Strategy Audit

A P P E N D I X 1.A

Strategic Audit of a Corporation

IV. Internal Environment:

Strengths and Weaknesses (SWOT)

A. Corporate Structure

1. How is the corporation structured at present?

a. Is the decision-making authority centralized around one group or decentralized to

many units?

b. Is the corporation organized on the basis of functions, projects, geography, or some

combination of these?

2. Is the structure clearly understood by everyone in the corporation?

3. Is the present structure consistent with current corporate objectives, strategies, policies,

and programs, as well as with the firm’s international operations?

4. In what ways does this structure compare with those of similar corporations?

B. Corporate Culture

1. Is there a well-defined or emerging culture composed of shared beliefs, expectations,

and values?

2. Is the culture consistent with the current objectives, strategies, policies, and programs?

3. What is the culture’s position on environmental sustainability?

4. What is the culture’s position on other important issues facing the corporation (that

is, on productivity, quality of performance, adaptability to changing conditions, and

internationalization)?

5. Is the culture compatible with the employees’ diversity of backgrounds?

6. Does the company take into consideration the values of the culture of each nation in

which the firm operates?

C. Corporate Resources

1. Marketing

a. What are the corporation’s current marketing objectives, strategies, policies, and

programs?

i. Are they clearly stated or merely implied from performance and/or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies, and

policies and with internal and external environments?

b. How well is the corporation performing in terms of analysis of market position and

marketing mix (that is, product, price, place, and promotion) in both domestic and international

markets? How dependent is the corporation on a few customers? How big

is its market? Where is it gaining or losing market share? What percentage of sales

comes from developed versus developing regions? Where are current products in the

product life cycle?

i. What trends emerge from this analysis?

ii. What impact have these trends had on past performance and how might these

trends affect future performance?

iii. Does this analysis support the corporation’s past and pending strategic decisions?

iv. Does marketing provide the company with a competitive advantage?

c. How well does the corporation’s marketing performance compare with that of similar

corporations?

d. Are marketing managers using accepted marketing concepts and techniques to evaluate

and improve product performance? (Consider product life cycle, market segmentation,

market research, and product portfolios.)

e. Does marketing adjust to the conditions in each country in which it operates?

f. Does marketing consider environmental sustainability when making decisions?

g. What is the role of the marketing manager in the strategic management process?

2. Finance

a. What are the corporation’s current financial objectives, strategies, and policies and

programs?

i. Are they clearly stated or merely implied from performance and/or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies, and

policies and with internal and external environments?

b. How well is the corporation performing in terms of financial analysis? (Consider ratio

analysis, common size statements, and capitalization structure.) How balanced,

in terms of cash flow, is the company’s portfolio of products and businesses? What

are investor expectations in terms of share price?

i. What trends emerge from this analysis?

ii. Are there any significant differences when statements are calculated in constant

versus reported dollars?

iii. What impact have these trends had on past performance and how might these

trends affect future performance?

iv. Does this analysis support the corporation’s past and pending strategic decisions?

v. Does finance provide the company with a competitive advantage?

c. How well does the corporation’s financial performance compare with that of similar

corporations?

d. Are financial managers using accepted financial concepts and techniques to evaluate

and improve current corporate and divisional performance? (Consider financial

leverage, capital budgeting, ratio analysis, and managing foreign currencies.)

e. Does finance adjust to the conditions in each country in which the company operates?

f. Does finance cope with global financial issues?

g. What is the role of the financial manager in the strategic management process?

3. Research and Development (R&D)

a. What are the corporation’s currentR&Dobjectives, strategies, policies, and programs?

i. Are they clearly stated or merely implied from performance or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies and policies

and with internal and external environments?

iii. What is the role of technology in corporate performance?

iv. Is the mix of basic, applied, and engineering research appropriate given the corporate

mission and strategies?

v. Does R&D provide the company with a competitive advantage?

b. What return is the corporation receiving from its investment in R&D?

c. Is the corporation competent in technology transfer? Does it use concurrent engineering

and cross-functional work teams in product and process design?

d. What role does technological discontinuity play in the company’s products?

e. How well does the corporation’s investment in R&D compare with the investments

of similar corporations? How much R&D is being outsourced? Is the corporation using

value-chain alliances appropriately for innovation and competitive advantage?

f. Does R&D adjust to the conditions in each country in which the company operates?

g. Does R&D consider environmental sustainability in product development and

packaging?

h. What is the role of the R&D manager in the strategic management process?

4. Operations and Logistics

a. What are the corporation’s current manufacturing/service objectives, strategies,

policies, and programs?

i. Are they clearly stated or merely implied from performance or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies, and

policies and with internal and external environments?

b. What are the type and extent of operations capabilities of the corporation? How

much is done domestically versus internationally? Is the amount of outsourcing appropriate

to be competitive? Is purchasing being handled appropriately? Are suppliers

and distributors operating in an environmentally sustainable manner? Which

products have the highest and lowest profit margins?

i. If the corporation is product oriented, consider plant facilities, type of manufacturing

system (continuous mass production, intermittent job shop, or flexible

manufacturing), age and type of equipment, degree and role of automation

and/or robots, plant capacities and utilization, productivity ratings, and availability

and type of transportation.

ii. If the corporation is service oriented, consider service facilities (hospital, theater,

or school buildings), type of operations systems (continuous service over time to

same clientele or intermittent service over time to varied clientele), age and type

of supporting equipment, degree and role of automation and use of mass communication

devices (diagnostic machinery, video machines), facility capacities and

utilization rates, efficiency ratings of professional and service personnel, and

availability and type of transportation to bring service staff and clientele together.

c. Are manufacturing or service facilities vulnerable to natural disasters, local or national

strikes, reduction or limitation of resources from suppliers, substantial cost increases

of materials, or nationalization by governments?

d. Is there an appropriate mix of people and machines (in manufacturing firms) or of

support staff to professionals (in service firms)?

e. How well does the corporation perform relative to the competition? Is it balancing inventory

costs (warehousing) with logistical costs (just-in-time)? Consider costs per

unit of labor, material, and overhead; downtime; inventory control management and

scheduling of service staff; production ratings; facility utilization percentages; and

number of clients successfully treated by category (if service firm) or percentage of

orders shipped on time (if product firm).

i. What trends emerge from this analysis?

ii. What impact have these trends had on past performance and how might these

trends affect future performance?

iii. Does this analysis support the corporation’s past and pending strategic decisions?

iv. Does operations provide the company with a competitive advantage?

f. Are operations managers using appropriate concepts and techniques to evaluate and

improve current performance? Consider cost systems, quality control and reliability

systems, inventory control management, personnel scheduling, TQM, learning

curves, safety programs, and engineering programs that can improve efficiency of

manufacturing or of service.

g. Do operations adjust to the conditions in each country in which it has facilities?

h. Do operations consider environmental sustainability when making decisions?

i. What is the role of the operations manager in the strategic management process?

5. Human Resources Management (HRM)

a. What are the corporation’s current HRM objectives, strategies, policies, and programs?

i. Are they clearly stated or merely implied from performance and/or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies, and

policies and with internal and external environments?

b. How well is the corporation’s HRM performing in terms of improving the fit between

the individual employee and the job? Consider turnover, grievances, strikes,

layoffs, employee training, and quality of work life.

i. What trends emerge from this analysis?

ii. What impact have these trends had on past performance and how might these

trends affect future performance?

iii. Does this analysis support the corporation’s past and pending strategic decisions?

iv. Does HRM provide the company with a competitive advantage?

c. How does this corporation’s HRM performance compare with that of similar corporations?

d. Are HRM managers using appropriate concepts and techniques to evaluate and improve

corporate performance? Consider the job analysis program, performance appraisal

system, up-to-date job descriptions, training and development programs,

attitude surveys, job design programs, quality of relationships with unions, and use of

autonomous work teams.

e. How well is the company managing the diversity of its workforce? What is the

company’s record on human rights? Does the company monitor the human rights

record of key suppliers and distributors?

f. Does HRM adjust to the conditions in each country in which the company operates?

Does the company have a code of conduct for HRM for itself and key suppliers

in developing nations? Are employees receiving international assignments to

prepare them for managerial positions?

g. What is the role of outsourcing in HRM planning?

h. What is the role of the HRM manager in the strategic management process?

6. Information Technology (IT)

a. What are the corporation’s current IT objectives, strategies, policies, and programs?

i. Are they clearly stated or merely implied from performance and/or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies, and

policies and with internal and external environments?

b. How well is the corporation’s IT performing in terms of providing a useful database,

automating routine clerical operations, assisting managers in making routine decisions,

and providing information necessary for strategic decisions?

i. What trends emerge from this analysis?

ii. What impact have these trends had on past performance and how might these

trends affect future performance?

iii. Does this analysis support the corporation’s past and pending strategic decisions?

iv. Does IT provide the company with a competitive advantage?

c. How does this corporation’s IT performance and stage of development compare

with that of similar corporations? Is it appropriately using the Internet, intranet, and

extranets?

d. Are IT managers using appropriate concepts and techniques to evaluate and improve

corporate performance? Do they know how to build and manage a complex database,

establish Web sites with firewalls and virus protection, conduct system analyses,

and implement interactive decision-support systems?

e. Does the company have a global IT and Internet presence? Does it have difficulty

with getting data across national boundaries?

f. What is the role of the IT manager in the strategic management process?

D. Summary of Internal Factors

(IFAS Table: IFAS (Internal Factor Analysis Summary) table A table that organizes internal factors into strengths and weaknesses and how well management is responding to these specific factors. )

Which of these factors are core competencies? Which, if any, are distinctive competencies?

Which of these factors are the most important to the corporation and to the industries

in which it competes at the present time? Which might be important in the future?

Which functions or activities are candidates for outsourcing?