Module 4: The Internal Assessment

Distinctive Competencies
Is a competitively valuable activity that a firm performs better than its rivals—it thus represents a competitively superior internal strength.
Internal Audit
requires gathering and assimilating information about firm’s management, marketing, finance/accounting, production /operations, research and development (R&D), and management information operations.
The process of gaining Competitive Advantage
Weakness >> Strengths >> Distinctive Competencies >> Competitive Advantage
Activity Ratios
measure the effectiveness of the use of resources from an operational point of view.
an analytical tool used to determine whether a firm’s value chain activities are competitive compared to rivals. The process of measuring products, services, and practices against those of competitors or companies recognised as industry leaders.
Breakeven point (BE)
The level of output at which total revenues (TR) equal total cost (TC), that is, the point at which operating income is zero.
Capital Budgeting (Investment Decision)
The allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization. Once strategies are formulated, capital budgeting decisions are required to successfully implement strategies.
Keeping the company on track and making sure all goals are met. All managers in an organisation have controlling responsibilities, such as conducting performance evaluation and taking necessary action to minimise inefficiencies.
Core Competence
proficiently performed internal activity that is central to a firm’s strategy and competitiveness.
Cost/Benefit Analysis
assessment of cost, benefits, and the risks associated with marketing decisions.
Organisational Culture
The values, attitudes and beliefs of the people working in an organisation that control the way they interact with each other and with external stakeholder groups
Customer Analysis
Examination and evaluation of consumer needs, desires, and wants; involves administering customer surveys, analysing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies.
Facts and statistics collected together for reference or analysis. Data becomes information only when they are evaluated, filtered, condensed, analysed for a specific purpose.
Empirical Indicators
For resources to be valuable, it must be either (1) rare, (2) hard to imitate, or (3) not easily substitutable. The more a resource is rare, non-imitable, and nonsubstitutable, the stronger a firm’s competitive advantage will be and the longer it will last.
Financial Ratio Analysis
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 Cost
An activity cost (as of investment in land, plant, and equipment) that must be met without regard to level of output. It remains the same regardless of the level of production or the level of sales.
Financing Decision
determines the best capital structure for firm and includes examining various methods by which the firm can raise capital ( for example, by issuing stock, increasing debt, selling assets, etc.). Should be both short-term and long-term.
Functions of Finance / Accounting
Responsible for acquiring, utilising and controlling the money in the best interests of the business. The money within the organisation is used to meet the objectives of the organisation. Three decisions: the investment, the financing and the dividend.
Functions of Management
planning, organising, motivating, staffing, controlling.
Growth Ratios
Measure the firm’s ability to maintain its economic position in the growth of the economy and industry (sales, net income, earning per share, dividend per share).
Human Resource Management (Personnel Management, Staffing)
The process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and dismissing if needed employees to achieve organisational objectives.
Internal Audit
A careful examination of the organization’s present internal condition, its strengths- primarily its core competencies- and weaknesses; carried out as part of long-term strategic planning and sometimes called the searching look within. It requires gathering and assimilating information about firm’s management, marketing, finance/accounting, production /operations, research and development (R&D), and management information operations.
Internal Factor Evaluation ( IFE) Matrix
A strategy-formulation tool that summarises 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.
Leverage Ratios
financial ratios that measure the extent to which a firm uses debt as a source of financing and its ability to service that debt.
Liquidity Ratios
ratios that measure the speed with which a company can turn its assets into cash to meet short-term debt.
Management Information System
a computerized database of financial information organized and programmed in such a way that it produces regular reports on operations for every level of management in a company and answers important operating and strategic questions.
Marketing Affiliate
is the process of earning a commission by promoting other company’s products and business. For example a sales commission by featuring links to outside e-commerce sites on marketing affiliated company’s website.
Marketing Research
the systematic design, collection, interpretation, and reporting of information to help marketers solve specific marketing problems or take advantage of marketing opportunities. Organisations that possess excellent marketing research skills have a definite strength in pursuing generic strategies.
Product and Service Planning
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.
Pricing (Five major stakeholders)
Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distribution, and competitors.
Profitability Ratios
measure management’s overall effectiveness by returns generated on sales and investment.
Research and Development (R&D)
department or function that is responsible for acquiring and applying new knowledge to create new products and processes, refine existing products and processes and ultimately decide whether or not new existing products and processes can create value.
Resource-Based View (RBV)
analyses and interpret internal resources of the organizations and emphasises resources and capabilities in formulating strategy to achieve sustainable competitive advantages. It states that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage.
By establishing and communicating clear objectives employees and managers can work together as a team and produce extraordinary results that could not have been achieved by any one individual. It results in powerful competitive advantages. The strategic-management process itself is aimed at creating this in an organisation.
Test Marketing
the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings.
Value Chain Analysis (VCA)
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.
Variable Cost (VC)
Any production cost that changes as the rate of output changes (e.g. energy supply and labor costs)