INTERNALASSESSMENTweek 5

InternalAudit

ManagementMarketingFinance and accountingProduction and operationResearch and deveelopmentManageement informationsystem

means: Identify strengthsand weaknesses in:

Key InternalForces

Competitors can't easily imitate ormatched

Competencies that make one companydifferent from its competitors

DISTINCTIVE COMPETENCIES

Key InternalForces

Building competitive advantageinvolves taking advantage ofdistinctive competencies

It's a starting point to makecompetitive advantages

DISTINCTIVE COMPETENCIES

Internal AuditProcess

Involvement in performing aninternal strategic-management audit provides avehicle for understandingthe nature and effect ofdecisions in otherfunctional business areas ofthe firm

MUST INVOLVE ALLMANAGERS ANDEMPLOYEES

Internal Audit

Exemplifies complexity ofrelationships amongfunctional areas of thebusiness

InternalAudit

Process

Management, markeeting, finance,accounting, production and operation,research and development, Management

Information System

GATHER INFORMATIONFROM:

Internal Audit

Managers and employeesfrom all areas provide

information

A team of managers thenselects 10 to 15 (20 in

Fred David) keyorganizational strengthsand weaknesses to focus

on

Resource BasedView (RBV)

INTERNAL ASSESSMENT

EXTERNAL ASSESSMENT

Resource Based View

PHYSICALRESOURCES

HUMAN RESOURCES ORGANIZATIONALRESOURCES

Three All-Encompassing Categories

NOT EASILYSUBTITUTABLE

Resource BasedView (RBV)

RARE HARD TO IMITATE

Empirical Indicators

Integrating Strategyand Culture

Organizational Culture:Pattern of behavior developed by an

organization as it learns to cope with itsproblem of external adaptation and

internal integration . . . is consideredvalid and taught to new members as the

correct way to perceive, think, and feel

Integrating Strategy andCulture:

Organizational Culture

RESISTANT TO CHANGE

MAY REPRESENT BOTHSTRENGTH AND

WEAKNESS

Organizational CultureCan Inhibit Strategic

Management

MISS EXTERNALCHANGES DUE TOSTRONGLY HELD

BELIEFS

NATURAL TENDENCY TO“HOLD THE COURSE”EVEN DURING TIMES

OF STRATEGIC CHANGE

Management

PlanningOrganizingMotivatingControlling

Planning(forsynergy)

Exists when everyone pullstogether as a team thatknows what it wants toachieve

Can develop through planning

Management AuditChecklist

Does the firm use strategicmanagement concepts?Are objectives/goals measurable? Well communicated?Do managers at all levels planeffectively?Do managers delegate well?Is the organization’s structureappropriate?Are job descriptions clear?Are job specifications clear?Is employee morale high?

Management AuditChecklist

Is employee absenteeism low?Is employee turnover low?Are the reward mechanismseffective?Are the organization’s controlmechanisms effective?

Marketing

DifiningAnticipatingCreatingFulfilling

"CUSTOMER NEEDSAND WANTS"

Finance/Accounting

Investment decision(Capital Budgeting)Financing DecisionDividend Decision

Finance/AccountingAudit

Where is the firmfinancially strong/weakas indicated by financialratio analysis?Can the firm raise neededshort-term capital?Can the firm raise neededlong-term capital throughdebt and/or equity?Does the firm havesufficient workingcapital?Are capital budgetingprocedures effective?

Finance/AccountingAudit

Are dividend payoutpolicies reasonable?Does the firm have goodrelations with itsinvestors andstockholders?Are the firm’s financialmanagers experienced andwell trained?Is the firm’s debtsituation excellent?

Production/Operations

ProcessCapacityInventoryWorkforceQuality

PRODUCTION/OPERATIONFUNCTION

Research andDevelopment

Development of newproducts beforecompetitorsImproving productqualityImproving manufacturingprocesses to reducecostsThese functions can bedone internally orexternally

RESEARCH ANDDEVELOPMENT FUNCTION

Management InformationSystem

Improve performance ofan enterprise by

improving the quality ofmanagerial decisions

PURPOSE

Value ChainAnalysis

AND COMPARES THEM TOTHE VALUE CHAIN OFRIVAL FIRMS

Purchasing raw materialsManufacturing productsMarketing products

THE PROCESS WHEREBY AFIRM DETERMINES THECOSTS ASSOCIATED WITH:

Value Chain Analysis

Distinctivecompetencies

BenchmarkingCore Competencies

Internal FactorEvaluation (IFE)

Matrix

List key internalfactorsAssign a weightranging from 0.0 to1.0Assign a 1 to 4rating to each factorMultiply the weighttimes the ratingSum the weightedscores