Chapter 4

Prepared By:
Caguioa, Rhoeby May
Castres, Maria Theresa
Paragas, Jojo
Internal strengths/weaknesses
External opportunities/threats

Clear statement of mission

 Perform
External
Audit

Impleme
Develop Generate, nt
Implement
Establish Strategie Measure
Vision and Evaluate Strategies-
Long- s- and
Mission and Select Manageme
Term Marketin Evaluate
Statements Strategies nt Issues
Objective g, Performanc
s Finance, e
Perform Accountin
Internal g, R&D,
Audit and MIS
Issues

Strategy Strategy Strategy

Formulation Implementation Evaluation
 Resource-based View seeks a better
understanding of the relationship between sources
and sustained competitive advantage in strategic
management.
RBV approach to competitive advantage
contends that internal resources are more
important for a firm than external forces in
achieving and sustaining competitive advantage.
RBV theory asserts that resources are actually
what helps a firm exploit opportunities and
neutralize threats.
Three Categories of Internal
Resources
PhysicalResources
Human Resources
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
Characteristics of Resources
• Rare-these are resources that other
competing firms do not posses
• Hard to imitate-a sustainable advantage may
be achieved only if other firms cannot easily
obtain these resources.
• Substitutability-even if a competing firm
cannot perfectly imitate a firm’s resource, it
can still obtain a sustainable competitive
advantage of its own by obtaining resource
substitutes.
Cultural Products include values, beliefs,
rites, rituals, ceremonies, myths, stories,
legends, sagas, language, metaphors,
symbols, and heroes. These products or
dimension are levers that strategists can
use to influence and direct strategy
formulation, implementation and
evaluation activities.
 Planning
 Organizing

 Motivating

 Staffing

 Controlling
 Financial Ratio Analysis exemplifies the
complexity of relationships among the functional
areas of business. 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. The
effectiveness of strategy formulation,
implementation and evaluation hinges upon a
clear understanding of how major business
function affect one another. For strategies to
succeed, a coordinated effort among all the
functional areas of business is needed.
1. Liquidity Ratios – measure a firm’s ability
to meet maturing short-term obligations
2. Leverage Ratios – measure the extent to
which a firm has been financed by debt
3. Activity Ratios – measure how effectively
a firm is using its resources
4. Profitability Ratios – measure
management’s overall effectiveness as
shown by the returns generated on sales
and investment
1. Dun & Bradstreet’s Industry Norms and
Key Business Ratios
2. Robert Morris Associates’ Annual
Statement Studies
3. Almanac of Business & Industrial.
4. U.S. Federal Trade Commission Reports
1. Management, marketing, management
production/operations, research and
development, and management
information systems decisions;
2. Actions by competitors, suppliers,
distributors, creditors, customers and
shareholders
3. Economic, social, cultural, demographic,
environmental, political, governmental,
legal and technological trends
The production operations functions of a
business consists of all those activities
that transform inputs into goods and
services. Production/operations
management deals with inputs,
transformations and outputs that vary
across industries and markets
 Function Description

1. Process Process decisions concern the design of the

physical production system.

2. Capacity Capacity decisions concern determination of

optimal output levels for the organization-not
too much and not too little.

3. Inventory Inventory decisions involve managing the

level of raw materials, work-in-process and
finished goods.
Function Description

4. Workforce Workforce decisions are concerned with

managing the skilled, unskilled, clerical and
managerial employees.

5. Quality Quality decisions are aimed at ensuring that

high-quality goods and services are
produced.
Effective management of R&D function
requires a strategic and operational
partnership between R&D and other vital
business function.
R&D decisions and plans must be
integrated and coordinated across
departments and divisions by having the
departments share experiences and
information.
FOUR APPROACHES TO DETERMINE R&D
BUDGET ALLOCATIONS:
1. Financing as many project proposals as
possible
2. Using a percentage-of-sales method
3. Budgeting about the same amount that
competitors spend for R&D
4. Deciding how many successful new
products are needed and working
backward to estimate the required R&D
investment
 Two forms of R&D:
1. Internal R&D- an organization operates
its own R&D departments
2. External R&D- a firm hires independent
researchers or independent agencies to
develop new products
MIS Purpose:
To improve the performance of an enterprise by
improving the quality of managerial decisions.
Collects, codes, stores, synthesizes and presents
information in such a manner that it answers
important operating and strategic questions
Gathers data about marketing, finance, production and
personnel matters internally and social, cultural,
demographic, environmental, economic, political,,
governmental, legal, technological and competitive
factors externally
CheckMATE is an expert system that
carries a firm through strategy
formulation and implementation.
The navigation in CheckMATE Strategic
Planning Software is designed to allow
the user full control of all aspects of the
Strategic Plan. It allows the user to
navigate between forms with ease.
Value Chain Analysis is the process
whereby a firm determines the costs
associated with organizational activities
from purchasing raw materials to
manufacturing product(s) to marketing
those products.
 Translating Company Performance of Value
Chain Activities into Competitive
Advantage Company
Company
proficiency
Competenci proficiency
in Company
Compan es and in
performing gains a
y capabilities performing
a core basis for
perform gradually one or two
competenc sustainabl
s emerge in value chain
e continues e
activitie certain activities
to build and competiti
s in its competitivel rises to the
evolves ve
value y important level of a
into a advantag
chain. value chain core
distinctive e.
activities. competenc
competenc
e.
e.
Benchmarking is an analytical tool
used to determine whether a firm’s value
chain activities are competitive compared
to rivals and thus conducive to winning in
the marketplace.
Sources of Benchmarking Information
•Published reports •Creditors

•Trade publications •Shareholders

•Suppliers •Lobbyists

•Distributors •Willing rival firms

•Customers •Partners