Strategic Management

Concepts & Cases

8th edition

Fred R. David

Chapter 4:
The Internal
Assessment
PowerPoint Slides By:
Anthony F. Chelte
Western New England College

Ch. 4-1
2001 Prentice Hall

Comprehensive Strategic Management

Model

External
Audit
Chapter 3

Vision
&
Mission
Statements

Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Chapter 2

Chapter 5

Chapter 6

Chapter 7

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Chapter 8

Measure &
Evaluate
Performance

Chapter 9

Internal
Audit
Chapter 4

Ch. 4-2
2001 Prentice Hall

Internal Assessment (Contd)

Internal Strategic Management Audit
Functional

areas of the business

Strengths
Weaknesses

Ch. 4-3
2001 Prentice Hall

Internal Assessment
(Contd)

Internal Audit
Gather & assimilate information from:

Management
Marketing
Finance/accounting
Production/operations
Research & development
Management information systems
Ch. 4-4
2001 Prentice Hall

Internal Assessment
(Contd)

Management

Planning
Organizing
Motivating
Staffing
Controlling
Ch. 4-5
2001 Prentice Hall

Internal Assessment
(Contd)

Management
Forecasting
Establishing
objectives
Planning

Devising strategies
Developing policies
Setting goals
Ch. 4-6
2001 Prentice Hall

Internal Assessment
(Contd)

Management

Organizin
g

Organizational
design
Job specialization
Job descriptions
Job specifications
Span of control
Unity of command
Coordination
Job design
Job analysis
Ch. 4-7
2001 Prentice Hall

Internal Assessment (Contd)

Management

Motivatin
g

Leadership
Communication
Work groups
Job enrichment
Job satisfaction
Needs fulfillment
Organizational
change
Morale

Ch. 4-8
2001 Prentice Hall

Internal Assessment (Contd)

Management

Staffing

Wage & salary admin

Employee benefits
Interviewing
Hiring
Firing
Training
Management
development
Safety
Affirmative action
EEO
Labor relations
Career development
Discipline procedures
Ch. 4-9
2001 Prentice Hall

Internal Assessment (Contd)

Management

Controllin
g

Quality control
Financial control
Sales control
Inventory control
Expense control
Analysis of variances
Rewards
Sanctions

Ch. 4-10
2001 Prentice Hall

Internal Assessment
(Contd)

Management 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 organizations structure
appropriate?
Ch. 4-11
2001 Prentice Hall

Internal Assessment
(Contd)

Management Audit Checklist (Contd)

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. 4-12
2001 Prentice Hall

Internal Assessment
(Contd)
Marketing

Customer analysis
Selling products/services
Product and service planning
Pricing
Distribution
Marketing research
Opportunity analysis
Ch. 4-13
2001 Prentice Hall

Internal Assessment
(Contd)

Customer surveys
Marketing

Customer
analysis

Consumer
information
Market positioning
strategies
Customer profiles
Market
segmentation
strategies
Ch. 4-14
2001 Prentice Hall

Internal Assessment
(Contd)

Advertising
Marketing

Sales
Promotion

Selling
Products/servic
es

Publicity
Sales force
management
Customer relations
Dealer relations
Ch. 4-15
2001 Prentice Hall

Internal Assessment
(Contd)

Test marketing
Marketing

Brand positioning
Devising warrantees
Packaging

Product/service
planning

Product
features/options
Product style
Quality
Ch. 4-16
2001 Prentice Hall

Internal Assessment
(Contd)

Forward integration
Marketing

Discounts
Credit terms
Condition of sale

Pricing

Markups
Costs
Unit pricing
Ch. 4-17
2001 Prentice Hall

Internal Assessment
(Contd)

Warehousing
Marketing

Channels
Coverage

Distribution

Retail site locations

Sales territories
Inventory levels
Transportation
Ch. 4-18
2001 Prentice Hall

Internal Assessment
(Contd)

Marketing

Data collection
Data input

Marketing
research

Data analysis
Support all business
functions

Ch. 4-19
2001 Prentice Hall

Internal Assessment
(Contd)

Marketing

Assessing costs
Assessing benefits

Opportunity
analysis

Assessing risks
Cost/benefit/risk
analysis

Ch. 4-20
2001 Prentice Hall

Internal Assessment
(Contd)

Marketing Audit Checklist

Are markets segmented effectively?

Is the organization positioned well among
competitors?
Has the firms market share been
increasing?
Are present channels of distribution reliable
and cost effective?
Does the firm have an effective sales force?
Ch. 4-21
2001 Prentice Hall

Internal Assessment
(Contd)

Marketing Audit Checklist (Contd)

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. 4-22
2001 Prentice Hall

Internal Assessment
(Contd)

Marketing Audit Checklist (Contd)

Are marketing planning and budgeting

effective?
Do the firms marketing mangers have
adequate experience and training?

Ch. 4-23
2001 Prentice Hall

Internal Assessment
(Contd)

Finance/Accounting

Investment decision (Capital

budgeting)
Financing decision
Dividend decision

Ch. 4-24
2001 Prentice Hall

Internal Assessment
(Contd)

Financial ratios

Firms ability to
meet its shortterm obligations
Ratios
Current ratio

Liquidity ratios

Quick
(or acid-test)
ratio

Ch. 4-25
2001 Prentice Hall

Internal Assessment
(Contd)

Financial ratios

Extent of debt
financing
Ratios

Leverage
ratios

Debt-to-total-assets
Debt-to-equity
Long-term debt-toequity
Times-interest earned
Ch. 4-26
2001 Prentice Hall

Internal Assessment
(Contd)

Financial ratios

Effective use of
firms resources
Ratios
Inventory-turnover

Activity ratios

Fixed assets turnover

Total assets turnover
Accounts receivable
turnover
Average collection period
Ch. 4-27
2001 Prentice Hall

Internal Assessment
(Contd)

Financial ratios

Effectiveness
shown by returns
on sales and
investment
Ratios

Profitability
ratios

Gross profit margin

Operating profit margin
Net profit margin
Return on total assets
(ROA)
Ch. 4-28
2001 Prentice Hall

Internal Assessment
(Contd)

Financial ratios

Profitability
ratios
(continued)

Effectiveness
shown by returns
on sales and
investment
Ratios
Return on stockholders
equity (ROE)
Earnings per share
Price-earnings ratio
Ch. 4-29

2001 Prentice Hall

Internal Assessment
(Contd)

Financial ratios

Firms ability to
maintain economic
position
Ratios

Growth ratios

Sales
Net income
Earnings per share
Dividends per share
Ch. 4-30
2001 Prentice Hall

Internal Assessment
(Contd)

Finance/Accounting Audit Checklist

(Contd)

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?

Ch. 4-31
2001 Prentice Hall

Internal Assessment
(Contd)

Finance/Accounting Audit Checklist

Are dividend payout policies

reasonable?
Does the firm have good relations with
its investors and stockholders?
Are the firms financial managers
experienced and well trained?
Ch. 4-32
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operations

Process
Capacity
Inventory
Workforce
Quality
Ch. 4-33
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operatio
ns

Design of facility
Choice of technology
Facility layout

Process

Process flow analysis

Facility location
Line balancing
Process control
Ch. 4-34
2001 Prentice Hall

Internal Assessment
(Contd)

Forecasting

Production/Operations

Facilities planning
Aggregate planning
Capacity

Scheduling
Capacity planning
Queuing analysis
Ch. 4-35
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operations
Raw material
Work in process
Inventory

Finished goods
Materials handling

Ch. 4-36
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operations

Job design
Work measurement
Job enrichment

Workforce

Work standards
Motivation
techniques

Ch. 4-37
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operations

Quality control
Sampling
Testing

Quality

Quality assurance
Cost control

Ch. 4-38
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operations Audit Checklist

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?
Ch. 4-39
2001 Prentice Hall

Internal Assessment
(Contd)

Production/Operations Audit Checklist

(Contd)

Are quality-control policies and

procedures effective?
Are facilities, resources, and markets
strategically located?
Does the firm have technological
competencies?
Ch. 4-40
2001 Prentice Hall

Internal Assessment
(Contd)

Research & Development

Development of new products

before competition
Improving product quality
Improving manufacturing
processes to reduce costs

Ch. 4-41
2001 Prentice Hall

Internal Assessment
(Contd)

Research &
Development

Financing as many
projects as
possible
Use percentage-ofsales method

R&D budgets

Budgeting relative
to competitors
Deciding how many
successful new
products are
needed
Ch. 4-42
2001 Prentice Hall

Internal Assessment
(Contd)

Research & Development Audit

Checklist

Does the firm have R&D facilities? Are

they adequate?
If outside R&D firms are used, are they
cost effective?
Are the organizations R&D personnel
well qualified?
Are R&D resources allocated effectively?
Ch. 4-43
2001 Prentice Hall

Internal Assessment
(Contd)

Research & Development Audit

Checklist (Contd)

Are management information and

computer systems adequate?
Is communication between R&D and
other organizational units effective?
Are present products technologically
competitive?

Ch. 4-44
2001 Prentice Hall

Internal Assessment
(Contd)

Computer Information Systems

Information Systems
CIO/CTO
Security
User-friendly
E-commerce
Ch. 4-45
2001 Prentice Hall

Internal Assessment
(Contd)

Computer Information Systems

Audit Checklist

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?
Ch. 4-46
2001 Prentice Hall

Internal Assessment
(Contd)

Computer Information Systems

Audit Checklist (Contd)

Do managers from all functional areas of

the firm contribute input to the
information system?
Are there effective passwords for entry
into the firms information system?
Are strategists of the firm familiar with
the information systems of rival firms?
Ch. 4-47
2001 Prentice Hall

Internal Assessment
(Contd)

Computer Information Systems

Audit Checklist (Contd)

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 firms system being improved?
Ch. 4-48
2001 Prentice Hall

HOW TO INTERPRET
RESPONSES

All questions with answer of YES

will be considered strengths that can
be intensified or maintained
All questions with answer of NO will
be considered weaknesses that can
be addressed and improved

Weaknesses are usually the sources of

problem statements for applied research
Ch. 4-49
2001 Prentice Hall

Internal Analysis (IFE)

Five-Step Process:

List key internal factors (10-20)

Strengths & weaknesses

Assign weight to each (0 to 1.0) with

0=not important to 1.0=all important.
Consultation with the owner/decision
maker is required.
Sum of all weights = 1.0

Ch. 4-50
2001 Prentice Hall

Internal Analysis (IFE)

(Contd)

Five-Step Process: (Contd)

Assign 1-4 rating to each factor

Firms current strategies response to
the factor
1=major weakness; 2=minor weakness
3=minor strength; 4=major strength
Multiply each factors weight by its rating
Produces a weighted score
Ch. 4-51
2001 Prentice Hall

Internal Analysis (IFE)

(Contd)

Five-Step Process: (Contd)

Sum the weighted scores for each

Determines

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. 4-52
2001 Prentice Hall

Weight

Rating

Weighte
d
score

.05

.20

.10

.40

Increasing free cash flows

.05

.15

Owns sizeable real estate property

.15

.60

Strong management team

.05

.15

Buffets at most facilities

.05

.15

Highly motivated staff

.05

.15

Long-range planning

.05

.20

.05

.15

.05

.15

Solaire Resort & Casino

Manila
One of theStrengths
largest casinos in the
Internal

country
Room occupancy rates over 95%

Strong reputation in the gaming

industry
Financial ratios

Ch. 4-53
2001 Prentice Hall

Weight

Rating

Weighte
d
score

Only one finished property

.05

.05

Little diversification

.05

.10

Only known among high rollers

.05

.10

No foreign affiliation

.10

.10

Recent loss of joint ventures

.10

.10

TOTAL (including Strengths)

1.0

Solaire Resort & Casino Manila

Internal Weaknesses

2.75

Ch. 4-54
2001 Prentice Hall

Internal Analysis (IFE)

(Contd)

Solaire Resort & Casino Manila (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. 4-55
2001 Prentice Hall