chapter04 slides

Fred R. DavidPrentice Hall

Ch 4-1

Internal Analysis (IFE)Internal Analysis (IFE)

Five-Step Process:Five-Step Process:

• List key internal factors (10-20)Strengths & weaknesses

• Assign weight to each (0 to 1.0)Sum of all weights = 1.0


Ch 4-2

Assign 1-4 rating to each factorFirm’s current strategies response to the

factor

• Multiply each factor’s weight by its ratingProduces a weighted score



Ch 4-3

• Sum the weighted scores for eachDetermines the total weighted score for the

organization

Highest possible weighted score for the organization is 4.0; the lowest, 1.0. Average = 2.5



Ch 4-4

.153.05 Financial ratios

.153.05 Reputation as family-friendly

.204.05 Long-range planning

.153.05 Minimal comps provided

.153.05 Buffets at most facilities

.153.05 Strong management team

.604.15 Owns 1 mile on Las Vegas strip

.153.05 Increasing free cash flows

.404.10 Room occupancy rates over 95%

.204.05 Largest casino company in world

Weighted

scoreRatingWeightMandalay Bay

Internal Strengths



Ch 4-5

2.751.0TOTAL (including Strengths)

.101.10Recent loss of joint ventures

.101.10Laughlin properties

.102.05Family reputation, not high rollers

.102.05Little diversification

.051.05Most properties located in Las Vegas

Weighted

scoreRatingWeightMandalay Bay

Internal Weaknesses



Ch 4-6

Mandalay Bay (in the previous example), has a total weighted score of 2.75 indicating that the firm is above average in its overall internal strength



Ch 4-7

Nature of an Internal AuditNature of an Internal Audit

Basis for objectives & strategies:Basis for objectives & strategies:

– Internal strengths/weaknesses– External opportunities/threats– Clear statement of mission


Ch 4-8

Key Internal ForcesKey Internal Forces

Functional business areas:Functional business areas:

– Vary by organization– Divisions have differing strengths and

weaknesses


Ch 4-9

Key Internal ForcesKey Internal Forces

Distinctive Competencies

• A firm’s strengths that cannot be easily matched or imitated by competitors

• Building competitive advantage involves taking advantage of distinctive competencies

• Strategies designed in part to improve on a firm’s weaknesses and turn to strengths


Ch 4-10

Internal AuditInternal Audit

• Parallels process of external audit• Gather & assimilate information from:

• Management• Marketing• Finance/accounting• Production/operations• Research & development• Management information systems


Ch 4-11


Involvement in performing an internal strategic-management audit provides vehicle for understanding nature and effect of decisions in other functional business areas of the firm.


Ch 4-12


Key to organizational success:

– Coordination and understanding among managers from all functional areas


Ch 4-13


Functional relationships:

– Number and complexity increases relative to organization size


Ch 4-14

Integrating Strategy and CultureIntegrating Strategy and Culture

Organizational Culture –Pattern of behavior developed by an organization as it learns to cope with its problem of external adaptation and internal integration…is considered valid and taught to new members as the correct way to perceive, think, and feel.


Ch 4-15


Organizational Culture --

• Resistant to change

• May represent a strength or weakness of the firm


Ch 4-16


Cultural products

Values beliefsrites

ritualsceremonies

myths

storieslegends

sagaslanguagesymbolsheroes


Ch 4-17


Culture can inhibit strategic management:

– Miss changes in external environment because they are blinded by strongly held beliefs

– When a culture has been effective in the past, natural tendency to stick with it in future, even during times of major strategic change


Ch 4-18

Functions of ManagementFunctions of Management

Planning

Stage When Most ImportantFunction

Strategy Formulation

Organizing

Strategy Implementation

Motivating


Staffing

Controlling


Strategy Evaluation


Ch 4-19

Management Audit ChecklistManagement Audit Checklist• 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?


Ch 4-20

Management Audit ChecklistManagement Audit Checklist

• Are job descriptions and job specifications clear?

• Is employee morale high?• Are employee turnover and

absenteeism low?• Are organizational reward and control

mechanisms effective?


Ch 4-21

MarketingMarketing

• Customer analysis• Selling products/services• Product and service planning• Pricing• Distribution• Marketing research• Opportunity analysis


Ch 4-22

Marketing AuditMarketing Audit

• 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 force?


Ch 4-23


• Does the firm conduct market research?• Are product quality and customer

service good?• Are the firm's products/services priced

appropriately?• Does the firm have an effective

promotion, advertising, and publicity strategy?


Ch 4-24


• Are marketing planning and budgeting effective?

• Do the firm’s marketing mangers have adequate experience and training


Ch 4-25

Finance/AccountingFinance/Accounting

• Determining financial strengths and weaknesses key to strategy formulation

• Investment decision (Capital budgeting)• Financing decision• Dividend decision


Ch 4-26

• Where is the firm strong and weak as indicated by financial ratio analysis?

• 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?

Finance/Accounting AuditFinance/Accounting Audit


Ch 4-27

• 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?

Finance/Accounting AuditFinance/Accounting Audit


Ch 4-28

• Process• Capacity• Inventory• Workforce• Quality

Production/OperationsProduction/Operations


Ch 4-29

• Are suppliers 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?

Production/Operations AuditProduction/Operations Audit


Ch 4-30

• Are quality-control policies and procedures effective?

• Are facilities, resources, and markets strategically located?

• Does the firm have technological competencies?

Production/Operations AuditProduction/Operations Audit


Ch 4-31

• Development of new products before competition

• Improving product quality• Improving manufacturing processes to

reduce costs

Research and DevelopmentResearch and Development


Ch 4-32

• 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?

Research and Development AuditResearch and Development Audit


Ch 4-33

• Are management information and computer systems adequate?

• Is communication between R&D and other organizational units effective?

• Are present products technologically competitive?

Research and Development AuditResearch and Development Audit


Ch 4-34

Purpose –– Improve performance of an enterprise by

improving the quality of managerial decisions.

Management Information Management Information SystemsSystems


Ch 4-35

• 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?

Management Information Management Information Systems AuditSystems Audit


Ch 4-36

• 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?

• Are strategists of the firm familiar with the information systems of rival firms?



Ch 4-37

• 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?

• Is the firm’s system being improved?


chapter04 slides

Documents

internal auditbasis

internal integrationis

internal auditkey

internal analysis ifeassign

list key internal factors

strategic management

total weighted score

weighted scores