copyright 2005 prentice hall1 bus 411 day 8. copyright 2005 prentice hall ch 3 -2 agenda discussion...
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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
Copyright 2005 Prentice Hall Ch 3 -3
Copyright 2005 Prentice Hall Ch 3 -4
Marketing
Customer Needs/Wants for Products/Services
1. Defining
2. Anticipating
3. Creating
4. Fulfilling
Copyright 2005 Prentice Hall Ch 3 -5
Marketing
Marketing Functions
1. Customer analysis
2. Selling products/services
3. Product & service planning
4. Pricing
5. Distribution
6. Marketing research
7. Opportunity analysis
Copyright 2005 Prentice Hall Ch 3 -6
Customer Analysis
Customer surveys
Consumer information
Market positioning strategies
Customer profiles
Market segmentation strategies
Marketing
Copyright 2005 Prentice Hall Ch 3 -7
AdvertisingSales
PromotionPublicity
Sales force managementCustomer relations
Dealer relations
Marketing
Selling Products/Services
Copyright 2005 Prentice Hall Ch 3 -8
Test marketingBrand positioning
Devising warranteesPackaging
Product features/optionsProduct style
Quality
Marketing
Planning Product/Service
Copyright 2005 Prentice Hall Ch 3 -9
Forward integrationDiscounts
Credit termsCondition of sale
MarkupsCosts
Unit pricing
Marketing
Pricing
Copyright 2005 Prentice Hall Ch 3 -10
WarehousingChannelsCoverage
Retail site locationsSales territoriesInventory levelsTransportation
Marketing
Distribution
Copyright 2005 Prentice Hall Ch 3 -11
Data collectionData input
Data analysisSupport business functions
Marketing
Marketing Research
Copyright 2005 Prentice Hall Ch 3 -12
Assessing costs
Assessing benefits
Assessing risks
Cost/benefit/risk analysis
Marketing
Opportunity Analysis
Copyright 2005 Prentice Hall Ch 3 -13
Marketing
Opportunity Analysis
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?
Copyright 2005 Prentice Hall Ch 3 -14
Marketing
Opportunity Analysis
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?
Copyright 2005 Prentice Hall Ch 3 -15
Marketing
Opportunity Analysis
10.Are the marketing planning & budgeting effective?
11.Do the firm’s marketing managers have adequate experience and training?
Copyright 2005 Prentice Hall Ch 3 -16
Finance/Accounting
Determining financial strengths & weaknesses key to strategy formation
Copyright 2005 Prentice Hall Ch 3 -17
Finance/Accounting
Finance/Accounting Functions
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision
Copyright 2005 Prentice Hall Ch 3 -18
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
Copyright 2005 Prentice Hall Ch 3 -19
Firm’s ability to meet its short-term obligations
Ratios
Current ratioQuick (or acid test) ratio
Bigger is better
Basic Financial Ratios
Liquidity Ratios
Copyright 2005 Prentice Hall Ch 3 -20
Extent of debt financing
Ratios
Debt-to-total assetsDebt-to-equity
Long-term debt-to-equityTimes-interest earned
Smaller is better
Basic Financial Ratios
Leverage Ratios
Copyright 2005 Prentice Hall Ch 3 -21
Effective use of firm’s resourcesRatios
Inventory-turnoverFixed assets turnoverTotal assets turnover
Accounts receivable turnoverAverage collection period
Bigger is better
Basic Financial Ratios
Activity Ratios
Copyright 2005 Prentice Hall Ch 3 -22
Effectiveness shown by returns on sales &
investmentRatios
Gross profit marginOperating profit margin
Net profit marginReturn on total assets (ROA)
Higher is better
Basic Financial Ratios
Profitability Ratios
Copyright 2005 Prentice Hall Ch 3 -23
Effectiveness shown by returns on sales &
investment
Ratios
Return on stockholders equity (ROE)
Earnings per sharePrice-earnings ratio
It depends
Basic Financial Ratios
Profitability Ratios(cont’d)
Copyright 2005 Prentice Hall Ch 3 -24
Firm’s ability to maintain economic position
RatiosSales
Net incomeEarnings per shareDividends per share
Higher is better
Basic Financial Ratios
Growth Ratios
Copyright 2005 Prentice Hall Ch 3 -25
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?
Copyright 2005 Prentice Hall Ch 3 -26
Finance/Accounting Audit
•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?
Copyright 2005 Prentice Hall Ch 3 -27
Finance/Accounting Audit
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
Copyright 2005 Prentice Hall Ch 3 -28
Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
Workforce
Quality
Copyright 2005 Prentice Hall Ch 3 -29
Facility designTechnology selection
Facility layoutProcess flow analysis
Facility locationLine balancingProcess control
Production/Operations
Process
Copyright 2005 Prentice Hall Ch 3 -30
ForecastingFacilities planning
Aggregate planningScheduling
Capacity planningQueuing analysis
Production/Operations
Capacity
Copyright 2005 Prentice Hall Ch 3 -31
Raw materialsWork in processFinished goods
Materials handling
Production/Operations
Inventory
Copyright 2005 Prentice Hall Ch 3 -32
Job designWork measurement
Job enrichmentWork standards
Motivation techniques
Production/Operations
Workforce
Copyright 2005 Prentice Hall Ch 3 -33
Quality controlSamplingTesting
Quality assuranceCost Control
Production/Operations
Quality
Copyright 2005 Prentice Hall Ch 3 -34
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?
Copyright 2005 Prentice Hall Ch 3 -35
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?
Copyright 2005 Prentice Hall Ch 3 -36
Research & Development
Research & Development Functions
Development of new products before competitors
Improving product quality
Improving manufacturing processes to reduce costs
Copyright 2005 Prentice Hall Ch 3 -37
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
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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?
Copyright 2005 Prentice Hall Ch 3 -39
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?
Copyright 2005 Prentice Hall Ch 3 -40
Management Information Systems
Purpose
Improve performance of an enterprise by improving the quality of managerial decisions.
Copyright 2005 Prentice Hall Ch 3 -41
Management Information Systems
Information Systems CIO/CTO Security User-friendly E-commerce
Copyright 2005 Prentice Hall Ch 3 -42
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?
Copyright 2005 Prentice Hall Ch 3 -43
Management Information Systems Audit
•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?
Copyright 2005 Prentice Hall Ch 3 -44
Management Information Systems Audit
•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?
Copyright 2005 Prentice Hall Ch 3 -45
Value Chain Analysis (VCA)
http://www.ukeducation.org.uk/UkeduFrames/Documents/images/Value_chain_Diagram_1.jpg
Copyright 2005 Prentice Hall Ch 3 -46
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.
Copyright 2005 Prentice Hall Ch 3 -47
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
Copyright 2005 Prentice Hall Ch 3 -48
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
Copyright 2005 Prentice Hall Ch 3 -49
IFE– Gateway Computers (2003)
Key Internal Factors Weight RatingWtd
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
Copyright 2005 Prentice Hall Ch 3 -50
IFE– Gateway Computers (2003)
Key Internal Factors Weight RatingWtd
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
Copyright 2005 Prentice Hall Ch 3 -51
IFE– Gateway Computers (2003)
Key Internal Factors Weight RatingWtd
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
Copyright 2005 Prentice Hall Ch 3 -52
Copyright 2005 Prentice Hall Ch 3 -53
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