slides

1. Fred R. David
Prentice Hall
Ch 4-1
Chapter 4Chapter 4
The Internal AssessmentThe Internal Assessment
Strategic Management:
Concepts and Cases. 9th
edition
Fred R. David
PowerPoint Slides by
Anthony F. Chelte
Western New England College

2. Fred R. David
Prentice Hall
Ch 4-2
Chapter OutlineChapter Outline
• The Nature of an Internal Audit
• Integrating Strategy and Culture
• Management

3. Fred R. David
Prentice Hall
Ch 4-3
Chapter OutlineChapter Outline
• Marketing
• Finance/Accounting
• Production/Operations

4. Fred R. David
Prentice Hall
Ch 4-4
Chapter OutlineChapter Outline
• Research and Development
• Management Information Systems
• The Internal Factor Evaluation
Matrix (IFE)

5. Fred R. David
Prentice Hall
Ch 4-5
The Internal AssessmentThe Internal Assessment
Great spirits have always encountered
violent opposition from mediocre minds.
-- Albert Einstein

6. Fred R. David
Prentice Hall
Ch 4-6
Nature of an Internal AuditNature of an Internal Audit
All organizations –All organizations –
• Strengths
• Weaknesses

7. Fred R. David
Prentice Hall
Ch 4-7
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

8. Fred R. David
Prentice Hall
Ch 4-8
Internal AuditInternal 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.

9. Fred R. David
Prentice Hall
Ch 4-9
Internal AuditInternal Audit
Key to organizational success:
– Coordination and understanding among
managers from all functional areas

10. Fred R. David
Prentice Hall
Ch 4-10
Internal AuditInternal Audit
Functional relationships:
– Number and complexity increases relative
to organization size

11. Fred R. David
Prentice Hall
Ch 4-11
Internal AuditInternal Audit
Financial Ratio Analysis:
– Exemplifies complexity of relationships
among functional areas of the business

12. Fred R. David
Prentice Hall
Ch 4-12
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

13. Fred R. David
Prentice Hall
Ch 4-13
Integrating Strategy and CultureIntegrating Strategy and Culture
Organizational Culture --
• Resistant to change
• May represent a strength or weakness
of the firm

14. Fred R. David
Prentice Hall
Ch 4-14
Integrating Strategy and CultureIntegrating Strategy and Culture
Cultural products
Values
beliefs
rites
rituals
ceremonies
myths
stories
legends
sagas
language
symbols
heroes

15. Fred R. David
Prentice Hall
Ch 4-15
Integrating Strategy and CultureIntegrating Strategy and Culture
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

16. Fred R. David
Prentice Hall
Ch 4-16
Functions of ManagementFunctions of Management
Five basic activities –
– Planning
– Organizing
– Motivating
– Staffing
– Controlling

17. Fred R. David
Prentice Hall
Ch 4-17
Functions of ManagementFunctions of Management
Planning
Stage When Most
ImportantFunction
Strategy Formulation
Organizing Strategy Implementation
Motivating Strategy Implementation
Staffing
Controlling
Strategy Implementation
Strategy Evaluation

18. Fred R. David
Prentice Hall
Ch 4-18
PlanningPlanning
Planning
Forecasting
Establishing objectives
Devising strategies
Developing policies
Setting goals

19. Fred R. David
Prentice Hall
Ch 4-19
Functions of ManagementFunctions of Management
Organizing
– Achieve coordinated effort
– Defining task and authority relationships
– Departmentalization
– Delegation of authority

20. Fred R. David
Prentice Hall
Ch 4-20
OrganizingOrganizing
Organizing
Organizational design
Job specialization
Job descriptions
Job specifications
Span of control
Unity of command
Coordination
Job design
Job analysis
Organizing
Organizational design
Job specialization
Job descriptions
Job specifications
Span of control
Unity of command
Coordination
Job design
Job analysis
Organizing
Organizational design
Job specialization
Job descriptions
Job specifications
Span of control
Unity of command
Coordination
Job design
Job analysis

21. Fred R. David
Prentice Hall
Ch 4-21
Functions of ManagementFunctions of Management
Motivating
– Influencing people to accomplish specific
objectives
– Communication is a major component

22. Fred R. David
Prentice Hall
Ch 4-22
MotivatingMotivating
Motivating
Leadership
Communication
Work groups
Job enrichment
Job satisfaction
Needs fulfillment
Organizational change
Morale

23. Fred R. David
Prentice Hall
Ch 4-23
Functions of ManagementFunctions of Management
Staffing
– Personnel management
– Human resources management

24. Fred R. David
Prentice Hall
Ch 4-24
StaffingStaffing
Staffing
Wage & salary admin
Employee benefits
Interviewing
Hiring
Firing
Training
Management development
Safety
Affirmative action
EEO
Labor relations
Career development
Discipline procedures
Management

25. Fred R. David
Prentice Hall
Ch 4-25
Functions of ManagementFunctions of Management
Controlling
– Ensure actual operations conform to
planned operations

26. Fred R. David
Prentice Hall
Ch 4-26
ControllingControlling
Controlling
Quality control
Financial control
Sales control
Inventory control
Expense control
Analysis of variances
Rewards
Sanctions
Management

27. Fred R. David
Prentice Hall
Ch 4-27
Leverage ratios
• Extent of debt
financing
Ratios
Debt-to-total-assets
Debt-to-equity
Long-term debt-to-equity
Times-interest earned
Basic Financial RatiosBasic Financial Ratios

28. Fred R. David
Prentice Hall
Ch 4-28
Activity ratios
• Effective use of firm’s
resources
Ratios
Inventory-turnover
Fixed assets turnover
Total assets turnover
Accounts receivable turnover
Average collection period
Basic Financial RatiosBasic Financial Ratios

29. Fred R. David
Prentice Hall
Ch 4-29
Profitability ratios
• Effectiveness shown
by returns on sales
and investment
Ratios
Gross profit margin
Operating profit margin
Net profit margin
Return on total assets (ROA)
Basic Financial RatiosBasic Financial Ratios

30. Fred R. David
Prentice Hall
Ch 4-30
Profitability ratios
(continued)
• Effectiveness shown
by returns on sales
and investment
Ratios
Return on stockholders’ equity
(ROE)
Earnings per share
Price-earnings ratio
Basic Financial RatiosBasic Financial Ratios

31. Fred R. David
Prentice Hall
Ch 4-31
Growth ratios
• Firm’s ability to
maintain economic
position
Ratios
Sales
Net income
Earnings per share
Dividends per share
Basic Financial RatiosBasic Financial Ratios

32. Fred R. David
Prentice Hall
Ch 4-32
• 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