The document outlines key topics from Chapter 4 of a strategic management textbook, including: - The internal audit process examines functional business areas to understand strengths and weaknesses - Culture and strategy must be integrated, as culture can inhibit strategic changes if not aligned - Resource-based view suggests competitive advantage comes from valuable internal resources rather than external factors - Financial ratios and other metrics are used to evaluate performance across marketing, production, R&D, and other functions

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

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

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

23. Cultural Products Values Legends Beliefs Heroes Rites Symbols Rituals Myths Integrating Strategy & Culture

26. Management Planning Stage When Most Important Function Strategy Formulation Organizing Strategy Implementation Motivating Strategy Implementation Staffing Controlling Strategy Implementation Strategy Evaluation

28. Planning Forecasting Establishing objectives Devising strategies Developing policies Setting goals Management

30. Organizing Organizational design Job specialization Job descriptions Job specifications Span of control Unity of command Coordination Job design Job analysis Management

32. Motivating Leadership Communication Work groups Job enrichment Job satisfaction Needs fulfillment Organizational change Morale Management

34. Staffing Wage & salary admin. Employee benefits Interviewing Hiring Discharging Training Management development Affirmative Action EEO Labor relations Management

36. Controlling Quality Financial Sales Inventory Expense Analysis of variance Rewards Sanctions Management

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

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

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

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

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)