Strategic Management - Review and Discussion - Ch 3-4

1. Describe the “process of performing an external audit” in an organization doing strategic planning for the first time. To perform an external audit, the company should get as many managers and employees involved as possible. This fosters understanding and commitment throughout the organization. In general, the process is conducted in three steps: 1. Gathering of competitive intelligence and information concerning:     

Economic forces Social, cultural, demographic, and natural environment forces Political, governmental, and legal forces Technological forces Competitive forces

2. Assimilating and evaluating intelligence/information for opportunities and threats. Managers should meet to rank and prioritize these factors with the following guidelines:    

Importance to achieving long-term and annual objectives Measurable Applicable to competing firms Hierarchical within the organization

3. Distributing and communicating the final list of the most important external factors throughout the organization. 4. Do you feel the advantages of a low value of the dollar offset the disadvantages for (1) a firm that derives 60 percent of its revenues from foreign countries and (2) a firm that derives 10 percent of its revenues from foreign countries? Justify your opinion. A low valued dollar can cause a significant increase in exports to foreign countries. Imports slow down and prices of foreign competitors go up, creating a more ideal competitive environment for the U.S. company. A company with 60 percent of its revenues coming from foreign countries would be able to offset the slowdown in demand/revenues at home in the U.S. and spread its risk across more than one economy/market. A company with only 10 percent would be much more affected by the U.S. economy and exposed to greater risk.

6. If you and a partner were going to visit a foreign country where you have never been before, how much planning would you do ahead of time? What benefit would you expect that planning to provide? I would do extensive planning: all logistics, research on history and points of interest, contacts of mutual friends living in the country, etc. I would have an itinerary of every day mapped out, down to times for lunch and dinner. We travel a lot and I do this for every trip. The planning gives me confidence that I’ll maximize my travel and experience every possible thing I can and want to. It also gives me a sense of security, knowing what to expect and where to go if an emergency or issue pops up. Finally, it helps me set a budget and know generally how much to plan for and set aside for the trip – knowing what each attraction or special point of interest costs before I get there helps me decide what’s important and triage what’s not. This way, I keep within budget and don’t stress about a huge Amex bill when I return home. So, the biggest benefits are stress free travel with no huge surprises on the back end! 9.

List the three ways that financial ratios should be compared/utilized? Which of the three comparisons do you feel is most important? Why? 1. Historical trends - over time 2. Against industry averages 3. Against key competitors Comparing financial ratios against those of key competitors would be the most important to me. This would help me identify their strengths and weaknesses and create a strategy for where I will improve my own ratios and leverage and exploit theirs to my advantage.

26. Why do you think production/operations managers often are not directly involved in strategy-formulation activities? Why can this be a major organizational weakness? Perhaps they are left out because production/operations are considered by organizations to be more execution, transaction, and implementation functions. Organizations see them as carrying out the strategy and really having no need to be involved in actually forming it. This can be a major weakness in an organization. Production/operations activities represent the greatest share of an organization’s assets: materials and inventory, facilities and plants, equipment and machinery, and often a large workforce. Without production/operations managers’ input into strategy

formulation, the organization runs the risk of implementing strategies that aren’t cost effective and counter-productive. 41. Define and explain value chain analysis (VCA). VCA is the process used to determine the costs associated with an organization’s activities from purchasing raw materials to manufacturing products to marketing those products. The process is designed to identify areas of low-cost advantage or disadvantage anywhere along the chain, and enables an organization to identify its own strengths and weaknesses, especially compared to competitors’ VCA.