Strategic Management Process: Strategy · PDF fileStrategic Management Process: Strategy...

© Dr. Nábrádi AndrásDE-AVK

By: By: Prof. Dr. AndrProf. Dr. Andráás Ns NáábrbráádidiPhD, MBAPhD, MBA

Strategic Management Process:

Strategy formulationStrategy formulation

University of DebrecenFacultyFaculty of Ag. Economics and of Ag. Economics and RuralRural DevelopmentDevelopment

DeptDept.: Business Management and Marketing.: Business Management and MarketingHUNGARYHUNGARY


Tasks of strategic management

Outline

� Strategy formulation

�Develop vision

�Develop mission

�Why mission statement

�External assessment

�Internal assessment

�Establish long term objectives

Strategy formulation

Strategy Implementation

Strategy Evaluation



Business mission

Internal analysis External analysis

Establishing long term objectives

ANALYSISANALYSIS

Outline


� Develop vision

� Develop mission

� Why mission statement

� External assessment

� Internal assessment

� Establish long term objectives


First stage of the strategic management

DevelopVision and MissionStatements

Establishlong termobjectives

Generate, evaluate, and selectstrategies


(Strategic planning)

Outline


� Develop vision

� Develop mission







�Developing vision and mission�Indetifying external opportunities and threats�Determining internal strenghts and weaknesses

�Establishing long term objectives

�Generating alternative strategies�Choosing particular strategies to pursue�Deciding what new business to enter

�How to allocate resources�Expand or diversify operations�Entering or not international market�Merge or form joint venture�How to avoid a hostile takeover

Outline


� Develop vision

� Develop mission







Developingvision and

mission

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� Develop vision

� Develop mission






Terms to remember

STRATEGIC VISIONSTRATEGIC VISION

A view of an organization�s futuredirection and busines course; a

guiding for what the organization is trying to do and to become.

What do we want to become?

Outline


� Develop vision

� Develop mission






Vision

Henkel is want to be a leader with brands and technologies that make people's lives easier, better and more beautiful.

We will provide knowledge and take actionto ensure the national security of the United States and the preservation of American life and ideals.

Outline


� Develop vision

� Develop mission





What do we want to become?


Vision

To be the leading food company in knowledge, consumer relations and revenues among companiesheadquartered in the region of Southeast, Central and Eastern Europe, as well as a pharmaceutical companywhich achieves more through a distinctive partnershipapproach.

Outline


� Develop vision

� Develop mission




� Establish long term objectives What do we want to become?


Terms to remember

A mission statement broadly outlines the organization�s future direction and serves as

aquiding concept for what the organization is to doand to become. Overriding premise in line with the

values or expectations of stakeholders.

STRATEGIC MISSIONSTRATEGIC MISSION

What is our business?

Outline


� Develop vision

� Develop mission






Az üzleti küldetésThe mission

We believe our first responsibility is to the doctors nurses to mothers who use our products and services.

We offer a wide range of home furnishings withgood design and function at prices so low thatas many people as possible will be able to afford them.

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� Develop vision

� Develop mission







Az üzleti küldetésThe mission

We are the eyes and ears of the nation and at timesits hidden hand .

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� Develop vision

� Develop mission





To create high-quality branded products thatacquire the trust of clients and consumers.

To pioneer the future in space exploration, scientificdiscovery and aeronautics research.



Az üzleti küldetésPersonal mission statement

Throughout each day in my life I strive to be loyal to my friends and family, lead a successful career thatI will enjoy, stay healthy, and take on anychallenges that come my way.

I value my family members, friends, spiritualfulfillment, sense of accomplishment, and respectfor others.

Outline


� Develop vision

� Develop mission






Az üzleti küldetésStrategic management principle

Outline


� Develop vision

� Develop mission





Profit NOT mission or Profit NOT mission or vision is a primary vision is a primary

corporate motivatorcorporate motivator!!


Az üzleti küldetésThe process of developing a mission statement

� First to select several articles about mission statements and ask all managers to read these as background information� Ask managers themselves to prepare a mission statement for the organization� Committee of top managers should then merge these statements into a single documents,� Than distribute this draft mission statement to all managers as a request for modifications� Finalize the modified statement in front of CEO�s

Outline


� Develop vision

� Develop mission






Az üzleti küldetésThe process of developing a mission statement

An effective mission statementAn effective mission statement� should not too lengthy; recommended is less than 200 words� arouses positive feelings and emotions about an organization� generates the impression that a firm is successful, has direction� distinguish a given organization from all others� widely understood throughout the organization � identify the utility of a firm�s products to its consumers >>>>

Outline


� Develop vision

� Develop mission






Az üzleti küldetésDo not offer me things

Do not offer me clothes. Offer me attractive looks.Do not offer me shoes. Offer me comfort feet of walking.Do not offer me a house. Offer me security, comfort, and place that is clean and happy.Do not offer me books. Offer me hours of pleasure and benefit of knowledge.Do not offer me records. Offer me leisure and sound of music.Do not offer me things. Offer me ideas, Do not offer me things. Offer me ideas, emotions, ambience, feelings and benefits.emotions, ambience, feelings and benefits.

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� Develop vision

� Develop mission






Az üzleti küldetésCharacteristic of a mission statement

��Declaration of attitudeDeclaration of attitude�� Not allowed to move wrong diversification� Not designed to concrete ends, rather to provide motivation, general direction, image and philiosophy

�� Costumer orientation Costumer orientation � To attract customers who give meaning to an organization

� Declaration of social policyDeclaration of social policy�� Different kind of responsibility

Outline


� Develop vision

� Develop mission






Az üzleti küldetésWhy mission statement?

1. To ensure unanimity of purpose within the organization.

2. To provide a basis or standard for allocating organizational resources.

3. To establish a general tone or organizational climate.

4. To serve a focal point for individuals to identify with the organization�s purpose and direction.

5. To facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organization.

6. To specify organizational purposes or motion and then to translate these purposes into objectives.

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� Develop vision

� Develop mission






Az üzleti küldetésWhy mission statement?

Outline


� Develop vision

� Develop mission







Business mission

Internal analysis External analysisExternal analysis


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� Develop vision

� Develop mission






Az üzleti küldetésExternal assessment

Outline


� Develop vision

� Develop mission





�ORGANIZATION�Suppliers Consumers

Competitors

Regulatory agencies.Unions, c

hambers

InternationalLega

l sys

tem

Economic policy Socio/

cultu

ral

Technological

Natural environment

Financial corporations


Az üzleti küldetésThe nature of an external audit

The purpose is to develop a finite list of The purpose is to develop a finite list of opportunitiesopportunities that could benefit a firm and that could benefit a firm and

threatsthreats that should be avoided.that should be avoided.

Methods for external assessment;Methods for external assessment;

1.1. Key external forces; (STEP analysis)Key external forces; (STEP analysis)2.2. Competitive Analysis (PorterCompetitive Analysis (Porter��s Five Forces s Five Forces

Model)Model)3.3. The External Factor Evaluation Matrix (EFE)The External Factor Evaluation Matrix (EFE)4.4. The Competitive Profile Matrix (CPM)The Competitive Profile Matrix (CPM)

Outline


� Develop vision

� Develop mission






Az üzleti küldetésKey external forces

Key external forces; (STEP analysis)Key external forces; (STEP analysis)�� SSocial, cultural, demographic, and

environment�� TTechnological�� EEconomic �� PPolitical, governmental, and legal

++�� CompetitiveCompetitive

Outline


� Develop vision

� Develop mission






Az üzleti küldetésSocial, Cultural, Demographic, and Environmental Forces

Outline


� Develop vision

� Develop mission





1. What is the dominant religion? 2. What are attitudes to foreign products and services? 3. Does language impact upon the diffusion of products onto markets? 4. How much time do consumers have for leisure? 5. What are the roles of men and women withinsociety?6. How long are the population living? Are the oldergenerations wealthy? 7. Do the population have a strong/weak opinion on green issues?


Az üzleti küldetésSocial, Cultural, Demographic, and Environmental Variables

Outline


� Develop vision

� Develop mission





Number of marriagesNumber of divorcesNumber of birthsNumber of deathImmigration ratesSocial security programsLife expectancy ratesTrust in governmentEthical concernsAverage level of educationSex rolesAverage disposable income

Retirement ageAttitudes tow. leisure timePollution controlSocial programsNumber of churchesAttitudes tow. product qal.Attitudes tow. authorityWaste managementNumber of school, collegeRecyclingWater pollutionOzone depletionAir pollutionSocial responsibility


Az üzleti küldetésTechnological Forces

Outline


� Develop vision

� Develop mission





1. Does technology allow for products and servicesto be made more cheaply and to a better standard of quality? 2 .Do the technologies offer consumers and businesses more innovative products and servicessuch as Internet banking, new generation mobile telephones, etc?3. How is distribution changed by new technologiese.g. books via the Internet, flight tickets, auctions, etc? 4. Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?


Az üzleti küldetésEconomic Forces

Outline


� Develop vision

� Develop mission





Strategists Strategists needneed to to considerconsider the the statestate of a of a tradingtrading economy in the economy in the shortshort and and longlong--termsterms. .

ThisThis is is especiallyespecially truetrue whenwhen planningplanning for for international marketing. international marketing.

You need to look at:1. Interest rates2. The level of inflation Employment level per capita3. Long-term prospects for the economy GrossDomestic Product (GDP) per capita, and so on


Az üzleti küldetésKey Economic Variables to be Monitored

Outline


� Develop vision

� Develop mission





Availability of creditLevel of disposable incomeInterest ratesInflation ratesGovernment budget deficitConsumption patternsUnemployment ratesImport/export factorsPrice fluctuationsMonetary policiesFiscal policies

Gross domestic product trendWorker productivity levelsValue of the local currencyStock market trendsExport of labor and capitalIncome differences by region and consumer groupsTax ratesChange of European Economic Policy


Az üzleti küldetésPolitical, governmental, and legal forces

Outline


� Develop vision

� Develop mission





The The politicalpolitical arenaarena has a has a hugehuge influenceinfluence uponupon the the regulationregulation of businesses, and the of businesses, and the spendingspending power of power of consumersconsumers and and otherother businesses. businesses. YouYou must must considerconsider

issuesissues suchsuch as: as:

1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your business?3.What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?


Az üzleti küldetésSome Political, Governmental, and Legal Variables to be Monitored

Outline


� Develop vision

� Develop mission





Government regulationsChanges in tax lawsSpecial tariffsNumber of patternsPolitical action committeesEnvironmental protection lawsLevel of governmental subsidiesImport/export regulationGovernment fiscal and monetary policy changes

Political conditions in foreign countriesSpecial local laws, taxesLobbying activitiesSize of governmental budgetNational/local elections, regulationsLocation and severity of terrorist activitiesRelationships between neighbor countriesAntitrust legislation


Az üzleti küldetésCompetitive forces

Outline


� Develop vision

� Develop mission





Collecting and evaluating information on competitors is Collecting and evaluating information on competitors is essential for successful strategy formulation.essential for successful strategy formulation.

1. What are the major competitor�s strengths?2. What are the major competitor�s weaknesses?3. What are the major competitor�s objectives and

strategies?4. How will the major competitors most likely

respond to STEP affecting our industry?5. How vulnerable are the major competitors to

our alternative company strategies?6. How are our products or services positioned

relative to major competitors?


Az üzleti küldetésCompetitive forces

Outline


� Develop vision

� Develop mission





To what extent are new firms entering and old firms leaving this industry?

7. What key factors have resulted in our present competitive position in this industry?

8. How have sales and profit rankings of major competitors in the industry changed over recent years? Why have these rankings changed that way?

9. What is the nature of supplier and distributor relationships in this industry?

10. To what extent could substitute products or services be a threat to competitors in this industry?








Outline


� Develop vision

� Develop mission






Az üzleti küldetésCompetitive Analysis Porter�s Five-Forces Model

Outline


� Develop vision

� Develop mission





Potential development of substitute products

Potential entry of new competitors

Bargaining power of suppliers

Bargaining powerof consumers

Rivalry amongcompeting

firms


Az üzleti küldetésRivalry among competing firms

The most powerful

ToolsTools

1. Lowering prices2. Enhancing quality3. Adding features4. Providing services5. Extending warranties6. Increasing advertising

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� Develop vision

� Develop mission






Az üzleti küldetésThe intensity of Rivalry increases

1. Number of competitor increases2. Competitors become more equal3. Demand for the products declines4. Price cutting become common5. Consumers can switch brands easily6. Fixed costs are high7. Consumer demand decline or stagnates8. Mergers and acquisitions are common

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� Develop vision

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�Develop vision

�Develop mission






Potential entry of new competitorsPotential entry of new competitors




firms


Az üzleti küldetésPotential entry of new competitors

BARRIERSBARRIERS1. The lack of experience2. Strong consumer

royalty3. Strong brand

preferences4. Government regulatory

policies5. Tariffs6. Lack of process to raw

materials7. Possession of patterns8. Undesirable location9. Market saturation

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� Develop vision

� Develop mission





OPPORTUNITIESOPPORTUNITIES1. Higher quality products2. Lower prices3. Substantial marketing

resources4. All the opposite listed

in barriers



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firms


Az üzleti küldetésPotential development of substitute products

Competitive pressures arising from substitute products increase as the relative price of substitute products declines and consumer�s switching costs decrease.

SubstitutesSubstitutes

Outline


� Develop vision

� Develop mission





Eyeglasses, contact lens >>>>>>> Laser surgerySugar >>>>>>>> Artificial sweetenersNewspapers >>>>>>>> Internet


Az üzleti küldetésBargaining power of suppliers

WHEN bigger?WHEN bigger?

1. Large number of suppliers2. Few good substitute raw materials3. Cost of switching raw materials is

especially costly

Tools against the bargaining power of suppliers

Backward integrationSelf manufacture

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� Develop vision

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firms


Az üzleti küldetésBargaining power of consumers

WHEN bigger?WHEN bigger?

1. When costumers are concentrated2. Products are standard or undifferentiated3. If they can inexpensively switch to

competing brands or substitutes4. If they are particularly important to the

seller5. When sellers extremely need consumer

demand6. If they are informed about seller�s product

prices and costs

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� Develop vision

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� Develop vision

� Develop mission






Az üzleti küldetésExternal Factor Evaluation (EFE) Matrix

EFE allows strategists to summarize and evaluate all external factors in oneone sum.

1. Collect 10 to 20 factors both opportunities and threats that affectthe firm and its industry.

2. Assign to each factor a weight from 0,00 (not important) to 1,00(extremely important). The weight indicates the relative importance of that factor to being successful in the firmfirm��s s industryindustry. The sum of all weights is 1.

3. Assign a rating between 1 and 4 to each external factor to indicate how effectively the firmfirm��s current strategiess current strategies respond to the factor: where 4 is superior, 3 is above average, 2 is average and 1 is response is poor.

4. Multiply each factor�s weight by rating to determine a weighted score.

5. Sum the weighted score to determine the total weighted score fororganization.

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� Develop vision

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3. >>>>9 or 10 key items

0,0710,072. Leading rival firms are more fully integrated

Σ (1 to 4)1,00Total

0,0820,041. Increasing governmental regulation in the industry

Threats3 . >>>>�..9 or 10 items

0,0620,032. Packaging technology offers 15 % annual cost savings

0,2840,071. Demand for prepared food increasing 10 % annually

Opportunities

Weighted score

RatingWeightKey external factors 12 3 4

5Importance to the firm�s industry

Importance to the firm�s current strategy



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� Develop vision

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The highest weighted score is 4 the lowest is 1 the average is 2,5.

4 means: the firm�s strategies effectively take advantage of existing opportunities and minimize the potential adverse of external threats.

1 means: The firm�s strategies are not capitalizing on opportunities or avoiding external threats.








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� Develop vision

� Develop mission






Az üzleti küldetésThe Competitive Profile Matrix (CPM)

Identifies a firm�s major competitors and its particular strengths and weaknesses in relation to a sample

firm�s strategic position1. Collect 10 to 20 critical success factors (CSF) that affect the firm

and its industry. The SCF include both internal and external issues.2. Assign to each factor a weight from 0,00 (not important) to 1,00

(extremely important). The weight indicates the relative importance of that factor to being successful in the industryindustry. The sum of all weights is 1.

3. Assign a rating between 1 and 4 to each external factor to refer to strengths and weaknesses: where 4 is major strength, 3 is minor strength, 2 is minor weakness, and 1 is major weakness.



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2,803,151,00TOTAL

0,1530,0510,05Market share

0,4020,840,20Global expansion

0,2020,440,10Customer loyalty

0,4530,640,15Financial position

0,3030,440,10Management

0,4040,330,10Price competitiveness

0,3030,440,10Product quality

0,6030,210,20Advertising

ScoreRating

ScoreRatingWeightCritical Success Factors

Procter&Gamble

AVONAN EXAMPLE



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� Develop vision

� Develop mission





Important differences between EFE and CPM

CPMCPM� are boarder, they do not include specific or

factual data and even may focus on internal issues.

� Not grouped into opportunities and threats.� CPM ratings and total weighted scores for rival

firms can be compared to the sample firm.



Business mission



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� Develop vision

� Develop mission






Internal assessmentInternal assessment

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� Develop vision

� Develop mission





Internal strengths/weaknessesstrengths/weaknesses, coupled with external opportunities/threats and clear statement of mission provide the basis for establishing objectives and strategies.

Methods for internal assessment:Methods for internal assessment:

1.1. Resource Based View (RBV) ApproachResource Based View (RBV) Approach2.2. Analyzing Key Internal ForcesAnalyzing Key Internal Forces3.3. Value Chain Analysis (VCA), (ABC)Value Chain Analysis (VCA), (ABC)4.4. Internal Factor Evaluation (IFE) MatrixInternal Factor Evaluation (IFE) Matrix


Internal assessment Methods

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� Develop vision

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1.1. Resource Based View approachResource Based View approach� Physical resources

Plant, equipment, location, technology, raw materials, machines

� Human resourcesEmployees, training, experience, intelligence,

knowledge, skills, abilities� Organizational resources

Firm structure, planning processes, information systems, patents, trademarks, copyrights, databases



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� Develop vision

� Develop mission





Key internal forces:Key internal forces:

1. Management2. Marketing3. Finance/accounting4. Production/operation5. Research and development6. Management Information System



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� Develop vision

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2. Analyzing key internal forces 2. Analyzing key internal forces 1. Management

Planning, organizing, motivating, staffing, and controlling.

2. MarketingCustomer analysis, selling products and services,

product and service planning, pricing, distribution, marketing research, opportunity analysis

3. Finance/ accountingFirm�s liquidity, leverage, working capital,

profitability, asset utilization, cash flow, and equity



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� Develop vision

� Develop mission





2. Analyzing key internal forces 2. Analyzing key internal forces 4. Production/operation

Decision on process, capacity, inventory, workforce and quality.

5. Research and development6. Management information system

Data become information only when they are evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.

3. Value Chain Analysis3. Value Chain AnalysisRefers to the process whereby a firm determines the

costs associated with organizational activities.4. Internal Factor Evaluation (IFE) Matrix4. Internal Factor Evaluation (IFE) Matrix


Key Internal Forces ManagementManagement

1.1. planning:planning: consists of all those managerial activities related to preparing for future. Specific tasks: forecasting, establishing objectives, devising strategies, developing policies, and setting goals.

2.2. Organizing:Organizing: includes all those managerial activities that result in a structure of task and authority relationships. Specific areas: organizational design, job specialization, job description, coordination, job analysis.

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� Develop vision

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3.3. Motivating:Motivating: involves efforts directed towards shaping human behavior. Specific topics: leadership, communication, work groups, delegation of authority, job satisfaction, employee morale.

4.4. Staffing: Staffing: are centered on personnel or HRM. Wage and salary administration, interviewing, hiring, firing, training, employee safety, union relation, career development, personnel research, public relations.

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� Develop vision

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5.5. Controlling:Controlling: ensuring that actual results are consistent with planned results. Key areas: quality control, financial control, sales control, inventory control, expense control, analysis of variances, rewards, and sanctions.

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� Develop vision

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Strategy Strategy evaluationevaluation

ControllingControllingStaffingStaffingMotivatingMotivating Strategy Strategy

ImplementationImplementation

OrganizingOrganizing

Strategy Strategy FormulationFormulation

PlanningPlanning



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� Develop vision

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Key Internal Forces Finance/accountingFinance/accounting

1.1. Investment decision:Investment decision: (capital budgeting) is the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.

2.2. Financing decision:Financing decision: determines the best capital structure, how the firm can raise capital. Issuing stock, increasing dept, selling assets or using a combination of these.

3. Dividend decision: percentage of earnings paid to stockholders.

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� Develop vision

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Key financial ratios:Key financial ratios:Like a blood test: reflect a situation at just one

point in time.

1. Liquidity2. Leverage3. Activity4. Profitability5. Growth

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1.1. LiquidityLiquidityOutline


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A firm can (not) meet its short term obligationsWithout relying upon the sale of its inventories

Current assets � inventoryCurrent liabilities

Quick ratio

A firm can (not) meet its short term obligations

Current assetsCurrent liabilities

Current

What it measuresWhat it measuresHow calculatedHow calculatedRATIORATIO



2. Leverage ratios2. Leverage ratiosOutline


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A balance between dept and equity in a firm�s long term capital structure

Long term dept__Total stockholder�s equity

Long term dept to equity

The extent to which earnings can decline without the firm becoming unable to meet its annual interest costs

Profit before interest and taxes

Total interest charges

Times interest earned ratio

The % of total funds provided by creditors versus by owners

Total dept____ Total stockholder�s equity

Dept to equity

The % of total funds that are provided by creditors

Total deptTotal assets

Dept to total assets




3. Activity ratios3. Activity ratiosOutline


� Develop vision

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The average length of time it takes a firm to collect credit sales (%)

Annual credit salesAccount receivable

Account receivable turnover

The average length of time it takes a firm to collect credit sales (days)

Account receivableTotal credit sales/365 days

Average collection period

Sales productivity on total assets

Sales______Total assets

Total assets turnover

Sales productivity and plant and equipment utilization

Sales______Fixed assets

Fixed assets turnover

Whether a firm holds excessive stocks of inventories

Sales______Inventory of finished goods

Inventory turnover




4. Profitability ratios4. Profitability ratiosOutline


� Develop vision

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After tax profits of salesNet income______Sales

Net profit margin

Profitability exclude I&TEarnings before interest and taxesSales

Operating profit margin

A total margin available to cover operating expenses and yield a profit

Sales minus cost of good soldSales

Gross profit margin




4. Profitability ratios (continued)4. Profitability ratios (continued)Outline


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Attractiveness of firm on equity market

Market price per shareEarnings per share

Price earning ratio

Earnings available to the owners of common stock

Net income______Number of shares of common stock

Earnings per share (EPS)

After tax profits of stockholder�s investment

Net incomeTotal stockholders� equity

Return on stockholders� equity

After tax profits of assets (Return on investment)

Net incomeTotal assets

Return on total assets (ROA)




5. Growth ratios5. Growth ratiosOutline


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Firms growth rate in EPS

Annual % growth in EPSEarnings per share

Firms growth rate in dividends per share

Annual % growth in dividends per share

Dividends per share

Firms growth rate in profits

Annual % growth in profitsNet income

Firms growth rate in sales

Annual % growth in total sales

Sales



Internal assessment

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Key Internal Forces Production/operationProduction/operation

This function of a business consists of all those activities that transform inputs

into good and services.

5 functions or decision areas5 functions or decision areas:

� Process� Capacity� Inventory� Workforce� Quality

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Key Internal Forces Production/operationProduction/operation

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Design of physical production system. Specific: choice of technology, facility layout, process flow analysis, process control, transportation analysis

1. Process

Ensuring the certain quality goods and services are produced. Specific: quality control, sampling, qualityassurance and cost control

5. Quality

Managing the skilled, unskilled, clerical, and managerial employees. Specific: job design, work measurement, job enrichment, work standards and motivation techniques.

4. Workforce

Managing the level of raw materials, work-in process, and finished goods. Specific: what to order, how much to order, materials handling.

3. Inventory

Determination of optimal output level for the firm. Specific: forecasting, facilities planning, aggregate planning, scheduling, capacity planning.

2. Capacity

DESCRIPTIONDESCRIPTIONFUNCTIONFUNCTION



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1.1. Resource Based View (RBV) ApproachResource Based View (RBV) Approach2.2. Analyzing Key Internal ForcesAnalyzing Key Internal Forces3.3. Value Chain Analysis (VCA)Value Chain Analysis (VCA) Activity Based Activity Based

Costing (ABC)Costing (ABC)4.4. Internal Factor Evaluation (IFE) MatrixInternal Factor Evaluation (IFE) Matrix


Value chain Analysis

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Value chain analysis refers to the process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing products to marketing those products.

Aims to identify where low cost Aims to identify where low cost advantages or disadvantages exist advantages or disadvantages exist

anywhere along the value chain.anywhere along the value chain.


Value Chain Analysis

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Supplier Production Distribution Sales +marketing

Customerservice



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Customerservice

MaintenanceWarehouse

Food and lodging

FuelCost accounting

Storing

Transportation

RailroadsR and DInspection

AdvertisingTruckingComputerComponent parts

PromotionInternetPlant locationTruck drivers

WarrantyPublicityPersonnelMaintenanceTransportation

InternetInternetBudgetingPlant layoutEnergy

PhoneWeb siteShippingReceivingFuel

PostageSalespersonsLoadingInventory system

Raw mat.



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Customerservice



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Customerservice





1.1. Resource Based View (RBV) ApproachResource Based View (RBV) Approach2.2. Analyzing Key Internal ForcesAnalyzing Key Internal Forces3.3. Value Chain Analysis (VCA), (ABC)Value Chain Analysis (VCA), (ABC)4.4. Internal Factor Evaluation (IFE) MatrixInternal Factor Evaluation (IFE) Matrix

Outline


�Develop vision

�Develop mission






Az üzleti küldetésThe Internal Factor Evaluation Matrix

Identifies a firm�s major strengths and weaknessesallows strategists to summarize and evaluate all

internal factors in oneone sum.

1. Collect 10 to 20 internal factors including both strengths and weaknesses. Use percentage, ratios and comparative numbers.

2. Assign to each factor a weight from 0,00 (not important) to 1,00(extremely important). The weight indicates the relative importance of that factor to being successful in the industryindustry. The sum of all weights is 1.

3. Assign a rating between 1 and 4 to each external factor to refer to strengths and weaknesses: where 4 is major strength, 3 is minor strength, 2 is minor weakness, and 1 is major weakness.



Outline


�Develop vision

�Develop mission






Az üzleti küldetésInternal Factor Evaluation (IFE) Matrix

3. >>>>9 or 10 key items

0,0710,072. 86 % of the trade revenues come from Europe

Σ (1 to 4)1,00Total

0,0620,031. Our company total dept to equity ratio is 0,36 compared to the industry average of 0,9

Weaknesses3 . >>>>�..9 or 10 items

0,2440,062. Our company has 50 subsidiary in Europe and Asia

0,2430,081. Our company provide 24-hour, 7 day services

Strengths

Weighted score

RatingWeightKey internal factorsOutline


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Internal Factor Evaluation (IFE) Matrix

The highest weighted score is 4 the lowest is 1 the average is 2,5.

Total weighted scores well below 2,5below 2,5characterize organizations that are weakweak internally, whereas scores significantly above 2,5above 2,5 indicate a strongstronginternal positionposition.

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�Develop vision

�Develop mission






Internal Factor Evaluation (IFE) Matrix

Outline


�Develop vision

�Develop mission






Business mission


Establishing long term objectivesEstablishing long term objectives

Generating alternative strategiesChoosing particular strategies to pursue

Deciding what new business to enter

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