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Chapter 4  The Internal Assessment ,[object Object],[object Object],[object Object],[object Object],[object Object]
Chapter Outline The Nature of an Internal Audit The Resource-Based View (RBV) Integrating Strategy & Culture
Chapter Outline ( cont’d ) Management Marketing Opportunity Analysis
Chapter Outline ( cont’d ) Finance/Accounting Production/Operations Research & Development
Chapter Outline ( cont’d ) Management Information Systems The Internal Factor Evaluation (IFE) Matrix
[object Object],Internal Assessment Weak leadership can wreck the soundest strategy. –  Sun Zi
[object Object],[object Object],The Nature of an Internal Audit Functional Areas of Business
[object Object],[object Object],[object Object],Nature of an Internal Audit Basis for Objectives & Strategies
Key Internal Forces Functional Business Areas: ,[object Object],[object Object]
Key Internal Forces Distinctive Competencies: ,[object Object]
Key Internal Forces Distinctive Competencies: ,[object Object]
Key Internal Forces Distinctive Competencies: ,[object Object]
Internal Audit ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Parallels process of external audit
Internal Audit 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
Internal Audit Coordination & understanding among managers from all functional areas Key to Organizational Success
Internal Audit Number and complexity increases relative to organization size Functional Relationships
Internal Audit Exemplifies complexity of relationships among functional areas of the business Financial Ratio Analysis
Resource Based View (RBV) Approach to Competitive Advantage Internal resources are more important than external factors
Resource Based View (RBV) 3 All Encompassing Categories ,[object Object],[object Object],[object Object]
Resource Based View (RBV) Empirical Indicators ,[object Object],[object Object],[object Object]
Integrating Strategy & 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 Organizational Culture
Integrating Strategy & Culture Organizational Culture ,[object Object],[object Object],[object Object],[object Object]
Cultural Products Values Legends Beliefs Heroes Rites Symbols Rituals Myths Integrating Strategy & Culture
Integrating Strategy & Culture Organizational Culture Can Inhibit Strategic Management ,[object Object],[object Object]
Management Functions of Management ,[object Object],[object Object],[object Object],[object Object],[object Object]
Management Planning Stage When Most Important Function Strategy Formulation Organizing Strategy Implementation Motivating Strategy Implementation Staffing Controlling Strategy Implementation Strategy Evaluation
Management Planning ,[object Object],[object Object],[object Object]
Planning Forecasting Establishing objectives Devising strategies Developing policies Setting goals Management
Management Organizing ,[object Object],[object Object],[object Object],[object Object]
Organizing Organizational design Job specialization Job descriptions Job specifications Span of control Unity of command Coordination Job design Job analysis Management
Management Motivating ,[object Object],[object Object]
Motivating Leadership Communication Work groups Job enrichment Job satisfaction Needs fulfillment Organizational change Morale Management
Management Staffing ,[object Object],[object Object]
Staffing Wage & salary admin. Employee benefits Interviewing Hiring Discharging Training Management development Affirmative Action EEO Labor relations Management
Management Controlling ,[object Object],[object Object],[object Object]
Controlling Quality Financial Sales Inventory Expense Analysis of variance Rewards Sanctions Management
Management Audit Checklist ,[object Object],[object Object],[object Object]
Management Audit Checklist ,[object Object],[object Object],[object Object],[object Object],[object Object]
Management Audit Checklist ,[object Object],[object Object],[object Object],[object Object]
Marketing Customer Needs/Wants for Products/Services ,[object Object],[object Object],[object Object],[object Object]
Marketing Marketing Functions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Customer Analysis Customer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategies Marketing
Advertising Sales Promotion Publicity Sales force management Customer relations Dealer relations Marketing Selling Products/Services
Test marketing Brand positioning Devising warrantees Packaging Product features/options Product style Quality Marketing Planning Product/Service
Forward integration Discounts Credit terms Condition of sale Markups Costs Unit pricing Marketing Pricing
Warehousing Channels Coverage Retail site locations Sales territories Inventory levels Transportation Marketing Distribution
Data collection Data input Data analysis Support business functions Marketing Marketing Research
Assessing costs Assessing benefits Assessing risks Cost/benefit/risk analysis Marketing Opportunity Analysis
Marketing Opportunity Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object]
Marketing Opportunity Analysis ,[object Object],[object Object],[object Object],[object Object]
Marketing Opportunity Analysis ,[object Object],[object Object]
Finance/Accounting ,[object Object]
Finance/Accounting Finance/Accounting Functions ,[object Object],[object Object],[object Object]
Firm’s ability to meet its short-term obligations Ratios Current ratio Quick (or acid test) ratio Basic Financial Ratios Liquidity Ratios
Extent of debt financing Ratios Debt-to-total assets Debt-to-equity Long-term debt-to-equity Times-interest earned Basic Financial Ratios Leverage Ratios
Effective use of firm’s resources Ratios Inventory-turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period Basic Financial Ratios Activity Ratios
Effectiveness shown by returns on sales & investment Ratios Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Basic Financial Ratios Profitability Ratios
Effectiveness shown by returns on sales & investment Ratios Return on stockholders equity (ROE) Earnings per share Price-earnings ratio Basic Financial Ratios Profitability Ratios (cont’d)
Firm’s ability to maintain economic position Ratios Sales Net income Earnings per share Dividends per share Basic Financial Ratios Growth Ratios
Finance/Accounting Audit ,[object Object],[object Object],[object Object]
Finance/Accounting Audit ,[object Object],[object Object],[object Object],[object Object]
Production/Operations Production/Operations Functions ,[object Object],[object Object],[object Object],[object Object],[object Object]
Facility design Technology selection Facility layout Process flow analysis Facility location Line balancing Process control Production/Operations Process
Forecasting Facilities planning Aggregate planning Scheduling Capacity planning Queuing analysis Production/Operations Capacity
Raw materials Work in process Finished goods Materials handling Production/Operations Inventory
Job design Work measurement Job enrichment Work standards Motivation techniques Production/Operations Workforce
Quality control Sampling Testing Quality assurance Cost Control Production/Operations Quality
Production/Operations Audit ,[object Object],[object Object],[object Object]
Production/Operations Audit ,[object Object],[object Object],[object Object]
Research & Development Research & Development Functions ,[object Object],[object Object],[object Object]
Financing as many projects as possible use percent-of-sales method Budgeting relative to competitors How many successful new products are needed Research & Development R&D Budgets
Research & Development Audit ,[object Object],[object Object],[object Object],[object Object]
Research & Development Audit ,[object Object],[object Object],[object Object]
Management Information Systems Purpose ,[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],Management Information Systems
Management Information Systems Audit ,[object Object],[object Object],[object Object]
Management Information Systems Audit ,[object Object],[object Object],[object Object]
Management Information Systems Audit ,[object Object],[object Object],[object Object],[object Object]
0.15 3 0.05 5.  As a direct seller, Gateway holds high brand recognition 0.40 4 0.10 4.  Consumer Reports (Sept 2002) recommended Gateway 500X as #1 0.15 3 0.05 3.  Well-known brand name 0.15 3 0.05 2.  Continuous decline in operating costs and cost of goods sold 0.40 4 0.05 1.  Several new senior executive with world-class skills and leadership experience Strengths Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
0.15 3 0.05 9.  Gateway retails stores excellent 0.20 4 0.05 8.  Economies of scale, the 6 th  largest PC maker I the world 0.20 4 0.05 7.  Good relationship with its suppliers.  0.30 3 0.10 6. Gateway is diversifying into non-PC products Strengths (cont’d) Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
0.05 2 0.025 4.  No niche market 0.10 1 0.025 3.  Low return on assets ratio 0.05 1 0.10 2.  Almost no budget for R&D vs. Dell’s 18% of revenue 0.15 3 0.05 1.  High operating expense (22% of revenue vs. 10% for Dell) Weaknesses Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
2.85 1.00 TOTAL 0.20 2 0.10 7.  Weak performance in overseas market 0.10 2 0.05 6.  Limited number Gateway stores 0.20 2 0.10 5.  Shortage of cash due to successive losses Weaknesses (cont’d) Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
[object Object],For Review (Chapter 4) Activity Ratios Cost/Benefit Analysis Capital Budgeting Cultural Products Communication Distinctive Competencies Controlling Distribution
[object Object],For Review (Chapter 4) Dividend Decision Functions of  Finance/Accounting Empirical Indicators Functions of Management Financial Ratio Analysis Functions of Marketing Financing Decision Functions of Production/ Operations
[object Object],For Review (Chapter 4) Growth Ratios Investment Decision Human Resource  Management Leverage Ratios Internal Audit Liquidity Ratios Internal Factor Evaluation (IFE) Matrix Management Information Systems
[object Object],For Review (Chapter 4) Motivating Personnel Management Opportunity Analysis Planning Organizational Culture Pricing Organizing Product & Service Planning
[object Object],For Review (Chapter 4) Production/Operations Functions Selling Profitability Ratios Staffing Research & Development Synergy Resource Based View (RBV) Test Marketing
[object Object],For Review (Chapter 4) Value Chain Analysis (VCA)

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The Internal Assessment

  • 1.
  • 2. Chapter Outline The Nature of an Internal Audit The Resource-Based View (RBV) Integrating Strategy & Culture
  • 3. Chapter Outline ( cont’d ) Management Marketing Opportunity Analysis
  • 4. Chapter Outline ( cont’d ) Finance/Accounting Production/Operations Research & Development
  • 5. Chapter Outline ( cont’d ) Management Information Systems The Internal Factor Evaluation (IFE) Matrix
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.
  • 11.
  • 12.
  • 13.
  • 14. Internal Audit 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
  • 15. Internal Audit Coordination & understanding among managers from all functional areas Key to Organizational Success
  • 16. Internal Audit Number and complexity increases relative to organization size Functional Relationships
  • 17. Internal Audit Exemplifies complexity of relationships among functional areas of the business Financial Ratio Analysis
  • 18. Resource Based View (RBV) Approach to Competitive Advantage Internal resources are more important than external factors
  • 19.
  • 20.
  • 21. Integrating Strategy & 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 Organizational Culture
  • 22.
  • 23. Cultural Products Values Legends Beliefs Heroes Rites Symbols Rituals Myths Integrating Strategy & Culture
  • 24.
  • 25.
  • 26. Management Planning Stage When Most Important Function Strategy Formulation Organizing Strategy Implementation Motivating Strategy Implementation Staffing Controlling Strategy Implementation Strategy Evaluation
  • 27.
  • 28. Planning Forecasting Establishing objectives Devising strategies Developing policies Setting goals Management
  • 29.
  • 30. Organizing Organizational design Job specialization Job descriptions Job specifications Span of control Unity of command Coordination Job design Job analysis Management
  • 31.
  • 32. Motivating Leadership Communication Work groups Job enrichment Job satisfaction Needs fulfillment Organizational change Morale Management
  • 33.
  • 34. Staffing Wage & salary admin. Employee benefits Interviewing Hiring Discharging Training Management development Affirmative Action EEO Labor relations Management
  • 35.
  • 36. Controlling Quality Financial Sales Inventory Expense Analysis of variance Rewards Sanctions Management
  • 37.
  • 38.
  • 39.
  • 40.
  • 41.
  • 42. Customer Analysis Customer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategies Marketing
  • 43. Advertising Sales Promotion Publicity Sales force management Customer relations Dealer relations Marketing Selling Products/Services
  • 44. Test marketing Brand positioning Devising warrantees Packaging Product features/options Product style Quality Marketing Planning Product/Service
  • 45. Forward integration Discounts Credit terms Condition of sale Markups Costs Unit pricing Marketing Pricing
  • 46. Warehousing Channels Coverage Retail site locations Sales territories Inventory levels Transportation Marketing Distribution
  • 47. Data collection Data input Data analysis Support business functions Marketing Marketing Research
  • 48. Assessing costs Assessing benefits Assessing risks Cost/benefit/risk analysis Marketing Opportunity Analysis
  • 49.
  • 50.
  • 51.
  • 52.
  • 53.
  • 54. Firm’s ability to meet its short-term obligations Ratios Current ratio Quick (or acid test) ratio Basic Financial Ratios Liquidity Ratios
  • 55. Extent of debt financing Ratios Debt-to-total assets Debt-to-equity Long-term debt-to-equity Times-interest earned Basic Financial Ratios Leverage Ratios
  • 56. Effective use of firm’s resources Ratios Inventory-turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period Basic Financial Ratios Activity Ratios
  • 57. Effectiveness shown by returns on sales & investment Ratios Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Basic Financial Ratios Profitability Ratios
  • 58. Effectiveness shown by returns on sales & investment Ratios Return on stockholders equity (ROE) Earnings per share Price-earnings ratio Basic Financial Ratios Profitability Ratios (cont’d)
  • 59. Firm’s ability to maintain economic position Ratios Sales Net income Earnings per share Dividends per share Basic Financial Ratios Growth Ratios
  • 60.
  • 61.
  • 62.
  • 63. Facility design Technology selection Facility layout Process flow analysis Facility location Line balancing Process control Production/Operations Process
  • 64. Forecasting Facilities planning Aggregate planning Scheduling Capacity planning Queuing analysis Production/Operations Capacity
  • 65. Raw materials Work in process Finished goods Materials handling Production/Operations Inventory
  • 66. Job design Work measurement Job enrichment Work standards Motivation techniques Production/Operations Workforce
  • 67. Quality control Sampling Testing Quality assurance Cost Control Production/Operations Quality
  • 68.
  • 69.
  • 70.
  • 71. Financing as many projects as possible use percent-of-sales method Budgeting relative to competitors How many successful new products are needed Research & Development R&D Budgets
  • 72.
  • 73.
  • 74.
  • 75.
  • 76.
  • 77.
  • 78.
  • 79. 0.15 3 0.05 5. As a direct seller, Gateway holds high brand recognition 0.40 4 0.10 4. Consumer Reports (Sept 2002) recommended Gateway 500X as #1 0.15 3 0.05 3. Well-known brand name 0.15 3 0.05 2. Continuous decline in operating costs and cost of goods sold 0.40 4 0.05 1. Several new senior executive with world-class skills and leadership experience Strengths Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
  • 80. 0.15 3 0.05 9. Gateway retails stores excellent 0.20 4 0.05 8. Economies of scale, the 6 th largest PC maker I the world 0.20 4 0.05 7. Good relationship with its suppliers. 0.30 3 0.10 6. Gateway is diversifying into non-PC products Strengths (cont’d) Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
  • 81. 0.05 2 0.025 4. No niche market 0.10 1 0.025 3. Low return on assets ratio 0.05 1 0.10 2. Almost no budget for R&D vs. Dell’s 18% of revenue 0.15 3 0.05 1. High operating expense (22% of revenue vs. 10% for Dell) Weaknesses Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
  • 82. 2.85 1.00 TOTAL 0.20 2 0.10 7. Weak performance in overseas market 0.10 2 0.05 6. Limited number Gateway stores 0.20 2 0.10 5. Shortage of cash due to successive losses Weaknesses (cont’d) Wtd Score Rating Weight Key Internal Factors IFE– Gateway Computers (2003)
  • 83.
  • 84.
  • 85.
  • 86.
  • 87.
  • 88.