Summary Outline

1. Introduction to Internal Strategic Management Audit

2. Key Internal Forces
3. The Process of Performing an Internal Audit
4. The Resource-Based View (RBV)
5. Integrating Strategy and Culture
6. Management
a. Planning
b. Organizing
c. Motivating
d. Staffing
e. Controlling
7. Marketing
a. Customer Analysis
b. Selling Products/Services
c. Product and Service Planning
d. Pricing
e. Distribution
f. Marketing Research
g. Cost/Benefit Analysis
8. Finance/Accounting
a. Finance/Accounting Functions
b. Basic Types of Financial Ratios
c. Finance/Accounting Audit Checklist
9. Production/Operations
a. Production/Operations Functions
b. Production/Operations Audit Checklist
10. Research and Development
11. R&D in Organizations
12. Management Information Systems
13. Strategic-Planning Software
14. Value Chain Analysis (VCA)
15. Benchmarking
16. The Internal Factor Evaluation (IFE) Matrix
17. Conclusion
 Summary

To discuss each topic, we will cover the following points:

1. Internal strategic-management audit:

o The process parallels the process of performing an external audit.
o Involves gathering and assimilating information about the firm's functional
areas.
o Representative managers and employees should be involved.
o Key factors should be prioritized to determine strengths and weaknesses.
2. Resource-Based View (RBV) in strategic management:
o Internal resources are more important than external factors for competitive
advantage.
o Resources can be physical, human, or organizational.
o Valuable resources are rare, hard to imitate, or not easily substitutable.
o Strategies should consider the firm's internal resources.
3. Key interrelationships among functional areas of business:
o Functional areas include management, marketing, finance/accounting,
production/operations, research and development, and management
information systems.
o Effective coordination and understanding among managers from all areas
are crucial.
o Relationships must be managed as the firm grows and diversifies.
4. Basic functions or activities in management, marketing, finance/accounting,
production/operations, research and development, and management information
systems:
o Management: planning, organizing, motivating, staffing, and controlling.
o Marketing: customer analysis, product planning, pricing, distribution, etc.
o Finance/Accounting: investment, financing, and dividend decisions.
o Production/Operations: process, capacity, inventory, workforce, quality.
o Research and Development: developing new products, improving quality,
etc.
o Management Information Systems: managing information systems
operations and coordination.
5. Determining and prioritizing a firm's internal strengths and weaknesses:
o Involves gathering information from all functional areas.
o Representative managers and employees should be involved.
o Key factors should be prioritized collectively.
6. Importance of financial ratio analysis:
o Widely used for evaluating strengths and weaknesses in investment,
financing, and dividend areas.
o Provides insights into liquidity, leverage, profitability, etc.
o Comparisons over time and with industry norms help identify strengths and
weaknesses.
 o
7. Nature and role of management information systems in strategic management:
o Manage information systems operations and ensure coordination among
functional areas.
o Crucial for establishing objectives and strategies.
8. Internal Factor Evaluation (IFE) Matrix:
o Evaluates a firm's internal strengths and weaknesses.
o Involves assigning weights and ratings to key factors.
o Calculates a weighted score to determine overall evaluation.
9. Benchmarking as a strategic management tool:
o Compares a firm's performance to competitors or industry leaders.
o Identifies best practices and sets performance targets.
o Improves performance and achieves competitive advantage.
10. Internal and External R&D:
o R&D activities can be conducted internally or externally.
o Joint ventures and hiring independent researchers are common approaches.
o R&D strengths and weaknesses impact strategy formulation and
implementation.
11. Strategic-Planning Software:
o Simple and user-friendly software facilitates wide participation in strategy
development.
o CheckMATE is an example of strategic-planning software.
o Performs planning analyses and generates strategies based on user input.
12. Value Chain Analysis (VCA):
o Describes a firm's business activities from raw materials to final
product/service delivery.
o Identifies cost advantages or disadvantages along the value chain.
o Helps firms understand strengths and weaknesses compared to
competitors.
13. Simplified
o Internal strategic-management audit involves gathering information and
prioritizing key factors.
o RBV emphasizes the importance of internal resources for competitive
advantage.
o Functional areas are interrelated, and effective coordination is crucial.
o Management, marketing, finance/accounting, production/operations,
research and development, and management information systems have
specific functions.
o Determining and prioritizing internal strengths and weaknesses involves
collective input.
o Financial ratio analysis provides insights into various aspects of a firm's
performance.
o Management information systems play a crucial role in strategic
management.
o The IFE Matrix evaluates a firm's internal strengths and weaknesses.
o Benchmarking compares a firm's performance to competitors or industry
leaders.
o R&D can be conducted internally or externally, and strategic-planning
software can aid in strategy development.
o Value Chain Analysis helps firms understand their competitive advantages or
disadvantages.
Key Terms

• Internal strategic-management audit: The process of evaluating a firm's internal

strengths and weaknesses in order to identify areas for improvement and develop
strategies

• Resource-Based View (RBV): An approach to strategic management that

emphasizes the importance of a firm's internal resources and capabilities in
achieving and sustaining competitive advantage.

• Functional areas of business: Different areas within a business, such as

management, marketing, finance/accounting, production/operations, research and
development, and management information systems.

• Distinctive competencies: Unique strengths of a firm that cannot be easily matched

or imitated by competitors.

• Financial ratio analysis: The evaluation of a firm's financial performance using

various ratios, such as return on investment, profit margin, and debt-to-equity ratio.

• Internal Factor Evaluation (IFE) Matrix: A tool used in strategic management to

assess a firm's internal strengths and weaknesses and assign weights to each factor
based on their importance.

• Benchmarking: A strategic management tool that involves comparing a firm's

performance to that of its competitors or industry leaders in order to identify areas
for improvement.

• Organizational culture: The shared values, beliefs, and behaviour’s that shape the
way an organization operates and interacts with its employees and stakeholders.

• Planning: The process of setting objectives and determining the most effective way
to achieve them.

• Organizing: The process of defining tasks, establishing authority relationships, and

coordinating efforts to achieve organizational goals.

• Motivating: The process of influencing and inspiring individuals to work towards

achieving specific objectives.

• Staffing: The process of recruiting, selecting, and developing employees to fill

positions within an organization.
• Controlling: The process of monitoring and evaluating performance to ensure that it
aligns with planned objectives and taking corrective actions when necessary.

• Customer analysis: The examination and evaluation of consumer needs, desires,

and wants in order to better understand and serve customers.

• Selling products/services: The activities involved in promoting and selling products

or services to customers.

• Product and service planning: The process of developing and managing products or
services, including determining features, quality, and options.

• Pricing: The process of setting prices for products or services based on factors such
as costs, competition, and customer demand.

• Distribution: The activities involved in getting products or services from the producer
to the customer, including warehousing, transportation, and retailing.

• Marketing research: The systematic gathering, recording, and analyzing of data

about consumer needs, preferences, and behaviour.

• Cost/benefit analysis: The evaluation of the costs and benefits associated with a
particular decision or action.

• Investment decision: The allocation of capital and resources to projects, products,

assets, and divisions of an organization.

• Financing decision: The determination of the best capital structure for a firm and the
methods by which it can raise capital.

• Dividend decision: The decision regarding the amount of earnings to be paid out to
stockholders as dividends.

• Process: The methods and procedures used to transform inputs into finished goods
or services.

• Capacity: The maximum amount of output that a firm can produce in a given period
of time.

• Inventory: The stock of goods or materials that a firm holds for production or sale.
• Workforce: The employees and labour resources of a firm.
• Quality: The degree to which a product or service meets customer expectations and
requirements.
• Research and development (R&D): The activities undertaken to develop new
products, improve existing products, and enhance manufacturing processes.

• Cross-training: The practice of training employees to perform multiple tasks or roles

within an organization.

• R&D (Research and Development): The process of creating new knowledge,

products, or services through scientific and technological research.

• Internal R&D: R&D activities conducted within an organization's own R&D

department.

• Contract R&D: R&D activities outsourced to independent researchers or agencies.

• Joint venture: A partnership between two or more firms to collaborate on R&D
projects.
• R&D capabilities: The skills and resources that enable an organization to conduct
effective R&D activities.
• R&D weaknesses: Limitations or deficiencies in an organization's R&D capabilities.
• Market leaders: Companies that strive to be at the forefront of innovation and new
product development.
• Market followers: Companies that focus on developing and improving existing
products rather than introducing new ones.
• R&D budget allocations: Approaches used to determine how much funding should
be allocated to different R&D projects.
• R&D audit: An evaluation of an organization's R&D activities, facilities, personnel,
resource allocation, management information systems, communication, and
technological competitiveness.
• Management Information Systems (MIS): Systems that collect, store, process, and
present information to support managerial decision-making.
• Internal audit: An assessment of an organization's internal strengths and
weaknesses in information systems.
• Strategic-planning software: Software tools that assist managers and executives in
developing organizational strategies.
• Value Chain Analysis (VCA): A process of analyzing a firm's activities from raw
material acquisition to customer service to identify cost advantages or
disadvantages and improve overall competitiveness.
• Market research: The systematic gathering, recording, and analyzing of data about
consumer needs, preferences, and behavior.
• Strategic-management audit: An assessment of an organization's internal
operations, including management, marketing, finance/accounting,
production/operations, R&D, and MIS, to identify strengths, weaknesses, and
opportunities for improvement.