Chapter 4: The internal assesment

Key Internal Forces

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Building competitive advantages involves taking advantage of distinctive competencies.

A firm’s strengths that cannot be easily matched or imitated by competitors

Distinctive competencies

The Process of Performing an Internal Audit

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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)

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

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.

Basic function of management

Planning

Organizing

Motivating

Staffing

Controlling

Marketing

the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services

Function of marketing

Customer analysis

Selling product/services

Pricing distribution

Marketing distribution

Opportunity analysis

Cost/Benefit Analysis

  1. compute the total costs associated with a decision,
  1. estimate the total benefits from the decision,
  1. compare the total costs with the total benefits.

Finance/Accounting Functions

The functions of finance/accounting comprise three decisions:

the investment decision

the financing decision

the dividend decision

Production/Operations

Production/operations function

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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.

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

Value Chain Analysis (VCA)

refers to the process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products

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

The Internal Factor Evaluation (IFE) Matrix