SH BS Chpt 4 Fred David 12e Nov 2012

8/9/2019 SH BS Chpt 4 Fred David 12e Nov 2012

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Ch 4 -1

Chapter 4

The Internal Assessment

Strategic Management:

Concepts & Cases

12th

EditionFred David


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Ch 4 -2

The at!re o" an Internal

A!dit

Strengths / WeaknessesDistinctive Competency Coordination Functional Analysis is the start point

Helps every one understand the fit of o! and dept into theoverall organi"ation #f Financial ratio says $%#Why& 'at( )roduction( *rand&

Communicationis the key

Functional Areas of *usiness


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Objective:

Identify DistinctiveCompetencies Firms strengths that cannot !e easilymatched or imitated !y competitors

Competitive advantage is !uilt through using

distinctive competencies+ VIDEO: Competitive advantage-DNA

3MDCResearchInnovative company

Distinctive competencies are developedthrough $esources

Ch 4 -3


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Ch 4 -4

#eso!rce $ased %ie '#$%(

Approach to Competitive Advantage

#nternal resources are more important

than e,ternal factors

$*-+ -$#.Frame0ork-#D1%+$*-2 $esources .eutrali"ethreats( 1,ploit

%pportunities2 Develop 3 e,ploit key resources

2 -$#. 4 Sustained Competitiveadvantage

2 VIDEO: Resource Based View2 $evie0 Templatefor #nternal Analysis


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Ch 4 -5

Management

)lanning

Stage *hen Most

ImportantF!nction o"Management

Strateg+ Form!lation

,rgani-ing Strateg+ Implementation

Motivating Strateg+ Implementation

Sta""ing

Controlling

Strateg+ Implementation

Strateg+ Eval!ation


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Management)lanning

*ridge 5present & future6 Forecasting

1sta!lishing goals 3

o!ectives

Developing policies

Done for everything

)lanning 4 Synergy 4 CA

,rgani-ing

Break Task into jobs Combine jobs to form

Departments Delegate authority Ahie!es oor"inate" effort

Ch 4 -#


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ManagementMotivating

#nfluencing to accomplishspecific o!ectives 7eadership

Communication

8o! enrichment 8o! satisfaction

Sta""ing

$ersonnel management

%&' #ntervie0ing

Hiring

Wage 3 salary admin9 :raining

11%

Firing

7a!or relations

Ch 4 -(


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Ch 4 -)

Controlling

;uality

Financial

Sales

#nventory

1,penseAnalysis of variance

$e0ards

Management: Controlling 1sta!lishing performance standards

1nsuring conformance :aking corrective actions


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Ch 4 -*

Mar.eting

Customer .eeds/Wants for )roducts/Services

9 Creating

?9 Fulfilling


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MarketingC!stomer Anal+sis

Customer surveys Customer profiling S:) strategies

?)@s

Ch 4 -1+

Mar.eting #esearch Data collection Data analysis

Support functions

)lanning )rod!ct/Service :est marketing

*rand positioning

)ackaging

)roduct features/options )roduct style

;uality

)ricing Disounts Cre"it terms Con"ition of sale 'arkups ,nit priing


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Marketing

Distri0!tion Warehousing

Channels/Coverage

$etail site locations

Sales territories #nventory levels

:ransportation

Ch 4 -11

Selling )rod!cts/Services Advertising

Sales )romotion

)u!licity

Sales force management Customer relations

Dealer relations


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Ch 4 -12

Finance/Acco!nting

Functions 5Decisions6

1 Investment decision

2 Capital 0!dgeting

2 Financing decision

2 Capital Str!ct!re

Dividend decision

2 3age o" earnings paid to stoc.holder

Determining financial strengths 3 0eaknesses

key to strategy formation


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Financial Ratios

Ch 4 -13

i5!idit+ #atio

Current ratio Current Assets /Current LiabilitiesQuick ratio Current Assets -Inventory/Current

LiabilitiesActivit+ #atios

Inventory-turnover Sales/inventory

Fixed assetsturnover Sales/Fixed Assets

Total assets turnover Sales/Total Assets

Accounts receivableturnover

Annual Credit Sales/ AccountsReceivable

Average collectionperiod

Accounts receivable/ Total CreditSales/ !"#$

everage #atios%ebt-to-total assets Total %ebt / Total Assets

%ebt-to-e&uity Total %ebt /Total Stock 'olders(&uity

Long-ter) debt-to-

e&uity

Long Ter) %ebt/ Total Stock

'olders (&uity


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Ch 4 -14

)ro"ita0ilit+ #atios

6ross pro"it margin Sales-C*+S/ Sales

,perating pro"it margin (,IT/Sales

et pro"it margin et Inco)e/ Sales

#et!rn on total assets '#,A( et Inco)e/ Total Assets

#et!rn on stoc.holders e5!it+'#,E( et Inco)e/Total S.are

'olders (&uityEarnings per share et Inco)e/ S.aresoutstanding

)rice7earnings ratio ')E( 0arket 1rice 1er s.are/ (1S

Financial Ratios

6roth #atios

Sales C!rrent7)revio!s / )revio!set income Do

Earnings / share Do

Dividends/share Do


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Ratios should also evaluatethe following: Ho0 has each ratio changedover time

Ho0 do they compare0ith industry averages

Ho0 do they compare0ith key competitors

Ch 4 -15


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Production/Operations)rocess

Facility location design 3layout

:echnology selection

)rocess flo0 analysis

)rocess control

Capacit+

oreasting ailities planning

Capaity planning .

/he"uling

Ch 4 -1#

Inventor+ $a0 materials

Work in process

Finished goods

*or."orce 8o! design

Work standards

'otivation techniues


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Ch 4 -1(

;uality control

Sampling:esting

;uality assurance

Cost Control

)rod!ction/,perations: 8!alit+

8!alit+


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Ch 4 -1)

#esearch & Development

$esearch 3 Development Functions

Development o" ne prod!cts0e"ore

competitors ' )rod!ct#&D(

Improving man!"act!ring processesto

red!ce costs ' )rocess#&D(

Internal #&D vs Contracted #&D


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Ch 4 -1*

Management In"ormation

S+stems

)urpose Improve per"ormance o" an enterprise 0+

improving the 5!alit+ o" managerial decisions

#nformation Systems C#%/C:%

Security

Bserfriendly


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Value Chain Analysis (VCA) :otal $evenue:otal Cost4ield -alue

All firms in an industry have a similar-C #ncluding activities from o!taining ra0 material(

designing products( !uilding manufacturing

facilities( developing cooperative agreements orcustomer services9

)rofita!ility+ When the total revenues :otal costs

Companies need to understand their o0n as 0ell

as their competitors( suppliers 3 distri!utors -C@s9

-ideo+ -CA #ntroduction

Ch 4 -2+


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Value Chain Analysis(VCA)

)rocess of determining costsassociated 0itheach activity )urchasing ra0 materials'anufacturing

product5s6marketing those products9

-CA identifies 0here lo0cost advantagesor

disadvantagese,ists9

1very item on -CA is interlinked Change #n one 0ill effect positively or negatively

the other

VIDEO: VC Boats

Ch 4 -21


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)ro"it

Margins

+eneral Ad)inistration

(General management, accounting, fnance, strategic planning)'u)an Resource 0anage)ent(Recruiting, Training, Developing)

Tec.nology %evelop)ent(R&D, Product and process improvements)

1rocure)ent(Purchasing o raw material, machines, supplies)

InboundLogistics

(raw materials

Handling &warehousing

*perations(manuacturing

machining

ssem!lingtesting

*utboundLogistics

(warehousing

&Distri!utiono fnished

Product)

0arketingand sales

(advertising,

promotionpricing,channel

Relations)

Services(installations

repair

parts)

Sup

portActiviti

es

1ri)ary Activities

The "alue #hain 9 ) 97 )7


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Value Chain Analysis Competitive advantage

'argins 4 :- E:C Ho0 to conduct -CA

*reak do0n activitiesAssess potential of adding value5cost

advantage or differentiation6Determine strategies 5)orter generic6 -ideo+ $elationships in -CA

-ideo+ Simple -CAChicken

$evie0 :emplate for #nternal Analysis

Ch 4 -23


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A y!ical Value Chain fo" a#anufactu"ing $"% S!ppliers Cost

$a0 material

Fuel/:ransportation #nspection 3 'aintenance

)rod!ction cost

#nventory system 3 $eceiving )lant location 3 layout

'aintenance

Computer/ $3D

Ch 4 -24

Distri0!tion Costs 7oading 3 Shipping )ersonnel :rucking( Fuel 3

'aintenance

Sales and Mar.eting Costs

Sales person We! site 3 )u!licity Advertising 3 )romotion

C!stomer Service Costs )ostage )hone Warranty

Management Costs H$ 3 Administration 1mployee !enefits 7a!or relations

2 %ideo: %CA7Airbus A380


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Translating Company performanceof VCA into Competitive

advantage: Figure !

Ch 4 -25

Compan+

per"orms

activities

in its

val!e

chain

Competencies and

capa!ilities

gradually emerge in

certain

competitively

important valuechain activities

Company proficiency

in performing one or

to val!e chain

activities rises to

the level of a core

competence

Company proficiency

in performing a core

competencecontin!es to 0!ild

and evolves into a

distinctive

competence

Company gains a

!asis fors!staina0le

competitive

advantage

2 %ideo: Dells International Value Cain


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&ench%a"'ing

Determining competitiveness of value chain Comparing costs of value chain across

industry

Determining !est practices among

Duplicating or improving !est practices9 cost( service( reputation or operations9

Ch 4 -2#


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Ch0 4-2(

Inte"nal Facto" valuation(IF)*+ ,te! -"ocess


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Documents

SH BS Chpt 4 Fred David 12e Nov 2012