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The Internal Assessment

The Internal Assessment

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The Internal Assessment

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  1. The Internal Assessment Strategic Management

  2. The Internal Assessment Great spirits have always encountered violent opposition from mediocre minds. -- Albert Einstein

  3. Nature of an Internal Audit All organizations – • Strengths • Weaknesses

  4. Nature of an Internal Audit Basis for objectives & strategies: • Internal strengths/weaknesses • External opportunities/threats • Clear statement of mission

  5. Key Internal Forces Functional business areas: • Vary by organization • Divisions have differing strengths and weaknesses

  6. Key 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

  7. Internal Audit • Parallels process of external audit • Gather & assimilate information from: • Management • Marketing • Finance/accounting • Production/operations • Research & development • Management information systems

  8. 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.

  9. Internal Audit Key to organizational success: • Coordination and understanding among managers from all functional areas

  10. Internal Audit Functional relationships: • Number and complexity increases relative to organization size

  11. Internal Audit Financial Ratio Analysis: • Exemplifies complexity of relationships among functional areas of the business

  12. Integrating 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. Integrating Strategy and Culture Organizational Culture -- • Resistant to change • May represent a strength or weakness of the firm

  14. Integrating Strategy and Culture Cultural products

  15. Integrating 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. Functions of Management Five basic activities – • Planning • Organizing • Motivating • Staffing • Controlling

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

  18. Functions of Management Planning • Start of the process • Bridge between present and future • Increases likelihood of achieving desired results

  19. Planning Forecasting Establishing objectives Devising strategies Developing policies Setting goals Planning

  20. Functions of Management Organizing • Achieve coordinated effort • Defining task and authority relationships • Departmentalization • Delegation of authority

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

  22. Functions of Management Motivating • Influencing people to accomplish specific objectives • Communication is a major component

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

  24. Functions of Management Staffing • Personnel management • Human resources management

  25. Staffing Wage & salary admin Employee benefits Interviewing Hiring Firing Training Management development Safety Affirmative action EEO Labor relations Career development Discipline procedures Management Staffing

  26. Functions of Management Controlling • Ensure actual operations conform to planned operations

  27. Controlling Management Quality control Financial control Sales control Inventory control Expense control Analysis of variances Rewards Sanctions Controlling

  28. 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 organization’s structure appropriate?

  29. Management Audit Checklist • Are job descriptions and job specifications clear? • Is employee morale high? • Are employee turnover and absenteeism low? • Are organizational reward and control mechanisms effective?

  30. Marketing Process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services

  31. Marketing • Customer analysis • Selling products/services • Product and service planning • Pricing • Distribution • Marketing research • Opportunity analysis

  32. Marketing Customer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategies Customer analysis

  33. Marketing Advertising Sales Promotion Publicity Sales force management Customer relations Dealer relations Selling Products/services

  34. Marketing Test marketing Brand positioning Devising warrantees Packaging Product features/options Product style Quality Product/service planning

  35. Marketing Forward integration Discounts Credit terms Condition of sale Markups Costs Unit pricing Pricing

  36. Marketing Warehousing Channels Coverage Retail site locations Sales territories Inventory levels Transportation Distribution

  37. Marketing Data collection Data input Data analysis Support all business functions Marketing research

  38. Marketing Assessing costs Assessing benefits Assessing risks Cost/benefit/risk analysis Opportunity Analysis

  39. Marketing Audit • Are markets segmented effectively? • Is the organization positioned well among competitors? • Has the firm’s market share been increasing? • Are present channels of distribution reliable and cost effective? • Does the firm have an effective sales force?

  40. Marketing Audit • 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?

  41. Marketing Audit • Are marketing planning and budgeting effective? • Do the firm’s marketing mangers have adequate experience and training

  42. Finance/Accounting • Determining financial strengths and weaknesses key to strategy formulation • Investment decision (Capital budgeting) • Financing decision • Dividend decision

  43. Finance/Accounting Functions of Finance/Accounting – • Investment decision (Capital budgeting) • Financing decision • Dividend decision

  44. Basic Financial Ratios Firm’s ability to meet its short-term obligations Ratios Current ratio Quick (or acid-test) ratio Liquidity ratios

  45. Basic Financial Ratios • Extent of debt financing Ratios Debt-to-total-assets Debt-to-equity Long-term debt-to-equity Times-interest earned Leverage ratios

  46. Basic Financial Ratios • Effective use of firm’s resources Ratios Inventory-turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period Activity ratios

  47. Basic Financial Ratios • Effectiveness shown by returns on sales and investment Ratios Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Profitability ratios

  48. Basic Financial Ratios • Effectiveness shown by returns on sales and investment Ratios Return on stockholders’ equity (ROE) Earnings per share Price-earnings ratio Profitability ratios (continued)

  49. Basic Financial Ratios • Firm’s ability to maintain economic position Ratios Sales Net income Earnings per share Dividends per share Growth ratios

  50. Finance/Accounting Audit • 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?