BUSI 490 – Chapter 4: The Internal Assessment

Activity ratios (p. 108)
Inventory turnover and average collection period measure how effectively a firm is using its resources.
Benchmarking (p. 116)
An analytical tool used to determine how a firm’s value chain activities compare to rival firms in order to better gain and sustain competitive advantages.
Breakeven (BE) point (p. 109)
The quantity of units that a firm must sell in order for its total revenues (TR) to equal its total costs (TC).
Capacity utilization (p. 111)
The extent to which a manufacturing plant’s output reaches its potential output; the higher the capacity utilization the better, because otherwise equipment may sit idle.
Capital budgeting (p. 105)
A basic function of finance; the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.
Communication (p. 92)
Perhaps the most important word in strategic management, because gathering, assimilating, and evaluating information in an interactive, effective manner can lead to enhanced understanding and commitment so vital in strategic planning.
Controlling (p. 100)
A basic function of management; includes all of those activities undertaken to ensure that actual operations conform to planned operations.
Core competence (p. 116)
A value chain activity that a firm performs especially well.
Cost/benefit analysis (p. 104)
An activity that involves assessing the costs, benefits, and risks associated with marketing decisions. Three steps are required to perform this:
1) compute the total costs associated with a decision
2) estimate the total benefits from the decision,
3) compare the total costs with the total benefits
Cultural products (p. 94)
Include values, beliefs, rites, rituals, ceremonies, myths, stories, legends, sagas, language, metaphors, symbols, heroes, and heroines. These products are levers that strategists can use to influence and direct strategy formulation, implementation, and evaluation activities.
Customer analysis (p. 101)
Examination and evaluation of consumer needs, desires, and wants; involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segment strategies.
Data (p. 115)
Raw facts and figures; “data” become “information” only when they are evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.
Distinctive competencies (p. 91)
A firm’s strengths that cannot be easily matched or imitated by competitors.
Distribution (p. 103)
The process of getting goods and services to market; includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing.
Dividend decisions (p. 105)
A basic function of finance; concerns issues such as the percentage of earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock.
Empirical indicators (p. 94)
Refers to three characteristics of resources (rare, hard to imitate, not easily substitutable) that enable a firm to gain and sustain competitive advantage.
Financial ratio analysis (p. 93)
Quantitative calculations that reveal the financial condition of a firm and exemplify the complexity of relationships among the functional areas of business. For example, a declining return on investment or profit margin ratio could be the result of ineffective marketing, poor management policies, research and development errors, or a weak management information system. Ratios are usually compared to industry averages, or to prior time periods, or to rival firms.
Fixed costs (FC) (p. 110)
A key variable in breakeven analysis; includes costs such as plant, equipment, stores, advertising, and land.
Financing decision (p. 105)
A basic function of finance; determines the best capital 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).
Functions of finance/accounting (p. 104)
The basic activities performed by finance managers; consists of three decisions:
1) Investment decision
2) Financing decision
3) Dividend decision
Functions of management (p. 96)
Consists of the five basic activities:
1) Planning
2) Organizing
3) Motivating
4) Staffing
5) Controlling
Functions of marketing (p. 100)
The basic activities performed by marketing mangers:
1) Customer analysis
2) Selling products/services
3) Product and service planning
4) Pricing
5) Distribution
6) Marketing research
7) Opportunity analysis
Growth ratios (p. 108)
Measures such as the percent increase/decrease in revenue or profit from one period to the next are important comparisons.
Human resource management (p. 99)
Also called personnel management; a basic function of management; includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations.
Information (p. 115)
Data that has been evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.
Internal audit (p. 92)
The process of gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operation, R&D, and MIS operations. The purpose is to identify/evaluate/prioritize a firm’s strengths and weaknesses.
Internal factor evaluation (IFE) matrix (p. 118)
A strategy-formulation tool that summarizes and evaluates a firm’s major strengths and weaknesses in the functional areas of a business, and provides a basis for identifying and evaluating relationships among those areas.
Investment decision (p. 105)
Also called capital budgeting; a basic function of finance; the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.
Leverage ratios (p. 108)
The debt-to-equity ratio and debt-to-total assets ratio measure the extent to which a firm has been financed by debt.
Liquidity ratios (p. 108)
The current ratio and quick ratio measure a firm’s ability to meet short-term cash obligations.
Management information system (MIS) (p. 115)
A system that gathers, assimilates, and evaluated external and internal information to facilitate decision making.
Marketing research (p. 103)
The systematic gathering, recording, and analyzing of data about problems/practices/issues related to the marketing of goods and services.
Motivating (p. 99)
A basic function of management; the process of influencing and leading people to accomplish specific objectives.
Organizational culture (p. 94)
A pattern of behavior developed by an organization over time 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, think, and feel in the firm.
Organizing (p. 98)
A basic function of management; the process of arranging duties and responsibilities in a coherent manner in order to determine who does what and who reports to whom.
Personnel management (p. 99)
Also called human resource management; includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations.
Planning (p. 96)
A basic function of management; the process of deciding ahead of time strategies to be pursued and actions to be taken in the future.
Pricing (p. 102)
A basic function of marketing; determining the appropriate value for products and services to be charged to customers, given associated costs and competitor’s prices.
Product and service planning (p. 102)
A basic function of marketing; includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products, and providing for customer service.
Production/operations function (p. 111)
Consists of all those activities that transform inputs into goods and services; including issues such as inventory control and capacity utilization.
Profitability ratios (p. 108)
The profit margin ratio and return on investment ratio measure the profitability of a firm’s operations.
Research and development (R&D) (p. 113)
Spending money to develop new and improved products and services.
Resource-based view (RBV) (p. 93)
An approach that suggests internal resources to be more important for a firm than external factors in achieving and sustaining competitive advantage.
Selling (p. 101)
A basic function of marketing; includes activities such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations.
Staffing (p. 99)
Includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees.
Synergy (p. 98)
The 1 + 1 = 3 effect; when everyone pulls together as a team, the results can exceed individuals working separately.
Test marketing (p. 102)
An activity to terming ahead of time whether a certain product or service or selling approach will be cost effective; also used to forecast future sales of new products.
Value chain analysis (VCA) (p. 116)
The process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products, and compares these costs to rival firms using benchmarking.
Variable costs (VC) (p. 110)
A key variable in breakeven analysis; includes costs such as labor and materials.