minimum each) and, as a class, refine the Competitive Profile Matrix analysis and the financial ratio analysis so that they are acceptable for Coca-Co 

Strategic Management Concepts: A Competitive Advantage Approach

Sixteenth Edition

Chapter 4

The Internal Assessment

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed:
1) MathType Plugin
2) Math Player (free versions available)
3) NVDA Reader (free versions available)
1

Learning Objectives (1 of 2)
4.1 Describe the nature and role of an internal assessment in formulating strategies.
4.2 Discuss why organizational culture is so important in formulating strategies.
4.3 Identify the basic functions (activities) that make up management and their relevance in formulating strategies.
4.4 Identify the basic functions of marketing and their relevance in formulating strategies.
4.5 Discuss the nature and role of finance and accounting in formulating strategies.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

After studying this chapter, you should be able to do the following:
4-1. Describe the nature and role of an internal assessment in formulating strategies.
4-2. Discuss why organizational culture is so important in formulating strategies.
4-3. Identify the basic functions (activities) that make up management and their relevance
in formulating strategies.
4-4. Identify the basic functions of marketing and their relevance in formulating strategies.
4-5. Discuss the nature and role of finance/accounting in formulating strategies.
4-6. Discuss the nature and role of production/operations in formulating strategies.
4-7. Discuss the nature and role of research and development (R&D) in formulating
strategies.
4-8. Discuss the nature and role of management information systems (MIS) in formulating
strategies.
4-9. Explain value chain analysis and its relevance in formulating strategies.
4-10. Develop and use an Internal Factor Evaluation (IFE) Matrix.
2

Learning Objectives (2 of 2)
4.6 Discuss the nature and role of production/operations in formulating strategies.
4.7 Discuss the nature and role of research and development (R&D) in formulating strategies.
4.8 Discuss the nature and role of management information systems (MIS) in formulating strategies.
4.9 Explain value chain analysis and its relevance in formulating strategies.
4.10 Develop and use an Internal Factor Evaluation (IFE) Matrix.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Figure 4-1 A Comprehensive Strategic-Management Model

Source: Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40. Also, Ratnaningsih, Anik, and Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and Technology, no. 4, (October 2010): 20.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Key Internal Forces
Distinctive competencies
A firm’s strengths that cannot be easily matched or imitated by competitors
Building competitive advantages involves taking advantage of distinctive competencies.
Figure 4-2 The Process of Gaining Competitive Advantage in a Firm
Weaknesses → Strengths → Distinctive Competencies → Competitive Advantage

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Strategies are designed in part to improve on a firm’s weaknesses, turning them into strengths—and maybe even into distinctive competencies that can provide the firm with competitive advantages over rival firms.
5

The Process of Performing an Internal Audit
The internal audit
Requires gathering, assimilating, and prioritizing information about the firm’s management, marketing, finance, accounting, production/operations, research and development (R and D), and management information systems operations
Provides more opportunity for participants to understand how their jobs, departments, and divisions fit into the whole firm

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

All organizations have strengths and weaknesses in the functional areas of business. No enterprise is equally strong or weak in all areas. Strategic planning is most successful when managers and employees from all functional areas work together to provide ideas and information.
6

The Resource-Based View (R B V) (1 of 3)
The Resource-Based View (R B V) Approach
contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

The Resource-Based View (R B V) (2 of 3)
Proponents of the R B V contend that organizational performance will primarily be determined by internal resources that can be grouped into three all-encompassing categories:
physical resources
human resources
organizational resources

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Physical resources include all plant and equipment, location, technology, raw materials, machines; human resources include all employees, training, experience, intelligence, knowledge, skills, abilities; and organizational resources include firm structure, planning processes, information systems, patents, trademarks, copyrights, databases, and so on.
8

The Resource-Based View (R B V) (3 of 3)
For a resource to be valuable, it must be either (1) rare, (2) hard to imitate, or (3) not easily substitutable.
These three characteristics of resources are called Empirical Indicators
These enable a firm to implement strategies that improve its efficiency and effectiveness and lead to a sustainable competitive advantage.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

The basic premise of the RBV is that the mix, type, amount, and nature of a firm’s internal resources should be considered first and foremost in devising strategies that can lead to sustainable competitive advantage.
9

Integrating Strategy and Culture
Organizational culture significantly affects planning activities.
If strategies can capitalize on cultural strengths, such as a strong work ethic or highly ethical beliefs, then management often can swiftly and easily implement changes.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Every business entity has a unique organizational culture that impacts strategic-planning activities.
10

Organizational Culture
Organizational culture is “a pattern of behavior that has been developed by an organization as it learns to cope with its problem of external adaptation and internal integration and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel.”

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Remarkably resistant to change, culture can represent a major strength or weakness for any firm. It can be an underlying reason for strengths or weaknesses in any of the major business functions.
11

Cultural Products
Values
Beliefs
Rites
Rituals
Ceremonies
Myths
Stories
Legends
Sagas
Language
Metaphors
Symbols
Folktales
Heroes and heroines

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

These products or dimensions are levers that strategists can use to influence and direct strategy formulation, implementation, and evaluation activities.
12

Table 4-2 Aspects of Organizational Culture

Dimension
Low
Degree
Degree
Degree
High

1. Strong work ethic; arrive early and leave late
1
2
3
4
5

2. High ethical beliefs; clear code of business ethics followed
1
2
3
4
5

3. Formal dress; shirt and tie expected
1
2
3
4
5

4. Informal dress; many casual dress days
1
2
3
4
5

5. Socialize together outside of work
1
2
3
4
5

6. Do not question supervisor’s decision
1
2
3
4
5

7. Encourage whistle-blowing
1
2
3
4
5

8. Be health conscious; have a wellness program
1
2
3
4
5

9. Allow substantial “working from home”
1
2
3
4
5

10. Encourage creativity, innovation, and open-mindedness
1
2
3
4
5

11. Support women and minorities; no glass ceiling
1
2
3
4
5

12. Be highly socially responsible; be philanthropic
1
2
3
4
5

13. Have numerous meetings
1
2
3
4
5

14. Have a participative management style
1
2
3
4
5

15. Preserve the natural environment; have a sustainability program
1
2
3
4
5

Fifteen Example (Possible) Aspects of an Organization’s Culture

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Table 4-2 provides some example (possible) aspects of an organization’s culture. Note that you might want to ask employees and managers to rate the degree that the dimension characterizes the firm.
13

Management
The functions of management consist of five basic activities:
planning
organizing
motivating
staffing
controlling

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

These activities are important to assess in strategic planning because an organization should continually capitalize on its management strengths and improve on its management weaknesses.
14

The Basic Functions of Management (1 of 2)
Planning: forecasting, establishing objectives, devising strategies, and developing policies
Organizing: organizational design, job specialization, job descriptions, span of control, coordination, job design, and job analysis
Motivating: leadership, communication, work groups, behavior modification, delegation of authority, job enrichment, job satisfaction, needs fulfillment, organizational change, employee morale, and managerial morale

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Planning consists of all those managerial activities related to preparing for the future.
Organizing includes all those managerial activities that result in a structure of task and authority relationships.
Motivating involves efforts directed toward shaping human behavior.
15

The Basic Functions of Management (2 of 2)
Staffing: wage and salary administration, employee benefits, interviewing, hiring, firing, training, management development, employee safety, equal employment opportunity, and union relations
Controlling: quality control, financial control, sales control, inventory control, expense control, analysis of variances, rewards, and sanctions

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Staffing refers to human resource (HR) activities.
Controlling refers to all those managerial activities directed toward ensuring that actual results are consistent with planned results.
16

Management Audit Checklist of Questions (1 of 2)
Does the firm use strategic-management concepts?
Are company objectives and goals measurable and well communicated?
Do managers at all hierarchical levels plan effectively?
Do managers delegate authority well?
Is the organization’s structure appropriate?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

This checklist of questions can help determine specific strengths and weaknesses in the functional area of business. An answer of no to any question could indicate a potential weakness. Positive or yes answers to the checklist questions suggest potential areas of strength.
17

Management Audit Checklist of Questions (2 of 2)
Are job descriptions and job specifications clear?
Is employee morale high?
Are employee turnover and absenteeism low?
Are organizational reward and control mechanisms effective?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Marketing
Marketing
the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services.
19

Functions of Marketing
Customer analysis
Selling products and services
Product and service planning
Pricing
Distribution
Marketing research
Cost/ benefit analysis

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

These are the seven basic functions of marketing. Each will be described on the following slides.
20

Customer Analysis
Customer Analysis
the examination and evaluation of consumer needs, desires, and wants
involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Customer analysis is the first function of marketing.
21

Selling Products and Services
Selling
includes many marketing activities, such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Selling products and services is the second function of marketing. Successful strategy implementation generally rests on the ability of an organization to sell some product or service.
22

Product and Service Planning
Product and Service Planning
includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products; and providing for customer service
important when a company is pursuing product development or diversification

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Product and service planning is the third function of marketing.
23

Pricing
Pricing
Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distributors, and competitors
Sometimes an organization will pursue a forward integration strategy primarily to gain better control over prices charged to consumers.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Pricing is the fourth function of marketing.
24

Distribution
Distribution
includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing
especially important when a firm is striving to implement a market development or forward integration strategy

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Distribution is the fifth function of marketing.
25

Marketing Research
Marketing Research
the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services
can uncover critical strengths and weaknesses

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Marketing research is the sixth function of marketing.
26

Cost/Benefit Analysis
Cost/Benefit Analysis
Three steps are required:
compute the total costs associated with a decision
estimate the total benefits from the decision
compare the total costs with the total benefits

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Cost/benefit analysis is the seventh function of marketing.
27

Marketing Audit Checklist of Questions (1 of 2)
Are markets segmented effectively?
Is the organization positioned well among competitors?
Has the firm’s market share been increasing?
Are present channels of distribution reliable and cost effective?
Does the firm have an effective sales organization?
Does the firm conduct market research?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

These questions about marketing must be examined in strategic planning.
28

Marketing Audit Checklist of Questions (2 of 2)
Are product quality and customer service good?
Are the firm’s products and services priced appropriately?
Does the firm have an effective promotion, advertising, and publicity strategy?
Are marketing, planning, and budgeting effective?
Do the firm’s marketing managers have adequate experience and training?
Is the firm’s Internet presence excellent as compared to rivals?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Finance/Accounting Functions (1 of 4)
The functions of finance/accounting comprise three decisions:
The investment decision
The financing decision
The dividend decision

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

According to James Van Horne, the functions of finance/accounting comprise three decisions: the investment decision, the financing decision, and the dividend decision.
30

Finance/Accounting Functions (2 of 4)
Investment Decision (Capital Budgeting)
the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization
Financing Decision
determines the best capital structure for the firm and includes examining various methods by which the firm can raise capital

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

After strategies are formulated, capital budgeting decisions are required to successfully implement strategies.
Firms may raise capital by, for example, issuing stock, increasing debt, selling assets, or using a combination of these approaches.
31

Finance/Accounting Functions (3 of 4)
Dividend Decisions
concern issues such as the percentage of earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock
determine the amount of funds that are retained in a firm compared to the amount paid out to stockholders

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Three financial ratios that are helpful in evaluating a firm’s dividend decisions are the earnings-per-share ratio, the dividends-per-share ratio, and the price-earnings ratio.
32

Finance/Accounting Functions (4 of 4)
How has each ratio changed over time?
How does each ratio compare to industry norms?
How does each ratio compare with key competitors?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Financial ratios are computed from an organization’s income statement and balance sheet. Computing financial ratios is like taking a photograph—the results reflect a situation at just one point in time. Comparing ratios over time and to industry averages is more likely to result in meaningful statistics that can be used to identify and evaluate strengths and weaknesses.
Financial ratio analysis should be conducted on three separate fronts.
33

Table 4-4 A Summary of Key Financial Ratios (1 of 4)

Ratio
How Calculated
What it measures

Liquidity Ratios

Current Ratio
Current assets over Current liabilities
The extent to which a firm can meet its short-term obligations

Quick Ratio
Current assets minus inventory over Current liabilities
The extent to which a firm can meet its short-term obligations without relying on the sale of its inventories

Leverage Ratios

Debt-to-Total-Assets Ratio
Total debt over Total assets
The percentage of total funds provided by creditors

Debt-to-Equity Ratio
Total debt over Total stockholders’ equity
The percentage of total funds provided by creditors versus by owners

Long-Term Debt-to-Equity Ratio
Long-term debt over Total stockholders’ equity
The balance between debt and equity in a firm’s long-term capital structure

Times-Interest-Earned Ratio
Profits before interest and taxes over Total interest charges
the extent to which earnings can decline without the firm becoming unable to meet its annual interest costs

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

A Summary of Key Financial Ratios (2 of 4)

Ratio
How Calculated
What it measures

Activity Ratios

Inventory turnover
Sales over Inventory of finished goods
Whether a firm holds excessive stocks of inventories and whether a firm is slowly selling its inventories compared to the industry average

Fixed Assets turnover
Sales over Fixed assets
Sales productivity and plant and equipment utilization

Total Assets turnover

Sales over Total assets
Whether a firm is generating a sufficient volume of business for the size of its asset investment

Accounts Receivable turnover
Annual credit sales over Accounts receivable
The average length of time it takes a firm to collect credit sales (in percentage terms)

Average Collection Period
Accounts receivable over total credit sales per 365 days
The average length of time it takes a firm to collect on credit sales (in days)

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

A Summary of Key Financial Ratios (3 of 4)

Ratio
How Calculated
What it measures

Profitability Ratios

Gross Profit Margin
Sales minus cost of goods sold over Sales
the total margin available to cover operating expenses and yield a profit

Operating Profit Margin
Earnings before interest and taxes EBIT over Sales
Profitability without concern for taxes and interest

Net Profit Margin
Net income over sales
After-tax profits per dollar of sales

Return on total Assets (R O A)
Net income over Total assets
After-tax profits per dollar of assets; this ratio is also called return on investment (R O I)

Return on Stockholders’ Equity (R O E)
Net Income over Total stockholders’ equity
After-tax profits per dollar of stockholders’ investment in the firm

Earnings Per Share (E P S)
Net income over Number of shares of common stock outstanding
Earnings available to the owners of common Stock

Price-Earnings Ratio
Market price per share over Earnings per share
Attractiveness of firm on equity markets

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

A Summary of Key Financial Ratios (4 of 4)

Ratio
How Calculated
What it measures

Growth Ratios

Sales
Annual percentage growth in total sales
Firm’s growth rate in sales

Net Income
Annual percentage growth in profits
Firm’s growth rate in profits

Earnings Per Share
Annual percentage growth in EPS
Firm’s growth rate in EPS

Dividends Per Share
Annual percentage growth in dividends per share
Firm’s growth rate in dividends per share

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Finance/Accounting Audit Checklist (1 of 2)
Where is the firm financially strong and weak as indicated by financial ratio analyses?
Can the firm raise needed short-term capital?
Can the firm raise needed long-term capital through debt and/or equity?
Does the firm have sufficient working capital?
Are capital budgeting procedures effective?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Some finance and accounting questions that should be examined in any strategic analysis of the firm are given here.
38

Finance/Accounting Audit Checklist (2 of 2)
Are dividend payout policies reasonable?
Does the firm have good relations with its investors and stockholders?
Are the firm’s financial managers experienced and well trained?
Is the firm’s debt situation excellent?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Production/Operations
Production/operations function
consists of all those activities that transform inputs into goods and services
Production/operations management deals with inputs, transformations, and outputs that vary across industries and markets.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Production and operations activities often represent the largest part of an organization’s human and capital assets.
40

Table 4-6 The Basic Functions (Decisions) Within Production/Operations

Decision Areas
Example Decisions

1. Process
these decisions include choice of technology, facility layout, process flow analysis, facility location, line balancing, process control, and transportation analysis. Distances from raw materials to production sites to customers are a major consideration.

2. Capacity
these decisions include forecasting, facilities planning, aggregate planning, scheduling, capacity planning, and queuing analysis. Capacity utilization is a major consideration.

3. Inventory
these decisions involve managing the level of raw materials, work-in- process, and finished goods, especially considering what to order, when to order, how much to order, and materials handling.

4. Workforce
these decisions involve managing the skilled, unskilled, clerical, and
managerial employees by caring for job design, work measurement, job
enrichment, work standards, and motivation techniques.

5. Quality
these decisions are aimed at ensuring that high-quality goods and ser-
vices are produced by caring for quality control, sampling, testing, quality
assurance, and cost control.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Table 4-7 Implications of Various Strategies on Production/Operations

Various Strategies
Implications

1. Become a low-cost provider
Creates high barriers to entry
Creates larger market
Requires longer production runs and fewer product changes

2. Become a high-quality provider
Requires more quality-assurance efforts
Requires more expensive equipment
Requires highly skilled workers and higher wages

3. Provide great customer service
Requires more service people, service parts, and equipment
Requires rapid response to customer needs or changes in
customer tastes
Requires a higher inventory investment

4. Be the first to introduce new products
Has higher research and development costs
Has high retraining and tooling costs

5. Become highly automated
Requires high capital investment
Reduces flexibility
May affect labor relations
Makes maintenance more crucial

6. Minimize layoffs
Serves the security needs of employees and may develop
employee loyalty
Helps attract and retain highly skilled employees

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Production/Operations Audit Checklist
Are supplies of raw materials, parts, and subassemblies reliable and reasonable?
Are facilities, equipment, machinery, and offices in good condition?
Are inventory-control policies and procedures effective?
Are quality-control policies and procedures effective?
Are facilities, resources, and markets strategically located?
Does the firm have technological competencies?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Questions such as these should be examined during the analysis of production and operations.
43

Research and Development Audit
Does the firm have R&D facilities? Are they adequate?
If outside R&D firms are used, are they cost-effective?
Are the organization’s R&D personnel well qualified?
Are R&D resources allocated effectively?
Are management information and computer systems adequate?
Is communication between R&D and other organizational units effective?
Are present products technologically competitive?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Organizations invest in R&D because they believe that such an investment will lead to a superior product or service and will give them competitive advantages.
44

Management Information Systems
Management Information System
Receives raw material from both external and internal evaluation of an organization
Improves the performance of an enterprise by improving the quality of managerial decisions
Collects, codes, stores, synthesizes, and presents information in such a manner that it answers important operating and strategic questions

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

The heart of an information system is a database containing the kinds of records and data important to managers.
45

Management Information Systems Audit (1 of 2)
Do all managers in the firm use the information system to make decisions?
Is there a chief information officer or director of information systems position in the firm?
Are data in the information system updated regularly?
Do managers from all functional areas of the firm contribute input to the information system?
Are there effective passwords for entry into the firm’s information system?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Questions such as these should be asked when conducting an MIS audit.
46

Management Information Systems Audit (2 of 2)
Are strategists of the firm familiar with the information systems of rival firms?
Is the information system user-friendly?
Do all users of the information system understand the competitive advantages that information can provide firms?
Are computer training workshops provided for users of the information system?
Is the firm’s information system continually being improved in content- and user-friendliness?

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Value Chain Analysis (V C A)
Value Chain Analysis (V C A)
refers to the process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products
aims to identify where low-cost advantages or disadvantages exist anywhere along the value chain from raw material to customer service activities

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

According to Porter, the business of a firm can best be described as a value chain, in which total revenues minus total costs of all activities undertaken to develop and market a product or service yields value.
48

Figure 4-8 Transforming Value Chain Activities into Sustained Competitive Advantage

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

More and more companies are using VCA to gain and sustain competitive advantage by being especially efficient and effective along various parts of the value chain.
49

Benchmarking
Benchmarking
an analytical tool used to determine whether a firm’s value chain activities are competitive compared to rivals and thus conducive to winning in the marketplace
entails measuring costs of value chain activities across an industry to determine “best practices”

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Benchmarking enables a firm to take action to improve its competitiveness by identifying (and improving on) value chain activities where rival firms have comparative advantages in cost, service, reputation, or operation.
50

The Internal Factor Evaluation (I F E) Matrix
List key internal factors as identified in the internal-audit process.
Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to each factor.
Assign a 1-to-4 rating to each factor to indicate whether that factor represents a strength or weakness.
Multiply each factor’s weight by its rating to determine a weighted score for each variable.
Sum the weighted scores for each variable to determine the total weighted score for the organization.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

A summary step in conducting an internal strategic-management audit is to construct an Internal Factor Evaluation (IFE) Matrix.
51

Table 4-8 A Sample Internal Factor Evaluation Matrix for a Retail Computer Store (1 of 2)

Key internal Factors
Weight
Rating
Weighted Score

Strengths
Blank
Blank
Blank

1. Inventory turnover increased from 5.8 to 6.7.
0.05
3
0.15

2. Average customer purchase increased from $97 to $128.
0.07
4
0.28

3. Employee morale is excellent.
0.10
3
0.30

4. In-store promotions resulted in 20% increase in sales.
0.05
3
0.15

5. Newspaper advertising expenditures increased 10%.
0.02
3
0.06

6. Revenues from repair/service in the store up 16%.
0.15
3
0.45

7. In-store technical support personnel have MIS college degrees.
0.05
4
0.20

8. Store’s debt-to-total assets ratio declined to 34%.
0.03
3
0.09

9. Revenues per employee up 19%.
0.02
3
0.06

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

The table reveals that the two most important factors to be successful in the retail computer store business are “Revenues from repair/service in the store” and “Employee morale.” Note that the store is doing best on “Average customer purchase” amount and “In-store technical support.” The store is having major problems with its carpet, bathroom, paint, and checkout procedures. Note also that the matrix contains substantial quantitative data rather than vague statements.

52

Table 4-8 A Sample Internal Factor Evaluation Matrix for a Retail Computer Store (2 of 2)

Key internal Factors
Weight
Rating
Weighted Score

Weaknesses
Blank
Blank
Blank

1. Revenues from software segment of store down 12%.
0.10
2
0.20

2. Location of store negatively impacted by new Highway 34.
0.15
2
0.30

3. Carpet and paint in store somewhat in disrepair.
0.02
1
0.02

4. Bathroom in store needs refurbishing.
0.02
1
0.02

5. Revenues from businesses down 8%.
0.04
1
0.04

6. Store has no website.
0.05
2
0.10

7. Supplier on-time delivery increased to 2.4 days.
0.03
1
0.03

8. Often customers have to wait to check out
0.05
1
0.05

Total
1.00
BLANK
2.50

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Copyright

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

image1.emf

image2

image3

image4.wmf

image5.wmf

image6.wmf

image7.wmf

image8.wmf

image9.wmf

oleObject5.bin

oleObject6.bin

oleObject1.bin

oleObject2.bin

oleObject3.bin

oleObject4.bin

image10.wmf

image11.wmf

image12.wmf

image13.wmf

image14.wmf

oleObject11.bin

oleObject7.bin

oleObject8.bin

oleObject9.bin

oleObject10.bin

image15.wmf

image16.wmf

image17.wmf

image18.wmf

image19.wmf

image20.wmf

image21.wmf

oleObject16.bin

oleObject17.bin

oleObject18.bin

oleObject12.bin

oleObject13.bin

oleObject14.bin

oleObject15.bin

image22

image23

Expert paper writers are just a few clicks away

Place an order in 3 easy steps. Takes less than 5 mins.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00