Strategic Management

By
Tauseef Iqbal Khan
Faculty Member- IQRA University
Notable Quotes

• You have to learn to treat people as a

resource--- you have to ask not what do they
cost, but what is the yield and , what can
they produce?
• A firm that continues to employ a previously
successful strategy eventually and inevitably
falls victim to a competitor.
Chapter 4 The Internal Assessment
Learning Objectives
• Describe how to perform an internal strategic-management audit.
• Discuss the Resource-Based View (RBV) in strategic management.
• Discuss key interrelationships among the functional areas of business.
• Identify the basic functions or activities that make up management, marketing,
finance/accounting production/operations, research and development, and management
information systems
• Explain how to determine and prioritize a firm’s internal strengths and weaknesses.
• Explain the importance of financial ratio analysis.
• Discuss the nature and role of management information systems in strategic management.
• Develop an Internal Factor Evaluation (IFE) Matrix.
• Explain cost/benefit analysis value chain analysis, and benchmarking as strategic-management tools.
FIGURE 4.1 Identifying the Components of a Single-Business Company’s Strategy

p. 56

4–4
Key Internal Forces
• Distinctive competencies
• A firm’s strengths that cannot be easily matched or
imitated by competitors
• Building competitive advantages involves taking
advantage of distinctive competencies.
The Process of Performing an
Internal Audit
• The internal audit
• Requires gathering and assimilating information about the firm’s
management, marketing, finance/accounting,
production/operations, research and development (R&D), and
management information systems operations
• Provides more opportunity for participants to understand how their
jobs, departments, and divisions fit into the whole organization
The Resource-Based View (RBV)
• The Resource-Based View (RBV) approach
• contends that internal resources are more important for a firm than external
factors in achieving and sustaining competitive advantage
• Proponents of the RBV contend that organizational performance will primarily
be determined by internal resources that can be grouped into three all-
encompassing categories: physical resources, human resources, and
organizational resources
The Resource-Based View (RBV)
• VRIN-
• For a resource to be valuable, it must be either (1) rare, (2) hard
to imitate, or (3) not easily substitutable (Empirical Indicators)
• These three characteristics of resources enable a firm to
implement strategies that improve its efficiency and
effectiveness and lead to a sustainable competitive advantage
Example Cultural Products Defined
Integrating Strategy and Culture
• Organizational culture significantly affects business decisions and
thus must be evaluated during an internal strategic-management
audit.
• If strategies can capitalize on cultural strengths, such as a strong
work ethic or highly ethical beliefs, then management often can
swiftly and easily implement changes.
Management
• The functions of management consist of five basic activities:
planning, organizing, motivating, staffing, and controlling.
• These activities are important to assess in strategic planning
because an organization should continually capitalize on its
management strengths and improve on its management
weaknesses.
The Basic Functions of Management
Marketing
• Marketing
• the process of defining, anticipating, creating, and fulfilling customers’ needs
and wants for products and services
Functions of Marketing
Customer analysis
Selling products/services
Product and service planning
Pricing Distribution
Marketing research
Opportunity analysis
Marketing
• Customer analysis
• the examination and evaluation of consumer needs, desires, and
wants
• involves administering customer surveys, analyzing consumer
information, evaluating market positioning strategies, developing
customer profiles, and determining optimal market segmentation
strategies
• essential in developing an effective mission statement
Product and Service Planning
• Product and service planning
• includes activities such as test marketing; product and brand positioning;
devising warranties; packaging; determining product options, features, style,
and quality; deleting old products; and providing for customer service
• important when a company is pursuing product development or
diversification
Pricing
• Five major stakeholders affect pricing decisions: consumers,
governments, suppliers, distributors, and competitors
• Sometimes an organization will pursue a forward integration strategy
primarily to gain better control over prices charged to consumers
Distribution
• Distribution
• includes warehousing, distribution channels, distribution coverage, retail site
locations, sales territories, inventory levels and location, transportation
carriers, wholesaling, and retailing
• especially important when a firm is striving to implement a market
development or forward integration strategy
Marketing Research
• Marketing research
• the systematic gathering, recording, and analyzing of data about problems
relating to the marketing of goods and services
• can uncover critical strengths and weaknesses
Cost/Benefit Analysis
Three steps are required to perform a cost/benefit analysis:
1. compute the total costs associated with a decision,
2. estimate the total benefits from the decision,
3. compare the total costs with the total benefits.
Finance/Accounting Functions
The functions of finance/accounting comprise three decisions:
1. the investment decision
2. the financing decision
3. the dividend decision
Finance/Accounting Functions
• Investment decision
• the allocation and reallocation of capital and resources to projects, products,
assets, and divisions of an organization
• Financing decision
• determines the best capital structure for the firm and includes examining
various methods by which the firm can raise capital
Finance/Accounting Functions
• Dividend decisions
• concern issues such as the percentage of earnings paid to stockholders, the
stability of dividends paid over time, and the repurchase or issuance of stock
• determine the amount of funds that are retained in a firm compared to the
amount paid out to stockholders
A Summary of Key
Financial Ratios
A Summary of Key
Financial Ratios
A Summary of Key
Financial Ratios
Production/Operations
• Production/operations function
• consists of all those activities that transforms inputs into
goods and services
• Production/operations management deals with
inputs, transformations, and outputs that vary across
industries and markets.
The Basic Functions (Decisions) Within
Production/Operations
Management Information Systems
• A management information system’s purpose is to improve the
performance of an enterprise by improving the quality of managerial
decisions
• An effective information system thus collects, codes, stores,
synthesizes, and presents information in such a manner that it
answers important operating and strategic questions
THE CONCEPT OF A COMPANY
VALUE CHAIN
• The Value Chain
• Identifies the primary internal activities that create
and deliver customer value and the requisite related
support activities.
• Permits a deep look at the firm’s cost structure and ability
to offer low prices.
• Reveals the emphasis that a firm places on activities that
enhance differentiation and support higher prices.

4–30
FIGURE 4.3 A Representative Company Value Chain

4–31
FIGURE 4.4 A Representative Value Chain System

4–32
Benchmarking
• Benchmarking
• an analytical tool used to determine whether a firm’s value chain activities are
competitive compared to rivals and thus conducive to winning in the
marketplace
• entails measuring costs of value chain activities across an industry to
determine “best practices”
Transforming Value Chain Activities into
Sustained Competitive Advantage
The Internal Factor Evaluation (IFE)
Matrix
1.List key internal factors as identified in the internal-audit process
2.Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to
each factor
3.Assign a 1-to-4 rating to each factor to indicate whether that factor represents a
strength or weakness
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
A Sample Internal Factor Evaluation Matrix
for a Retail Computer Store