1. JahanUniversity
BachelorofBusinessAdministration
Departmentof BusinessAdministration
Subject: Strategic Management
Lecture# Fifth
Lecturer: Hijratullah Tahir
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2. Objectives of the lecture
After completion of this lecture students will be able to know:
1. Internal audit
2. Key forces
3. Internal Factors evaluation
4. Resource based theory
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3. Outline of the lecture
Topic 1: Internal Audit
Topic 2: Key internal Forces
Topic 3: Management, Marketing, Accounting, Operations etc.
Topic 4: Internal Factors Evaluations.
Topic 5: Resource Based View
Topic 6: Value chain Analysis
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4. Nature of Internal Audit
• All organizations have strengths and weaknesses in the functional
areas of business.
• No enterprise is equally strong or weak in all areas.
• Internal strengths and weaknesses, coupled with external
opportunities and threats and clear vision and mission statements,
provide the basis for establishing objectives and strategies.
• Capitalizing on internal strengths and overcoming weaknesses.
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5. Key Internal Forces
• Includes; marketing, finance, accounting, management, management
information systems, and production and operations;
• Subareas; such as customer service, warranties, advertising, Mkg, etc.
• However, strategic planning must include a detailed assessment of how
the firm is doing in all internal areas.
• A complete internal assessment; assist to formulate, implement, and
evaluate strategies to gain and sustain competitive advantages.
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6. The Process of Internal Audit
• Parallels the process of performing an external audit.
• Representative managers and employees need to participate in
determining a firm’s strengths and weaknesses.
• The internal audit requires gathering, assimilating, and prioritizing
information about the firm’s management, marketing, finance and
accounting, production and operations, R&D, and MIS operations to
reveal the firm’s most important strengths and most severe weaknesses.
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7. Resource Base View
• Internal resources are more important for a firm than external factors
in achieving and sustaining competitive advantage.
• Internal resources - Three categories:
1. Physical resources,
2. Human resources, and
3. Organizational resources
• A resource can be; Rare, hard to imitate, or not easily substitutable
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8. Management
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Management Functions Strategic Management stage
Planning Strategy Formulation
Organizing Strategy Implementation
Motivating Strategy Implementation
Staffing Strategy Implementation
Controlling Strategy Evaluation

9. Marketing
• Following are the major functions of marketing:
1. Customer analysis,
2. Selling products and services,
3. Product and service planning,
4. Pricing, Distribution,
5. Marketing research, and cost/benefit analysis.
• Strategists identify and evaluate marketing strengths and weaknesses
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10. Finance and Accounting
• Single-best measure of a firm’s competitive position and overall
attractiveness to investors.
• Determining an organization’s financial strengths and weaknesses is
essential to effectively formulating strategies.
• A firm’s liquidity, leverage, working capital, profitability, asset utilization,
cash flow, and equity can eliminate some strategies.
• Financial factors often alter existing strategies and implementation.
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11. Production and Operations
• Consists of all those activities that transform inputs into goods and services.
• Deals with inputs, transformations, and outputs that vary across industries
and markets.
• A manufacturing operation transforms or converts inputs such as raw
materials, labor, capital, machines, and facilities into finished goods and
services.
• The higher the capacity utilization, the better; otherwise, equipment may sit
idle.
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12. Research and Development
• Specific strengths and weaknesses as input into formulating
strategies is research and development.
• Many firms today conduct no R&D, and yet many other companies
depend on successful R&D activities for survival.
• Firms pursuing a product-development strategy especially need to
have a strong R&D orientation.
• “First mover” or a “late follower”
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13. Management Information System
• Information ties all business functions together and provides the
basis for all managerial decisions.
• It is the cornerstone of all organizations.
• Information represents a major source of competitive management
advantage or disadvantage.
• Assessing a firm’s internal strengths and weaknesses in information
systems is a critical dimension of performing an internal audit.
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14. Value Chain Analysis
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• Process - firm determines the costs associated with organizational
activities from;
• purchasing raw materials - manufacturing product(s) - marketing
those products.
• low-cost advantages or dis-advantages exist anywhere along the value
chain from raw material to customer service a activities.
• Enable a firm to identify its own S&W, as compared to rivals value.

15. The Internal Factor Evaluation Matrix
A summary step in conducting an internal strategic-management audit is to
construct an Internal Factor Evaluation (IFE) Matrix.
1. List key internal factors as identified in the internal-audit process.
2. Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important)
to each factor. The sum of all weights must equal 1.0.
3. Assign a 1 to 4 rating to each factor
4. Multiply each factor’s weight by its rating to determine a weighted score for
each variable.
5. Sum the weighted scores for each variable to determine the total weighted
score for the organization.
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16. Conclusion
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• Internal Audit
• Key internal Forces
• Management, Marketing, Accounting, Operations etc.
• Internal Factors Evaluations.
• Resource Based View
• Value chain Analysis

17. References
1. Strategic Management Concepts and Cases Sixteen Edition by
Fred R. David.
2. Fundamental of Business Management Process by Marlon
Dumas and Jan Mandelling.
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