Copyright 2005 Prentice Hall1 Bus 411 Day 8. Copyright 2005 Prentice Hall Ch 3 -2 Agenda Discussion on Internal Assessment Strengths and Weakness Assignment

Copyright 2005 Prentice Hall 1

Bus 411

Day 8

Copyright 2005 Prentice Hall Ch 3 -2

Agenda

Discussion on Internal Assessment Strengths and Weakness

Assignment #2 Due Assignment #3 Posted

Due Feb 25 Bus 411 assignment three.doc



Marketing

Customer Needs/Wants for Products/Services

1. Defining

2. Anticipating

3. Creating

4. Fulfilling


Marketing

Marketing Functions

1. Customer analysis

2. Selling products/services

3. Product & service planning

4. Pricing

5. Distribution

6. Marketing research

7. Opportunity analysis


Customer Analysis

Customer surveys

Consumer information

Market positioning strategies

Customer profiles

Market segmentation strategies

Marketing


AdvertisingSales

PromotionPublicity

Sales force managementCustomer relations

Dealer relations

Marketing

Selling Products/Services


Test marketingBrand positioning

Devising warranteesPackaging

Product features/optionsProduct style

Quality

Marketing

Planning Product/Service


Forward integrationDiscounts

Credit termsCondition of sale

MarkupsCosts

Unit pricing

Marketing

Pricing


WarehousingChannelsCoverage

Retail site locationsSales territoriesInventory levelsTransportation

Marketing

Distribution


Data collectionData input

Data analysisSupport business functions

Marketing

Marketing Research


Assessing costs

Assessing benefits

Assessing risks

Cost/benefit/risk analysis

Marketing

Opportunity Analysis


Marketing


1. Are markets segmented effectively?

2. Is the organization positioned well among competitors?

3. Has the firm’s market share been increasing?

4. Are the distribution channels reliable & cost effective?

5. Is the sales force effective?


Marketing


6. Does the firm conduct market research?

7. Are product quality & customer service good?

8. Are the firm’s products/services priced appropriately?

9. Does the firm have effective promotion, advertising, & publicity strategies?


Marketing


10.Are the marketing planning & budgeting effective?

11.Do the firm’s marketing managers have adequate experience and training?


Finance/Accounting

Determining financial strengths & weaknesses key to strategy formation


Finance/Accounting

Finance/Accounting Functions

1. Investment decision (Capital budgeting)

2. Financing decision

3. Dividend decision


Financial ratios Objective indicators Two uses

Trending over time Comparison to industry norms & competitors

Websites with definitions and examples http://www.netmba.com/finance/financial/ratios/ http://cpaclass.com/fsa/ratio-01a.htm http://www.va-interactive.com/inbusiness/editorial/finance/ibt/ratio_analysis.html

Industry norms are available through UMFK electronic resources Business and Company Resource Center Business Source Premier Valueline

templates\Ratios.xlt


Firm’s ability to meet its short-term obligations

Ratios

Current ratioQuick (or acid test) ratio

Bigger is better

Basic Financial Ratios

Liquidity Ratios


Extent of debt financing

Ratios

Debt-to-total assetsDebt-to-equity

Long-term debt-to-equityTimes-interest earned

Smaller is better


Leverage Ratios


Effective use of firm’s resourcesRatios

Inventory-turnoverFixed assets turnoverTotal assets turnover

Accounts receivable turnoverAverage collection period

Bigger is better


Activity Ratios


Effectiveness shown by returns on sales &

investmentRatios

Gross profit marginOperating profit margin

Net profit marginReturn on total assets (ROA)

Higher is better


Profitability Ratios


Effectiveness shown by returns on sales &

investment

Ratios

Return on stockholders equity (ROE)

Earnings per sharePrice-earnings ratio

It depends


Profitability Ratios(cont’d)


Firm’s ability to maintain economic position

RatiosSales

Net incomeEarnings per shareDividends per share

Higher is better


Growth Ratios


Finance/Accounting Audit

•Where is the firm strong/weak as indicated by financial ratio analysis?•Can the firm raise short-term capital as needed?•Can the firm raise long-term capital as needed through debt and/or equity?

•Where is the firm strong/weak as indicated by financial ratio analysis?•Can the firm raise short-term capital as needed?•Can the firm raise long-term capital as needed through debt and/or equity?



•Does the firm have sufficient working capital?•Are capital budgeting procedures effective?•Are dividend payout policies reasonable?•Are the firm’s financial managers experienced & well trained?

•Does the firm have sufficient working capital?•Are capital budgeting procedures effective?•Are dividend payout policies reasonable?•Are the firm’s financial managers experienced & well trained?



Effective Financial Analysis Requires:1. Analysis of how the ratios have

changed over time2. How the ratios compare to industry

norms3. How the ratios compare with key

competitors

Effective Financial Analysis Requires:1. Analysis of how the ratios have

changed over time2. How the ratios compare to industry

norms3. How the ratios compare with key

competitors


Production/Operations

Production/Operations Functions

Process

Capacity

Inventory

Workforce

Quality


Facility designTechnology selection

Facility layoutProcess flow analysis

Facility locationLine balancingProcess control


Process


ForecastingFacilities planning

Aggregate planningScheduling

Capacity planningQueuing analysis


Capacity


Raw materialsWork in processFinished goods

Materials handling


Inventory


Job designWork measurement

Job enrichmentWork standards

Motivation techniques


Workforce


Quality controlSamplingTesting

Quality assuranceCost Control


Quality


Production/Operations Audit

•Are suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment & machinery in good condition?•Are inventory-control policies and procedures effective?

•Are suppliers of materials, parts, etc. reliable and reasonable?•Are facilities, equipment & machinery in good condition?•Are inventory-control policies and procedures effective?


Production/Operations Audit

•Are quality-control policies & procedures effective?•Are facilities, resources, and markets strategically located?•Does the firm have technological competencies?

•Are quality-control policies & procedures effective?•Are facilities, resources, and markets strategically located?•Does the firm have technological competencies?


Research & Development

Research & Development Functions

Development of new products before competitors

Improving product quality

Improving manufacturing processes to reduce costs


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

•Are the R&D facilities adequate?•If R&D is outsourced, is it cost effective?•Are the R&D personnel well qualified?•Are R&D resources allocated effectively?

•Are the R&D facilities adequate?•If R&D is outsourced, is it cost effective?•Are the R&D personnel well qualified?•Are R&D resources allocated effectively?


Research & Development Audit

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

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


Management Information Systems

Purpose

Improve performance of an enterprise by improving the quality of managerial decisions.


Management Information Systems

Information Systems CIO/CTO Security User-friendly E-commerce


Management Information Systems Audit

•Do managers use the information system to make decisions?•Is there a CIO or Director of Information Systems position in the firm?•Is data updated regularly?

•Do managers use the information system to make decisions?•Is there a CIO or Director of Information Systems position in the firm?•Is data updated regularly?



•Do managers from all functional areas contribute input to the information system?•Are there effective passwords for entry into the firm’s information system?•Are strategists of the firm familiar with the information systems of rival firms?

•Do managers from all functional areas contribute input to the information system?•Are there effective passwords for entry into the firm’s information system?•Are strategists of the firm familiar with the information systems of rival firms?



•Is the information system user-friendly?•Do all users understand the competitive advantages that information can provide?•Are computer training workshops provided for users?•Is the firm’s system being improved?

•Is the information system user-friendly?•Do all users understand the competitive advantages that information can provide?•Are computer training workshops provided for users?•Is the firm’s system being improved?


Value Chain Analysis (VCA)

http://www.ukeducation.org.uk/UkeduFrames/Documents/images/Value_chain_Diagram_1.jpg


The IFE Matrix

A summary step in conducting an internal strategic-management audit is to construct an IFE Matrix. This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among these areas.

Intuitive judgments are required in developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted to mean this is an all-powerful technique.


5 Steps to an IFE1. List key internal factors as identified in the internal-audit

process. Use a total from ten to twenty internal factors including both strengths and weaknesses.

2. Assign a weight ranging from 0 (not important) to 1.0 (very important). The weight indicates the relative importance of the factor to being successful in the firm’s industry. The sum of all the weights must equal 1.0.

3. Assign a 1-4 rating to each factor to indicate whether that factor represents a major weakness (1), minor weakness (2), minor strength (3), or major strength (4).

4. Multiply each factor’s weight by its rating to determine a weighted score for each variable.

5. Sum the weighted scores for each variable to determine the total weighted score for the organization.

Total weighted scores of below 2.5 indicate an internally weak organization. templates\IFE matrix.xlt


IFE– Gateway Computers (2003)

Key Internal Factors Weight RatingWtd

Score

Strengths1. Several new senior executive with world-class skills and leadership experience

0.05 4 0.40

2. Continuous decline in operating costs and cost of goods sold

0.05 3 0.15

3. Well-known brand name 0.05 3 0.15

4. Consumer Reports (Sept 2002) recommended Gateway 500X as #1

0.10 4 0.40

5. As a direct seller, Gateway holds high brand recognition

0.05 3 0.15




Score

Strengths (cont’d)6. Gateway is diversifying into non-PC products

0.10 3 0.30

7. Good relationship with its suppliers. 0.05 4 0.20

8. Economies of scale, the 6th largest PC maker I the world

0.05 4 0.20

9. Gateway retails stores excellent 0.05 3 0.15




Score

Weaknesses1. High operating expense (22% of revenue vs. 10% for Dell)

0.05 2 0.10

2. Almost no budget for R&D vs. Dell’s 18% of revenue

0.10 1 0.05

3. Low return on assets ratio 0.025 1 0.10

4. No niche market 0.025 2 0.05




Score

Weaknesses (cont’d)5. Shortage of cash due to successive losses

0.10 2 0.20

6. Limited number Gateway stores 0.05 2 0.10

7. Weak performance in overseas market 0.10 2 0.20

TOTAL 1.00 2.80

