Chapter 5

INTERNAL ANALYSIS

A. Management
B. Marketing
C. Finance and Accounting
D. Productions / Operations
E. Research and Development
E. Management Information System
F. Summary of Internal Analysis
1. List of Strengths and Weak Identified
2. Summary of Key Strengths and Weaknesses

D E T A I L S

Chapter 5
INTERNAL ANALYSIS
Introductory Paragraph for Chapter 5. Note that Internal Analysis of the
company is based on the 6 functional areas of business, namely
Management, Marketing, Finance and Accounting, Productions/Operations,
Research and Development and Management Information Systems. There
will be subareas within each function. Student should also explain here the
nature and process of performing an internal audit and analyzing the internal
forces (check pages 124 to 127). [– minimum 3 sentences]

[– number of sentences depends on the quality of the analysis] The student may also discuss here the issues on Culture (page 128 to 129 of the textbook) After discussion of this Management function and its subareas. if he/she want to discuss other necessary subareas to be considered (check p. In this Evaluation. the student may use the concept of Resource-Based View (RBV) in which the presence or absence of resource and capabilities are being evaluated relative to the functional area. [– 3 sentences] (This paragraph is very important because this will give a guide or reference on what is to be discussed) To assess the Management Function of the chosen company. In the evaluation.In the functional area on Productions / Operations. it is also possible to identify both one or more strength factors and one or more weakness factors in each function. EVALUATION will proceed. 130 – 134 or Table 4-3 in textbook). Emphasize how this functional area is different from the other functions. the student may answer or maybe guided by “Management Audit Checklist of Questions” in page 134 of Textbook. Narrative discussions (or lay down data and information) and explanations (in paragraph form) depends on the depth of the situation. Management Importance. it is important to identify either one strength factor or one weakness factor. It is discretion or it is option of the student. the analysis will use Operations Audit based on the Ten Operations Management Decision by Heizer and Render. In the identification of one strength or one weakness. the student must develop a conclusion or deduce a trend or assess the impact to the company. A. definition and principles of Management. In this chapter. but this is optional. the student may use the Resource-Based View (RBV) approach wherein internal resources were analyzed in order for a firm to achieve and sustain the competitive advantage. However. .

the student must develop a conclusion or deduce a trend or assess the impact to the company. . the student may answer or maybe guided by “Finance/Accounting Audit Checklist of Questions” in page 144 of Textbook. In the evaluation. the student may use the concept of Resource-Based View (RBV) in which the presence or absence of resource and capabilities are being evaluated relative to the functional area. Finance / Accounting Importance. the student may answer or maybe guided by “Marketing Audit Checklist of Questions” in page 138 of Textbook. EVALUATION will proceed. C. 134 – 138 of textbook). but this is optional. if he/she want to discuss other necessary subareas to be considered (check p. Narrative discussions (or lay down data and information) and explanations (in paragraph form) depends on the depth of the situation. it is also possible to identify both one or more strength factors and one or more weakness factors in each function. In the identification of one strength or one weakness. definition and principles of Marketing. [– 3 sentences] (This paragraph is very important because this will give a guide or reference on what is to be discussed) To assess the Marketing Function of the chosen company. It is discretion or it is option of the student. Emphasize how this functional area is different from the other functions. it is important to identify either one strength factor or one weakness factor. However. definition and principles of Finance and Accounting. [– 3 sentences] (This paragraph is very important because this will give a guide or reference on what is to be discussed) To assess the Finance/Accounting Function of the chosen company. Emphasize how this functional area is different from the other functions. Marketing Importance. [– number of sentences depends on the quality of the analysis] After discussion of this Marketing function and its subareas. In this Evaluation.B.

the trend in the computed financial ratios and must also explain the possible reason for such information. 2. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. [– number of sentences depends on the quality of the analysis] 1. Leverage Ratio Define and discuss the importance of Leverage Ratio Year ( ) Debt-to-total-assets ratio (Show Formula) Debt-to-equity ratio (Show Formula) Year ( ) Observations Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Interpretations: The student must assess here the observations. The student should also declare here the year of the 3 financial reports. Liquidity Ratio Define and discuss the importance of Liquidity Ratio Year ( ) Current ratio = Current Assets Current Liabilities Quick (or acid-test) ratio = Year ( ) Observations Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing.The compulsory or standard subareas to be considered are the financial ratios based on Table 4-6 on page 141 of Textbook. Narrative discussions (or lay down data and information) and explanations (in paragraph form) depends on the depth of the situation. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? .

decreasing or constant? .Long-term debt-toequity ratio (Show Formula) Times-interestearned (or coverage) ratio Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? (Show Formula) Interpretations: The student must assess here the observations. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. the trend in the computed financial ratios and must also explain the possible reason for such information. Activity Ratios Define and discuss the importance of Activity Ratio Year ( ) Inventory turnover (Show Formula) Fixed assets turnover (Show Formula) Total assets turnover (Show Formula) Accounts receivable turnover (Show Formula) Average collection period (Show Formula) Year ( ) Observations Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. 3. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing.

Growth Ratio . 5. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Operating profit margin (Show Formula) (Show Formula) Return on stockholders’ equity (ROE) (Show Formula) Earnings per share (EPS) (Show Formula) Price-earnings ratio (Show Formula) Interpretations: The student must assess here the observations. Profitability Ratios Define and discuss the importance of Profitability Ratio Year ( ) Gross profit margin (Show Formula) Year ( ) Observations Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. 4. the trend in the computed financial ratios and must also explain the possible reason for such information. decreasing or constant? Net profit margin (Show Formula) Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing.Interpretations: The student must assess here the observations. the trend in the computed financial ratios and must also explain the possible reason for such information. decreasing or constant? Return on Total Assets (ROA) Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing.

decreasing or constant? Interpretations: The student must assess here the observations. the student may use the concept of Resource-Based View (RBV) in which the presence or absence of resource and capabilities are being evaluated relative to the functional area. Emphasize how this functional area is different from the other functions. In the identification of one strength or one weakness. but this is optional. After discussion of this Finance and Accounting function and its subareas. it is also possible to identify both one or more strength factors and one or more weakness factors in each function. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. definition and principles of Productions / Operations. In the evaluation. D. EVALUATION will proceed. However. [– 3 sentences] . it is important to identify either one strength factor or one weakness factor. the trend in the computed financial ratios and must also explain the possible reason for such information.Define and discuss the importance of Growth Ratio Year ( ) Growth Ratio on Sales (Show Formula) Growth Ratio on Net Income (Show Formula) Growth Ratio on Earnings per share (Show Formula) Year ( ) Observations Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. the student must develop a conclusion or deduce a trend or assess the impact of this financial performance to the company. decreasing or constant? Show Computation and the Final Value (show the figures that came from financial reports) Show Computation and the Final Value (show the figures that came from financial reports) Is the final value increasing. Productions / Operations Importance. In this Evaluation.

line balancing. and queuing analysis. unskilled. These decisions involve managing the level of raw materials. Inventor y 4. process flow analysis. Workforc e Observation to the Company (This is where it will be advantageous for the student to have a friend or connection in his chosen company in order to have a realistic analysis of the operations) Evaluation -Identify a tentative strength factor or weakness factor in each OM Decisions Area . facility layout. and transportation analysis.Process These decisions include choice of technology. how much to order. and finished goods. Distances from raw materials to production sites to customers are a major consideration. process control. aggregate planning.(This paragraph is very important because this will give a guide or reference on what is to be discussed) To assess the Productions/Operations Function of the chosen company. when to order. These decisions include forecasting. the student may answer or maybe guided by “Productions/Operations Audit Checklist of Questions” in page 146 of Textbook. These decisions involve managing the skilled. especially considering what to order. and materials handling. facilities planning.Capacit y 3. [– number of sentences depends on the quality of the analysis] Operati ons Decisio n Areas Guide Issues 1. scheduling. and managerial employees 2. Narrative discussions (or lay down data and information) and explanations (in paragraph form) depends on the depth of the situation. facility location. Capacity utilization is a major consideration. The compulsory or standard subareas to be considered are the financial ratios based on Table 4-7 on page 145 of Textbook. capacity planning. clerical. work-inprocess.

It is discretion or it is option of the student. it is important to identify either one strength factor or one weakness factor. [– 3 sentences] (This paragraph is very important because this will give a guide or reference on what is to be discussed) To assess the Research and Development Function of the chosen company. testing. work standards. quality assurance. EVALUATION will proceed. job enrichment. Quality by caring for job design. sampling. These decisions are aimed at ensuring that high-quality goods and services are produced by caring for quality control. In the evaluation. the student must develop a conclusion or deduce a trend or assess the impact of this Productions/Operations situation to the company. In this Evaluation. and motivation techniques. After discussion of this Productions / Operations function and its subareas. if he/she want to discuss other necessary subareas to be considered (check p. 146 – 148 of textbook). Narrative discussions (or lay down data and information) and explanations (in paragraph form) depends . work measurement. the student may use the concept of Resource-Based View (RBV) in which the presence or absence of resource and capabilities are being evaluated relative to the functional area. However. Research and Development Importance. definition and principles of Research and Development. but this is optional. E.5. and cost control. the student may answer or maybe guided by “Research and Development Audit Checklist of Questions” in page 148 of Textbook. it is also possible to identify both one or more strength factors and one or more weakness factors in each function. Emphasize how this functional area is different from the other functions. In the identification of one strength or one weakness.

on the depth of the situation. In this Evaluation. In this Evaluation. In the evaluation. [– 3 sentences] (This paragraph is very important because this will give a guide or reference on what is to be discussed) To assess the Management Information System Function of the chosen company. it is also possible to identify both one or more strength factors and one or more weakness factors in each function. the student may use the concept of Resource-Based View (RBV) in which the presence or absence of resource and capabilities are being evaluated relative to the functional area. definition and principles of Management Information System.149 of Textbook. In the evaluation. In the identification of one strength or one weakness. the student may use the concept of Resource-Based View (RBV) in which the presence or absence . EVALUATION will proceed. In the identification of one strength or one weakness. Narrative discussions (or lay down data and information) and explanations (in paragraph form) depends on the depth of the situation. Emphasize how this functional area is different from the other functions. the student must develop a conclusion or deduce a trend or assess the impact to the company. it is important to identify either one strength factor or one weakness factor. However. [– number of sentences depends on the quality of the analysis] After discussion of this Management Information System function and its subareas. EVALUATION will proceed. it is important to identify either one strength factor or one weakness factor. E. Management Information System Importance. [– number of sentences depends on the quality of the analysis] After discussion of this Research and Development function and its subareas. the student must develop a conclusion or deduce a trend or assess the impact to the company. the student may answer or maybe guided by “Management Information System Audit Checklist of Questions” in page 148 . but this is optional.

It came from Marketing. it is also possible to identify both one or more strength factors and one or more weakness factors in each function. However. The basis of the identified factors must be specified (From what functional it came from. but this is optional. Strengths (Each factor must be complete sentence) . After classifying. rate each factor by assigning numerical value based on the dimension on competitive position or financial position (Check the PowerPoint slides for the lecture or textbook pages 208 to 212 for the explanation of Competitive Position and Financial Position. F. Summary of Internal Analysis 1. E. Upon gathering all the factors it must be classified if it has something to do with Competitive Position or Financial Position.g. List of Strengths and Weakness Identified In this part.of resource and capabilities are being evaluated relative to the functional area. or slide 31 to 33). the student must gather all the identified Strength factors and Weakness factors that emerge from all the functional area analysis. or Operation). The concept of Competitive Position and Financial Position will be more useful on Chapter pertaining to Strategy Formulation.

Weaknesses (Each factor must be complete sentence) .

Summary of Key Strengths and Weaknesses Select 6 to 8 Strengths and 6 to 8 Weaknesses. In the selection and prioritization of the Strengths factors. . ensure that you have at least one representative from stability competitive or financial position. The identification of key strengths and weaknesses must be meticulously done.2.

High or low ratings obtained in competitive and financial position is not a guide in the selection process. It’s impossible that a strength factor or weaknesses . Importance of the strength and weaknesses factors (in terms of the big impact or relevance to the company) must be considered very well.minimum of 6 and maximum of 8 factors. Check textbook pages 127 for the prioritization of the factors. Each factor must be complete sentence. Note: Ensure that each of these strengths and weaknesses factor must be traceable or has basis. The key internal factors should help (or realize the lacking) in achieving and sustaining the competitive advantage List of Key Strengths and Weakness of the (Company Name) Again .

. capabilities and core competencies that can be foundation in the competitive advantage of the company. Notes: *The Dimension in the table will reflect if the Strength or Weakness factor falls under competitive position or financial Position *All tables and figures in the entire chapter 5 must be mentioned and explained in paragraph discussions Ex. . . These lists are reduced to a manageable factors in order to make it useful and derive effective strategy. Figure below explains the . Table 5. Use the concept of Resource-Based View to check if the internal factors have the resources. . .2 shows the . **It is possible that 2 or more strengths (or weaknesses) can be identified from the same function. The student may reflect several times on this final lists to ensure that the Strength and Weaknesses are really the final factors.factor suddenly appeared in the list without assimilating information in the functional areas. .