The Internal Assessment

1. The Internal Assessment SM04

2. Internal Assessment The biggest levers you’ve got to change a company are strategy, structure, and culture. If I could pick two, I’d pick strategy and culture. –Wayne Leonard, CEO, Entergy Weak leadership can wreck the soundest strategy. – Sun Zi SM04

3. The Nature of an Internal Audit -- Strengths -- Weaknesses Functional Areas of Business

4. Nature of an Internal Audit • Internal strengths/weaknesses • External opportunities/threats • Clear statement of mission Basis for Objectives & Strategies SM04

5. Key Internal Forces Functional Business Areas: • Vary by organization • Divisions have differing strengths & weaknesses SM04

6. Key Internal Forces Distinctive Competencies: • Firm’s strengths that cannot be easily matched or imitated by competitors SM04

7. Key Internal Forces Distinctive Competencies: • Building competitive advantage involves taking advantage of distinctive competencies SM04

8. Key Internal Forces Distinctive Competencies: • Strategies designed to improve on a firm’s weaknesses and turn to strengths SM04

9. Example: Honda’s Distinctive Competence Expertise in gasoline enginetechnology and small engine design SM04

10. Example: Intel’s Distinctive Competence Design of complex chipsfor personal computers SM04

11. Example: Procter & Gamble’s Core Competences Superb marketing-distribution skills and R&D capabilities in five core technologies - fats, oils, skin chemistry, surfactants, emulsifiers SM04

12. Example: Sony’s Core Competence Expertise in electronic technology and ability to translate the expertise into innovative products —miniaturized radios and video cameras; TVs and MP3 players with unique features, attractively designed PCs SM04

13. Internal Audit Parallels process of external audit • Information from: • Management • Marketing • Finance/accounting • Production/operations • Research & Development • Management information Systems SM04

14. Internal Audit Involvement in performing an internal strategic-management audit provides vehicle for understanding nature and effect of decisions in other functional business areas of the firm SM04

15. Internal Audit Key to Organizational Success Coordination & understanding among managers from all functional areas SM04

16. Internal Audit Functional Relationships Number and complexity increases relative to organization size SM04

17. Internal Audit Financial Ratio Analysis Exemplifies complexity of relationships among functional areas of the business SM04

18. Resource Based View (RBV) Approach to Competitive Advantage Internal resources are more important than external factors SM04

19. Resource Based View (RBV) 3 All Encompassing Categories Physical resources Human resources Organizational resources SM04

20. Resource Based View (RBV) Empirical Indicators • Rare • Hard to imitate • Not easily substitutable SM04

21. Integrating Strategy & Culture Organizational Culture Pattern of behavior developed by an organization as it learns to cope with its problem of external adaptation and internal integration…is considered valid and taught to new members SM04

22. Integrating Strategy & Culture Organizational Culture • Resistant to change • May represent • Strength • Weakness SM04

23. Integrating Strategy & Culture Values Beliefs Legends SM04 Heroes Rites Cultural Products Symbols Rituals Myths

24. Integrating Strategy & Culture Organizational Culture Can Inhibit Strategic Management • Miss external changes due to strongly held beliefs • Natural tendency to “hold the course” even during times of strategic change SM04

25. Management Functions of Management Planning Organizing Motivating Staffing Controlling SM04

26. Management Stage When Most Important Function Planning Strategy Formulation Organizing Strategy Implementation Motivating Strategy Implementation SM04 Staffing Strategy Implementation Controlling Strategy Evaluation

27. Management Planning • Beginning of management process • Bridge between present & future • Improves likelihood of attaining desired results SM04

28. Management Forecasting Establishing objectives Devising strategies Developing policies Setting goals Planning SM04

29. Management Organizing • Achieves coordinated effort • Defines task & authority relationships • Departmentalization • Delegation of authority SM04

30. Management Organizational design Job specialization Job descriptions Job specifications Span of control Unity of command Coordination Job design Job analysis Organizing SM04

31. Management Motivating • Influencing to accomplish specific objectives • Communication – major component SM04

32. Management Leadership Communication Work groups Job enrichment Job satisfaction Needs fulfillment Organizational change Morale Motivating SM04

33. Management Staffing • Personnel management • Human resources management SM04

34. Management Wage & salary admin. Employee benefits Interviewing Hiring Discharging Training Management development Affirmative Action EEO Labor relations Staffing SM04

35. Management Controlling • Establishing performance standards • Ensure actual operations conform to planned operations • Taking corrective actions SM04

36. Management Quality Financial Sales Inventory Expense Analysis of variance Rewards Sanctions Controlling SM04

37. Management Audit Checklist • Does the firm use strategic management concepts? • Are objectives/goals measurable? Well communicated? • Do managers at all levels plan effectively? SM04

38. Management Audit Checklist • Do managers delegate well? • Is the organization’s structure appropriate? • Are job descriptions clear? • Are job specifications clear? • Is employee morale high? SM04

39. Management Audit Checklist • Is employee absenteeism low? • Is employee turnover low? • Are the reward mechanisms effective? • Are the organization’s control mechanisms effective? SM04

40. Marketing Customer Needs/Wants for Products/Services Defining Anticipating Creating Fulfilling SM04

41. Marketing Marketing Functions Customer analysis Selling products/services Product & service planning Pricing Distribution Marketing research Opportunity analysis SM04

42. Marketing Customer surveys Consumer information Market positioning strategies Customer profiles Market segmentation strategies Customer Analysis SM04

43. Marketing Advertising Sales Promotion Publicity Sales force management Customer relations Dealer relations Selling Products/Services SM04

44. Marketing Test marketing Brand positioning Devising warrantees Packaging Product features/options Product style Quality Planning Product/Service SM04

45. Marketing Forward integration Discounts Credit terms Condition of sale Markups Costs Unit pricing Pricing SM04

46. Marketing Warehousing Channels Coverage Retail site locations Sales territories Inventory levels Transportation Distribution SM04

47. Marketing Data collection Data input Data analysis Support business functions Marketing Research SM04

48. Marketing Assessing costs Assessing benefits Assessing risks Cost/benefit/risk analysis Opportunity Analysis SM04

49. Marketing Opportunity Analysis Are markets segmented effectively? Is the organization positioned well among competitors? Has the firm’s market share been increasing? Are the distribution channels reliable & cost effective? Is the sales force effective? SM04

50. Marketing Opportunity Analysis Does the firm conduct market research? Are product quality & customer service good? Are the firm’s products/services priced appropriately? Does the firm have effective promotion, advertising, & publicity strategies? SM04