ch 4 -1 chapter 4 (part-ii) the internal assessment strategic management: concepts & cases dr....
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Ch 4 -1
Chapter 4 (Part-II) The Internal Assessment
Strategic Management: Concepts & Cases
Dr. Ayham Jaaron
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Ch 4 -2
Finance/Accounting
Determining financial strengths & weaknesses key to strategy formation
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Ch 4 -3
Finance/Accounting
Finance/Accounting Functions
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision (interest paid on shares)
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Ch 4 -4
Firm’s ability to meet its short-term obligations
Ratios
Current ratioQuick (or acid test) ratio
Basic Financial Ratios
Liquidity Ratios
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Ch 4 -5
Extent of debt financing
Ratios
Debt-to-total assetsDebt-to-equity
Long-term debt-to-equityTimes-interest earned
Basic Financial Ratios
Leverage Ratios
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Ch 4 -6
Effective use of firm’s resources
Ratios
Inventory-turnoverFixed assets turnoverTotal assets turnover
Accounts receivable turnoverAverage collection period
Basic Financial Ratios
Activity Ratios
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Ch 4 -7
Effectiveness shown by returns on sales &
investment
Ratios
Gross profit marginOperating profit margin
Net profit marginReturn on total assets (ROA)
Basic Financial Ratios
Profitability Ratios
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Ch 4 -8
Effectiveness shown by returns on sales &
investment
Ratios
Return on stockholders equity (ROE)
Earnings per sharePrice-earnings ratio
Basic Financial Ratios
Profitability Ratios(cont’d)
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Ch 4 -9
Firm’s ability to maintain economic position
Ratios
SalesNet income
Earnings per shareDividends per share
Basic Financial Ratios
Growth Ratios
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Ch 4 -10
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?
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Ch 4 -11
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?
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Ch 4 -12
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
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Ch 4 -13
Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
Workforce
Quality
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Ch 4 -14
Facility designTechnology selection
Facility layoutProcess flow analysis
Facility locationLine balancingProcess control
Production/Operations
Process
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Ch 4 -15
ForecastingFacilities planning
Aggregate planningScheduling
Capacity planningQueuing analysis
Production/Operations
Capacity
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Ch 4 -16
Raw materialsWork in processFinished goods
Materials handling
Production/Operations
Inventory
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Ch 4 -17
Job designWork measurement
Job enrichmentWork standards
Motivation techniques
Production/Operations
Workforce
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Ch 4 -18
Quality controlSamplingTesting
Quality assuranceCost Control
Production/Operations
Quality
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Ch 4 -19
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?
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Ch 4 -20
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?
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Ch 4 -21
Research & Development
Research & Development Functions
Development of new products before competitors
Improving product quality
Improving manufacturing processes to reduce costs
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Ch 4 -22
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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Ch 4 -23
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?
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Ch 4 -24
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?
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Ch 4 -25
Management Information Systems
Purpose
Improve performance of an enterprise by improving the quality of managerial decisions.
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Ch 4 -26
Management Information Systems
Information Systems CIO/CTO Security User-friendly E-commerce
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Ch 4 -27
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?
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Ch 4 -28
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?
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Ch 4 -29
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?
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Ch 4 -30
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Ch 4 -31