The Internal Assessment-week 4 sem 2 -2023.pptx

The Internal Assessment-week 4 sem 2 -2023.pptx

1. Topic 4: The Internal Assessment Week 4 – Lecture ppt

2. Review: Analysing the Environment Which macro-environmental factors are affecting the organisation? Which of these are the most important at the present time Which of these will become important in the next few years? Which factors are threats to the operations of the organisations? Which factors would provide opportunities for the organisation’s business growth Which forces are affecting the industry or sector environmnet Business Strategies 1. Political; 2. Economic; 3. Social; 4. Technology; 5. Environment; 6. Legal. Impact External Analysis Key Questions Key Question Do we have resource capability to address macro-environmental factors/Industry factors? Resource Capability (internal Analysis Internal Analysis PESTEL Analysis SWOT Analysis Value Chain Analysis VIRO Test Resource Audit REVIEW Industry or sector Analysis Stake holders analysis 5 Force Analysis Competitor Analysis

3. The Internal Assessment Learning Outcome 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 prioritise a firm’s internal strengths and weaknesses.

4. The Internal Assessment The Nature of an Internal Audit All organisations have strength and weaknesses in the functional areas of business. No enterprise is equally strong or weak in all areas. The purpose of Internal Audit (assessment) is to identify those strengths and weaknesses in an organisation, and to build on those strengths and to minimize or eliminate those weaknesses. Or turn those weaknesses into strengths.

5. The Internal Assessment Key Internal Forces The organisation’s strengths and weaknesses can be in one or more of its functional areas; marketing, finance, accounting, management, management information systems and production/operations. Within these areas are also some crucial areas such as customer service , warranties , advertising , packaging and pricing. It is important that organisation focus on its resources on it Distinctive Competencies. A firm’s Distinctive Competencies are its strengths that can not be easily matched or imitated by its competitors.

6. The Internal Assessment The Process of Performing an Internal Audit Performing an internal audit requires gathering, assimilating and evaluating information about the firm’s operations. The internal audit requires gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operations, research and development and management information systems operations. Representative managers and employees from throughout the firm need to be involved in determining a firm’s strengths and weaknesses. At least 10 to 20 most important strengths and weaknesses can be identified and appropriate strategies are put in place to address them. Performing an internal audit provides more opportunity for participants to understand their jobs, departments and division fit into the whole organisation. This is great benefit because managers and employees perform better when they understand how their work affects other areas and activities of the firm. It is an excellent vehicle or forum for improving the process of communication in the organisation. Communication is most important in management.

7. The Internal Assessment The Resource-Based View (RBV) The Resource-Based View (RBV) contents that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage. The Resource-Based View (RBV) view is that organizational performance will primarily be determined by internal resources that can be grouped into: Physical Resources – plants and equipment, location, technology, raw material, machines. Human Resources – employees, training, experience, intelligence, knowledge, skills, abilities. Organisational Resources – firm structure, planning process, information systems, patents, trademarks, copyrights, database. RBV theory asserts that resources are actually what helps a firm exploit opportunities and neutralize threats.

8. The Internal Assessment The Resource-Base View (RBV) – continue The basis for of the RBV is that the mix, type, amount and nature of a firm’s internal resources should be considered first and foremost in devising strategies that can lead to sustainable competitive advantage. RBV assert that for a resource to be valuable it must either be (1) rare, (2) hard to imitate or (3) not easily substitutable. These three features are often called Empirical Indicators . The RBV has continued to grow in popularity and continues to seek a better understanding of the relationship between resources and sustained competitive advantage in strategic management. Understanding both external and internal factors and more importantly understanding the relationships among them will be the key to effective strategic management.

9. Resource Assessment (Resource Availability Assessment) OPERATIONAL RESOURCES PROGRAM OR PROJECT STATUS OF THE CURRENT RESOURCE (can current capacity and capability enable to the organisation to achieves its intend goals and objectives for the next operational period) WHAT IS AVAILABLE AND WHAT IS NOT AVAILABLE IDENTIFY THE GAP & RECOMMENDATION HRM FINANCE FACILITIES & EQUIPMENTS DATA OTHERS Source of the information Organisation’s strategic plans, Operational plans and Organisation’s Performance Report

10. Value Chain Analysis Identify value adding activities within the operational structure of the organisation. The value chain (Porter, 1985) Which operational activity is adding value? Which operational activity is NOT adding value? (e.g. Unproductive, consuming budget) How should the operational functions be improve? Adding value? Successful Organisation

11. All functions have their intended targets (goals and objectives) and performance indicators. All functions should be evaluated during and at the end of their operational period, e.g. one month, or three months or 6 months progressive evaluation Functions Operational Activity Performance Indicator 1.0 HRM 1.1 Training 1. Staff performance , 2. level of knowledge and skills 3. Performance competency 1.2 Incentives to improve performance 1. Level of motivation, staff job interest, job satisfaction 2.0 Quality Assurance Quality improvement 1. Less customer/clients complaints, 2. Less number of errors, less defects, customer/clients loyalty etc. 3.0 Transport Transportation of staff 1. Less operational cost 4.0 Marketing Promotion new products 1. Number of sales, 2. Customer satisfaction etc. Example of performance INDICATIORS How should I know which function is adding value and which ones are not adding value?

12. Value Chain Analysis of an organisation’s operations HRM Functions Which activity is adding value Performance Indicators (These are some examples of performance indicators) Data collection tools Recommendations for improvement 1. Finance and Accounting List all operational activities of Finance and Accounting function Profit Cash flow Sales 1. Staff interview 2. Progressive report 2. HRM Depart. 3. Staff performance 4. Performance appraisal 5. Competency assessment 3. Client complaints 4. Sales report 5. Performance appraisal reports etc. 3. Information Management Dept 6. Benchmark indicators 6. Benchmark indicators 4. Procumbent & Logistics Dept - Internal & external 5. Sales Department 6, Transport Dept 7. Quality Assurance Dept 8. Building and maintenance 9. Security Adding value to the organisation’s strategic plan & operations

13. VIRO TEST V Is it value to the organisation? Unique resource own by the organisation I Is it hard for the competitor to imitate (copy, duplicate follow)? R Is it rare O Can firm exploit it? Can it be a source of competitive advantage? YES ? NO ? YES ? NO ? YES ? NO ? YES ? NO ? Important to the organisation’s operations – useful, valuable Can not be copied, duplicate or imitate by the competitor, either resources is difficult to do so or competitor do not have capacity and capability to do so Resource is only own by the organisation. Hard to find, difficult to obtain by the competitor Organisation have technical know how to use the resource, re-modify, innovate, re-adjust, firm have easy access to it etc.

14. The Internal Assessment Integrating Strategy and Culture Organisational Culture can be defined as a pattern of behavior that has been developed by an organisation as it learns to cope with its problem of external adaption and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, thank and feel. U nconscious forces that shape the workforce. It can be an underlying reason for strengths or weaknesses in any of the major business functions. To be successful and organisation should integrate its strategies with its cultures. An organisation’s culture must support the collective commitment of its people to a common purpose. It must foster competence and enthusiasm among its managers and employees.

15. The Internal Assessment Culture Products and Associated Definitions Cultural Products Associated Definitions Rites Relatively elaborate, dramatic, planned sets of activities that consolidate various forms of cultural expression into one event, carried out through social interactions, usually not for the benefit of an audience. Ceremonial A system of several rites connected with a single occasion or event. Ritual A standardized, detailed set of techniques and behaviours that manage anxieties but seldom produce intended, technical consequences of practical importance. Myth A dramatic narrative of imagined events, usually used to explain origins or transformations of something, also an unquestioned belief about the practical benefits of certain techniques and behaviours that is not supported by facts. Saga A historical narrative describing the unique accomplishments of a group and its leaders, usually a heroic terms. Legend A handed-down narrative of some wonderful event that is based on history but has been embellished with fictional details. Story A narrative based on true events, sometimes a combination of truth and fiction.

16. The Internal Assessment Cultural Products Associated Definitions Folktale A completely fictional narrative. Symbol An object, act, event, quality or relation that serves as a vehicle for conveying meaning, usually by representing another thing. Language A particular form or manner in which members of a group use sounds and written signs to convey meaning to each other. Metaphors Shorthand of words used to capture a vision or to reinforce old or new values. Values Life-directing attitudes that serve as behavioural guidelines. Belief An understanding of a particular phenomenon. Heroes/Heroine Individuals whom the organisation has legitimized to model behavior for others.

17. The Internal Assessment US Versus Foreign Countries To be successful in world markets, managers must obtain better knowledge of historical, cultural and religious forces that motivate and drive people in other countries. Most European workers are unionized and enjoy more frequent vacations and holidays than US workers. Lunch break 90 minutes, coffee break 20 minutes for Europeans. US use first name instantly while Japanese use first name only among family members and intimate friends. US managers have low tolerance for silence, whereas Asian managers view extended period of silence as important for organizing and evaluating one’s thoughts. US mangers put greater emphasis on short-term results than foreign managers do. Example, Japanese managers strive to achieve everlasting customers whereas Americans strive to make a one-time sale. Japanese see a sale as the beginning, not the end, of the selling process. WHAT DO YOU KNOW ABOUT CULTURAL DIFFERENCES IN PAPUA NEW GUINEA? HOW YOU CAN INTEGRATE TO BE SUCCESSFUL MANAGERS?

18. The Internal Assessment Cultural Pitfalls that you need to know Waving is a serious insult in Greece and Nigeria, particularly if the hand is near someone’s face. In China, last names are written first. Breakfast meetings are considered uncivilized in most foreign countries. Latin Americans are on average 20 minutes late to business appointments. Direct eye contact is impolite in Japan. Don’t cross your legs in any Arab or many Asian countries – it’s rude to show the sole of your shoe. Folding your arms across your chest is a sign of annoyance in Finland. In China, leave some food on your plate to show that your host was so generous that you couldn’t finish. One form of communication works the same worldwide. It is__________? So take that along wherever you go.

19. The Internal Assessment Management The functions of management consist of five (5) basic activities: Planning, Organising, Motivating, Staffing and Controlling. Function Description Stages of Strategic-Management Process Planning Planning is consists of all those managerial activities related to preparing for the future. Specific tasks include forecasting, establishing objectives, devising strategies, developing policies and setting goals. Strategy Formulation Organising Organising includes all those managerial activities that result in structure of task and authority relationships. Specific areas include organizational design, job specialization, job descriptions, job specifications, span of control, unity of command, coordination, job design and job analysis. Strategy Implementation Motivating Motivating involves efforts directed toward shaping human behavior. Specific topics include leadership, communication, work groups, behavior modification, delegation of authority, job enrichment, job satisfaction, needs fulfillment, organizational change, employee moral and managerial morale. Strategy Implementation

20. The Internal Assessment Function Description Stages of Strategic-Management Process Staffing Staffing activities are centered on personnel or human resource management . Included are wages and salary administration, employee benefits, interviewing, hiring, firing, training, management development, employee safety, affirmative action, equal employment opportunity, union relations, career development, personnel research, discipline policies, grievance procedures and public relations. Strategy Implementation Controlling Controlling refers to all those managerial activities directed toward ensuring that actual results are consistent with planned results. Key areas of concern include quality control, financial control, sales control, inventory control, expense control, analysis of variances, rewards and sanction. Strategy Evaluation

21. The Internal Assessment Planning The only thing certain about the future of any organisation is CHANGE, and planning is the essential bridge between the present and the future that increases the likelihood of achieving desired result. Determine whether to attempt a task, work out the most effective way of reaching desired objectives and prepare to overcome unexpected difficulties with adequate resources. Planning is the start of the process by which an individual or business may turn empty dreams into achievements. Planning enables one to avoid the trap of working extremely hard but achieving little. Planning enables a firm to gather the resources needed and carry out tasks in the most efficient way possible. Planning is an up-front investment in success. It is considered the foundation of management. However, it is commonly the task that managers neglect most. Successful organisations strive to control their own futures rather than react to external forces and events as they occur. Swift adaption is needed today more than ever because changes in markets, economies and competition worldwide are accelerating.

22. The Internal Assessment Organising The purpose of organizing is to achieve coordinated effort by defining task and authority relationships. Organising means who does what and who reports to whom. A well-organize firm generally has motivated managers and employees who are committed to seeing the organisation succeed. Resources are allocated more effectively and used more efficiently in a well-organized firm than in a disorganized firm. Organising functions consist of three sequential activities; (1) breaking down tasks into jobs (work specialization), (2) combining jobs to form departments (departmentalization), (3) and delegating authority.

23. The Internal Assessment Motivation Motivation can be defined as the process of influencing people to accomplish specific objectives. Motivation explains why some people work hard and others do not. Objectives, strategies and policies have little chance of succeeding if employees and managers are not motivated to implement strategies once they are formulated. Four components of motivations are; (1) leadership, (2) group dynamics, (3) communication and (4) organizational change. Leadership – establish relationship with subordinates, understand employees needs and concerns, set good examples, trustworthy and fair. Group dynamics – informal groups, can be very positive to very negative. Constructive contributions accept. Communication – Good two way communication is vital for gaining support for departmental and divisional objectives and policies. Encourage subordinates to discuss their concerns, reveal problems, provide recommendations and give suggestions. Organisational change – empowerment, sharing information and delegating authority for decision making.

24. The Internal Assessment Staffing It is also referred to as Personnel Management or Human Resource Management. It is important to identify strengths and weaknesses in the staffing area. Staffing activities play a major role in strategic-implementation efforts, and for this reason, human resource managers are becoming more actively involved in the strategic-management process. Numerous court cases that directly affect staffing are decided each day. Organisations and individuals can be penalized severely for not following federal, state and local laws. Due to globalization movement of staff with spouse and children need to be considered.

25. The Internal Assessment Controlling The controlling function of management includes all of those activities undertaken to ensure that actual operations conform to planned operations. All managers in an organisation have controlling responsibilities. Controlling consists of four basic steps: Establishing performance standards. Measuring individual and organisation standards / performance. Comparing actual performance to planned performance standards. Taking corrective actions.

26. The Internal Assessment Management Audit Checklist of Questions (to continue) The following are checklist of questions that can help determine specific strengths and weaknesses in the functional area of business: Does the firm use strategic-management concepts? Are company objectives and goals measurable and well communicated? Do managers at all hierarchical levels plan effectively? Do managers delegate authority level? Is the organisation’s structure appropriate? Are job descriptions and job specifications clear? Is employee moral high? Are employees turnover and absenteeism low? Are organizational reward and control mechanisms effective?

27. The Internal Assessment Marketing Is the process of defining, anticipating, creating and fulfilling customers needs and wants for products and services. There are seven basic functions of Marketing: Customers analysis. Selling Products/Services. Product and Service Planning. Pricing. Distribution. Marketing research. Opportunity analysis.

28. The Internal Assessment Customer Analysis Customer analysis is the examination and evaluation of customers needs, desires and wants – involves administering customers surveys, analyzing consumer information, evaluating market positioning strategies, developing customers profiles and determining optimal market segmentation strategies. Successful organisations continually monitor present and potential customers buying patterns. Selling Products/Services Selling includes many marking activities, such as advertising, sales promotions, publicity, personal selling, sales force management, customer relations and dealer relations.

29. The Internal Assessment Product and Service Planning Product and service planning includes activities such as test marketing, product and brand positioning, devising warranties, packaging, determining product options, product features, product style, product quality, deleting old products and providing for customer service. Pricing Is the market value you put on the product/service to be bought by the customers. Pricing decision are influenced by; consumers, governments, suppliers, distributors and competitors. Often pricing are based on supply and demand.

30. The Internal Assessment Distribution Distribution includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and locations, transportation careers, wholesaling and retailing. It is often call logistics – where deliveries are coordinated to reached the customers. Marketing Research Marketing research is the systematic gathering, recording and analyzing of data about problems relating to the marketing of goods and services. Organisations that possess excellent marketing research skills have a definite strength in pursuing generic strategies.

31. The Internal Assessment Opportunity Analysis Opportunity analysis involves assessing the costs, benefits and risks associated with marketing decision. Three (3) steps required to perform cost/benefit analysis are: Compute the total cost associated with a decision. Estimate the total benefits from the decisions. Compare the total costs with the total benefits. When expected benefits exceed total costs, an opportunity becomes more attractive. Risk is also considered in arriving at the final decision after the cost/benefit analysis is carried out.

32. The Internal Assessment Marketing Audit Checklist of Questions The following questions about marketing be asked: 1. Are markets segmented effectively? Is the organisation positioned well among competitors? Has the firm’s market share been increasing? Are present channels of distribution reliable and cost-effective? Does the firm have an effective sales organisation? Does the firm conduct market research? Are product quality and customer service good? Are the firm’s products and services priced appropriately? Does the firm have an effective promotion, advertising and publicity strategy? Are marketing, planning and budgeting effective? Do the firm’s marketing manager have adequate experience and training?

33. The Internal Assessment Finance/Accounting Is often considered the single best measure of a firm’s competitive position and overall attractiveness to investors. Under Finance/Accounting we will look at the following areas: Finance/Accounting Function. Basic Types of Financial Rations. Finance/Accounting Audit Checklist

34. The Internal Assessment Finance/Accounting Function The finance/accounting function comprise three (3) decisions: The Investment Decision. The Financing Decision. The Dividend Decision. The Financial Ratio Analysis is the most widely used method for determining an organisation’s strengths and weaknesses in the Investing, Financing and Dividend areas.

35. The Internal Assessment The Investment Decision The investment decision is also called the capital budgeting, is the allocation and reallocation of capital and resources to projects, products, assets and divisions of an organisation. The Financing Decision The financing decision determines the best financial structure for the firm and includes examining various methods by which the firm can raise capital (for example by issuing stock, increasing debt, selling assets or using a combination of these approaches). The financing decision must consider both short-term and long-term needs for working capital.

36. The Internal Assessment Dividend Decision Dividend decision is concerned with issues such as the percentage of earnings paid to stock-holders, the stability of dividend paid over time and the repurchase or issuance of stock. Dividend decisions determine the amount of funds that are retained in a firm compared to the amount paid out to stockholders. Three (3) ratios are helpful in evaluating a firm’s dividend decisions are: Earnings-per-share ratio. Dividend-per-share ratio. Price-earnings ratio.

37. The Internal Assessment Basic Types of Financial Ratios Financial ratios are computed from organisation’s Income Statement and Balance Sheet. Comparing ratios over time and to industry averages is more likely to result in meaningful statistics that can be used to identify and evaluate strength and weaknesses. Financial ratios can be classified into the following five (5) types: 1. Liquidity Ratios – measures a firm’s ability to meet maturing short-term obligations Current ratio Quick (acid-test) ratio.

38. The Internal Assessment Basic Types of Financial Ratios – continue 2. Leverage Ratios – measure the extend to which a firm has been financed by debt. Debt-to-total-assets ratio. Debt-to-equity ratio. Long-term debt-to-equity ratio. Times-interest-earned (or coverage) ratio.

39. The Internal Assessment 3. Activity Ratios – measure how effectively a firm is using its resources. Inventory turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period

40. The Internal Assessment 4. Profitability Ratios – measure management’s overall effectiveness as shown by the returns generated on sales and investment. Gross profit margin. Operating profit margin. Net profit margin. Return on total assets (ROA). Return on stockholders’ equity (ROE). Earnings per share (EPS). Price-earnings ratio.

41. The Internal Assessment 5. Growth Ratios – measure the firm’s ability to maintain its economic position in the growth of the economy and industry. Sales. Net Income. Earnings per share. Dividend per share. Financial rations calculation and interpretation bring out much credibility and meaning when conducted with the following questions in find: How has each ratio changed over time? How does each ratio compare to industry norms? How does each ratio compare with key competitors? Note: Refer separate worksheet for the details of financial ratios.

42. The Internal Assessment Finance/Accounting Audit Checklist Where is the firm financially strong and weak as indicated by financial ratio analysis? Can the firm raise needed short-term capital? Can the firm raise needed long-term capital through debt and/or equity? Does the firm have sufficient working capital? Are capital budgeting procedures effective? Are dividend payout policies reasonable? Does the firm have good relations with its investors and stockholders. Are the firm’s financial managers experienced and well trained?

43. Summary Management, market, finance and accounting, production/operations, research and development, and management information systems represents the core operations of most businesses. The process of performing an internal audit represents an opportunity for managers and employees throughout the organisation to participate in determining the future of the firm. Involvement in the process can energize and mobilize managers and employees.