PYQ-SM-CHAPTER 4

CHAPTER 4: THE INTERNAL ASSESSMENT
PREPARED BY: WIRDA BINTI OSMAN (2010356463) –BMB5Bc

APRIL 2006 – PART B (QUESTION 2)
Define organizational culture and state two importances. (5M)

Organizational culture can be defined as a pattern of behavior that has been developed by an organization as it learns to cope with its problem of external adaptation 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.

Two importances:
1. Organizational culture captures the subtle, elusive and largely unconscious forces that shape a workplace. Remarkably, resistance to change.
2. May represent strength and weaknesses for the firm. It can be underlying reasons for strength and weaknesses  in any of the major business functions


OCT 2006 – PART B (QUESTION 4)
  Writes a short note of the following:
 Value Chain Analysis       (5M)
 Benchmarking        (5 M)


Value Chain Analysis      
• The process whereby a firm determines the costs associated with ;
(a) Purchasing raw materials
(b) Manufacturing products
(c) Marketing products
• And compares them to the value chain of rival firms.
• Aims to identify where low cost advantages or disadvantages exist anywhere along the value chain from raw material to customer service activities
• Enable a firm to better identify its own strengths and weaknesses, especially as compared to competitors’ value chain analyses and their own data examined over time.
• Value chain differs immensely across industries and firms.
• A core competence is a value chain activity that a firm perform especially well
• When a core competence evolves into a major competitive advantage, then it is called distinctive competence.

Benchmarking
• Benchmarking is an analytical tool used to determine whether a firm’s value chain activities are competitive compared to rivals and thus conductive to winning in the market place.
• Entails measuring costs of value chain activities across an industry to determine “best practices” among competing firms for the purpose of duplicating or improving upon those best practices.
• Enable a firm to take action to improve its competitiveness by identifying and improving upon value chain activities where rival firms have comparative advantages in cost, service, reputation or operation.
• The hardest part of benchmarking can be gaining access to other firm’s value chain activities with associated costs.
• Typically sources of benchmarking information however include published reports, trade publications, suppliers, distributors, customers, partners, creditors, shareholders, lobbyists and willing rival firms.
• Some rival firms share benchmarking data.


OCT 2009 – PART B (QUESTION 4)
Explain the process of performing external and internal audit   (20M)


External Audit
- The process of performing an external audit must involve as many managers and employees as possible.
- Involvement in the strategic management process can lead to understanding and commitment from organizational members.
- Individuals appreciate having the opportunity to contribute ideas and to gain a better understanding of their firms industry, competitors and markets.

1. Gather competitive intelligence
- To perform external audit, a company first must gather competitive intelligence and information about economic, social, cultural, demographic, environmental, political, governmental, legal and technological trends.
- Individuals can be asked to monitor various sources of information, such as key magazines, trade journals and news papers.
- These persons can submit periodic scanning reports to a committee of managers charged with performing the external audit.
- This approach provides a continuous stream of timely strategic information and involves many individuals in the external-audit process.
- The internet provides another source for gathering strategic information, as do corporate, university and public libraries.
- Suppliers, distributors, salespersons, customers and competitors represent other sources of vital information.

2. Assimilate information
- Once information is gathered, it should be assimilated and evaluated.
- A meeting or series of meetings of managers is needed to collectively identify the most important opportunities and threats facing the firm.
- These key external factors should be listed on flip carts or a chalk-board.
- A prioritized list of these factors could be obtained by requesting that all managers rank the factors identified, from 1 for the most important opportunities/threat to 20 for the least important opportunity and threat.
- These key external factors can vary over time and by industry.

3. Evaluate
- Relationships with suppliers or distributors are often a critical success factor.
- Other variables commonly used include market share, breadth of competing products, world economies, foreign affiliates, proprietary and key account advantages, price competitiveness, technological advancements, population shifts, interest rates and pollution abatement.
- Freund emphasized that these key external factors should be
(1) Important to achieving long term and annual objectives
(2) Measurable
(3) Applicable to all competing firms
(4) Hierarchical in the sense that some will pertain to the overall company and others will be more narrowly focused on functional or divisional areas..
- A final list of the most important key external factors should be communicated and distributed widely in the organization.
- Both opportunities and threats can be key external factors.

Internal Audit
- The process of performing an internal audit closely parallels the process of performing an external audit.
- Representative managers and employees from throughout the firm need to be involved in determining a firms strength and weaknesses
- The internal audit requires gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operations, research and development (R&D) and management information system operations.
- Compared to external audit, the process of performing an internal audit provides more opportunity for participants to understand how their jobs, departments and divisions fit into the whole organization.
- This is great benefit because managers and employees perform better when they understand how their work affects others areas and activities of the firm.
- For example; when marketing and manufacturing managers jointly discuss issues related to internal strength and weaknesses, they gain a better appreciation of the issues, problems, concerns and needs of all the functional areas.
- In organization that do not use strategic management, marketing, finance, and manufacturing managers often do not interact with each other in significant ways.
- Performing an internal audit thus is an excellent vehicle or forum for improving the process of communication in the organization.
- Communication may be the most important word in management.

1. Gathering
2. Assimilating
3. Evaluating

- Performing an internal audit requires gathering, assimilating and evaluating information about the firms operations.
- “Managers and employees from all areas provide information”
- Critical success factors consisting of both strength and weaknesses
- “The development of conclusions; a team manager then selects 10 to 15 key organizational strength and weaknesses to focus on.”
- Strategic management is a highly interactive process that requires effective coordination among management, marketing, finance/accounting, production/operations, R&D, and management information systems managers.
- Although the strategic management process is overseen by strategist, success requires that managers and employees from all functional areas work together to provide ideas and information
- Financial managers for example may need to restrict the number of feasible options available to operations managers or R&D managers may develop products for which marketing managers need to set higher objectives.
- A key to organizational success is effective coordination and understanding among managers from all functional business areas.
- Through involvement in performing an internal strategic management audit, managers from different departments and division of the firm come to understand the nature and effect of decisions in other functional business areas in their firm
- Knowledge of these relationships is critical for effectively establishing objectives and strategies.
- A failure to recognize and understand relationships among the functional areas of business can be detrimental to strategic management and the number of those relationships that must be managed increases dramatically with a firm’s size, diversity, geographic dispersion and the number of products or services offered.
- Governmental and nonprofit enterprises traditionally have not placed sufficient emphasis on relationship among the business functions.
- Some firms place too great an emphasis on one function at the expense of others.
- Ansoff explain;
- During the fifty years, successful firms focused their energies on optimizing the performance of one of the principal functions: productions/operations, R&D, o marketing. Today due to the growing complexity and dynamism of the environment, success increasingly depends on a judicious combination of several functional influences. This transition from a single function focus to a multifunction focus is essential for successful strategic management.
- Financial ratio analysis;
- Exemplifies the complexity of relationships among the functional areas of business
- A declining ROI or profit margin ratio could be the result of ineffective marketing, poor management policies, R&D errors or weak MIS.
- The effectiveness of strategy formulation, implementation and evaluation activities hinges upon a clear understanding of how major business functions affect one another
- For strategies to success, a coordinated effort among all the functional areas of business is needed.



JAN 2012 – PART B (QUESTION 3)
Explain the characteristics of RBV and distinguish RBV from I/O View  (12M)


Industrial Organizational View (IOV)
• Approach to competitive advantage advocates that external industry factors are more important than internal factors in a firm achieving competitive advantage.
• Organizational performance will be primarily determined by industry forces.
• Porter’s Five Forces Model is an example of the I/O perspectives which focuses on analyzing external forces and industries variables as a basis for getting and keeping competitive advantage.
• According to I/O advocates, competitive advantage is determined largely by competitive positioning within an industry.
• Managing strategically from the I/O perspective entails firms striving to compete in attractive industries, avoiding weak or faltering industries and gaining a full understanding of key external factor relationship within that attractive industry.
• I/O research provides important contributions to our understanding of how to gain competitive advantage.
• I/O theorists contend that external factors in general and the industry in which a firm choose to compete has a stronger influence on the firm performance than do the internal functional decision managers make in marketing, finance and the like.
• Firm performance, they contend, is primarily based more on industry properties such as economies of scale, barriers to market entry, product differentiation, the economy and level of competitiveness than on internal resources, capabilities, structure and operations.
• The global economic recession’s impact on both strong and weak firms has added credence of late to the notion that external forces are more important than internal.
• The I/O view has enhanced our understanding of strategic management.
• However, it is not a question of whether external or internal factors are more important in gaining and maintaining competitive advantage.
• Effective integration and understanding of both external and internal factors is the key to securing and keeping a competitive advantage.


Resource-Based View (RBV)
• An approach to competitive advantage contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage.
• In contrast to I/O theory, proponents of the RBV view contend that organizational performance will primarily be determined by internal resources that can be grouped into three all encompassing categories: physical resources, human resources, and organizational resources.
• Physical resources include all plant and equipment, location, technology, raw materials, machines.
• Human resources include all employees, training, experience, intelligence, knowledge, skills abilities.
• Organizational resources include firm structure, planning processes, information systems, patents, trademarks, copyrights, databases.
• RBV theory asserts that resources are actually helps a firm exploit opportunities and neutralize threats.
• The basic premise of the RBV is that the mix, type, amount and nature of firm’s internal resources should be considered first and foremost in devising strategies that can lead to sustainable competitive advantage.
• Managing strategically according to the RBV involves developing and exploiting a firm’s unique resources and capabilities and continually maintaining and strengthening those resources.
• The theory asserts that it is advantageous for a firm to pursue a strategy that is not currently being implemented by any competing firm.
• According to RBV theorists, when other firms are unable to duplicate a particular strategy, then the focal firm has a sustainable competitive advantage.
• For resources to be valuable, it must be either rare, hard to imitate or not easily substitutable.
• Often called “empirical indicator”, these 3 characteristics of resources enable a firm to implement strategies that improve its efficiency and effectiveness and leads to sustainable competitive advantage.
• The more a resource is rare, non-imitable and non-substitutable, the stronger a firm’s competitive advantage will be and the longer it will last.
• Rare resources  are resources that other competing firms do not possess
• If many firms have the same resources, then those firms will likely implement similar strategies, thus giving no one firm a sustainable competitive advantage.
• This is not to say that resources that are common are not valuable; they do indeed aid the firm in its chance for economic prosperity.
• However, to sustain a competitive advantage, it is more advantages if the resources are rare.
• It is also important that these same resources be difficult to imitate.
• RBV theorists say, if firms cannot easily gain the resources, then those resources will lead to a competitive advantage more so than resources easily imitate.
• Even if a firm employs resources that are rare, a sustainable competitive advantage may be achieved only if other firms cannot easily obtain these resources.
• The third empirical indicator that can make resources a source of competitive advantage is substitutability.
• Borrowing from Porter’s Five Forces Model, to the degree that there are no substitutes, a firm will be able to sustain its competitive advantage.
• However, even if competing firm cannot perfectly imitate a firm’s resource, it can still obtain a sustainable competitive advantage of it’s by obtaining resources substitutes.
• The RBV has continued to grow in popularity and continues to seek a better understanding of the relationship between resources and sustained competitive advantage in strategic management.



JAN 2012 – PART B (QUESTION 2)
Discuss organizational culture and elaborate some importance and impact of culture in Strategy Implementation.       (20M)

• Relationship among a firm’s functional business activities perhaps can be exemplified best by focusing on organizational culture, an internal phenomenon that permeates all departments and divisions of an organization.
• Organizational culture can be defined as a pattern of behavior that has been developed by an organization as it learns to cope with its problem of external adaptation 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.
• The  importance of matching external with internal factors in making strategic decisions:
1. Organizational culture captures the subtle, elusive and largely unconscious forces that shape a workplace. Remarkably, resistance to change.
2. May represent strength and weaknesses for the firm. It can be underlying reasons for strength and weaknesses  in any of the major business functions
• Cultural products include values, beliefs, rites, rituals, ceremonies, myths, stories, legends, sagas, language, metaphors, symbols, heroes and heroines.
• These products or dimensions are levers that strategists can use to influence and direct strategy formulation, implementation and evaluation activities.
• An organization’s culture compares to an individual’s personality in the sense that no two organization have the same culture and no two individuals have the same personality. Both culture and personality are enduring and can be warm, aggressive, friendly, open, innovative, conservative, liberal, harsh or likable.
• Example of cultural products defined;
(a) Rites – planned sets of activities that consolidate various forms of cultural expressions into one event
(b) Ceremonial – several rites connected together
(c) Folktale – a fictional story
(d) Heroes/heroines – individuals greatly respected
• Dimension of organization culture permeate all the functional areas of business.
• It is something of an art to uncover the basic values and beliefs that are deeply buried in an organization’s rich collection of stories, language, heroes and rituals but cultural products can represent both important strengths and weaknesses.
• Cultural is an aspect of an organization that can no longer be taken for granted in performing an internal strategic management audit because culture and strategy must work together.
• Example (possible) aspects of an organization culture- dimension
(a) Strong work ethic; arrive early and leave late
(b) Be health conscious; have a wellness program
(c) Have numerous meeting
(d) Formal dress; shirt and tie expected
• The strategic management process takes place largely within a particular organization’s culture. Executives in successful companies are emotionally committed to the firms culture, but the culture can inhibit strategic management in two basic ways;
1. First, managers frequently miss the significance of changing external conditions because they are blinded by strongly held beliefs.
2. Second, when a particular culture has been effective in the past, the natural response is to stick with it in the future, even during times of major strategic change.
• An organization culture must support the collective commitment of its people to a common purpose.
• It must foster competence and enthusiasm among managers and employees
• Organizational culture significantly affects business decisions and thus must be evaluated during an internal strategic management audit.
• If strategies can capitalize on cultural strengths, such as strong work ethic or highly ethical beliefs, then management often can swiftly and easily implement changes.
• However, if the firm’s culture is not supportive, strategic changes may be ineffective or even counterproductive.
• A firm’s culture can become antagonistic to new strategies, with the result being confusion and disorientation.
• Internal strength and weaknesses associated with a firm’s culture sometimes are overlooked because of the interfunctional nature of this phenomenon.
• It is important, therefore, for strategists to understand their firm as a sociocultural system
• Success is often determined by linkages between firm’s culture and strategies.
• The challenges of strategic management today are to bring about the changes in organizational culture and individual mind-sets that are needed to support formulation, implementation and evaluation of strategies.



JAN 2012 – PART B (QUESTION 6)
Discuss four ways in which management information system can benefit a company  (10M)

Management Information System
• A management information system (MIS) provides information that is needed to manage organizations efficiently and effectively.
• Management information systems involve three primary resources: people, technology, and information or decision making.
• Management information systems are distinct from other information systems in that they are used to analyze operational activities in the organization.
• Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g. decision support systems, expert systems, and executive information systems.
• Information ties all business functions together and provides the basis for all managerial decisions
• It is the cornerstone of all organization
• Information represents a major source of competitive management advantage or disadvantage.
• Assessing firm’s internal strengths and weaknesses in information systems is a critical dimension of performing an internal audit.
• The purpose of MIS is to improve the performance of an enterprise by improving the quality of managerial decisions.
• The following are some of the benefits that can be attained for different types of management information systems.
1. Companies are able to highlight their strengths and weaknesses due to the presence of revenue reports, employees' performance record etc. The identification of these aspects can help the company improve their business processes and operations.
2. Giving an overall picture of the company and acting as a communication and planning tool.
3. The availability of the customer data and feedback can help the company to align their business processes according to the needs of the customers. The effective management of customer data can help the company to perform direct marketing and promotion activities.
4. Information is considered to be an important asset for any company in the modern competitive world. The consumer buying trends and behaviors can be predicted by the analysis of sales and revenue reports from each operating region of the company.
5. Reducing the level of redundancy equates to cost-savings. When redundancy is reduced and/or eliminated, this saves on man hours worked and frees up employees to take on other tasks. In addition, processes can be streamlined through information systems which further reduce redundancy.

6. Efficiency is another tangible benefit of assimilating information systems. When computers can take over some of the tedious, detailed and mundane tasks, this makes processes move more quickly with a higher degree of accuracy. While it's true employees still play an importance role in ensuring data is entered correctly, once entered in the program, the management information system can effectively increase efficiency and data integrity.
7. With proper planning a company can maximize profit while decreasing overhead costs. Implementing a new system typically comes with a large price tag, but if business requirements and processes are properly and accurately identified, the payoffs can be big
8. Investing in management information systems keeps a business competitive and helps an organization carry the ability to maintain visible status in the global economy. Without MIS, a business will more than likely fall rapidly behind



OCT 2007 – PART B (QUESTION 2)
Discuss the guidelines that a firm can use to determine whether it is conduct internally or externally         (12 M)