Transcript pps
Chapter Six
Internal Analysis
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Chapter 6 - Internal Analysis PPT 6-1
Financial Performance – Sales and Profitability
• Sales and Market Share • Profitability • Measuring Performance: Shareholder Value Analysis Chapter 6 - Internal Analysis PPT 6-2
Shareholder Value Analysis
• • Cost of equity —weighted average of cost of capital and cost of debt – e.g. Capital $1 billion (12%); Debt $3 billion (4%) then the cost of capital is 6% Each business aims at ROA to exceed cost of equity so shareholder can improve stock investment Chapter 6 - Internal Analysis PPT 6-3
Shareholder Value Risks
• • • • ROA estimate requires knowing the cash flow of any investment and the assets employed —could encourage short term results Reducing assets employed by outsourcing could result in loss of control of business Reducing investment could affect offering Increasing debt to reduce cost of equity could be risky Chapter 6 - Internal Analysis PPT 6-4
Performance Measures Reflecting Long-Term Profitability Customer Satisfaction/ Brand Loyalty Product/Service Quality Brand/Firm Associations Relative Cost New Product Activity Manager/Employee Capability and Performance Current Performance Long Term Profits
Chapter 6 - Internal Analysis PPT 6-5
Figure 6.1
Relative Cost vs. Relative Performance - Strategic Implications More Expensive
• •
Change Design Manufacturing/Systems Ignore Inferior Our Component is
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Value Analysis Raise prices Promote Cost Reduction Superior
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Value Analysis De-emphasize Upgrade
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Value Analysis Emphasize/promote Leave it alone Less Expensive
Chapter 6 - Internal Analysis
Figure 6.2
PPT 6-6
Strengths and Weaknesses
• • Strategies leverage strengths and neutralize weaknesses Point of advantage vs. points of parity vs. liability Chapter 6 - Internal Analysis PPT 6-7
Threats & Opportunities
• • Key output of external analysis Evaluate as to – – Immediacy Impact Chapter 6 - Internal Analysis PPT 6-8
Structuring Strategic Decisions
Organizational Strengths and Weaknesses Competitor Strengths and Weaknesses Strategy Decisions
• • • •
Strategic Investment Value Proposition Assets and Competencies Functional Strategies and Programs
Chapter 6 - Internal Analysis
Market Needs, Attractiveness, and Key Success Factors Figure 6.3
PPT 6-9
Key Learnings
• Sales and profitability analysis provide an evaluation of past strategies and an indication of the current market viability of a product line.
• Shareholder value holds that the flow of profits emanating from an investment should exceed the cost of capital (which is the weighted average of the cost of equity and cost of debt). Routes to achieving shareholder value – such as downsizing, reducing assets employed, and outsourcing – can be risky when they undercut assets and competencies.
• Performance assessment should go beyond financials to include such dimensions as customer satisfaction/brand loyalty, product/service quality, brand/firms associations, relative cost, new product activity, and manager/employee capability and performance.
• Assets and competences can represent a point of advantage, a point of parity, or a liability. Threats and opportunities that are both imminent and important should trigger strategic imperatives, programs with high priority.
Chapter 6 - Internal Analysis PPT 6-10
Chapter 6 - Internal Analysis
Ancillary Slides
PPT 6-12
“We have met the enemy and he is us.”
- Pogo
Chapter 6 - Internal Analysis PPT 6-13
“Self-conceit may lead to self-destruction.”
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Aesop, “The Frog and the Ox”
Chapter 6 - Internal Analysis PPT 6-14
“The fish is the last to know if it swims in water.”
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Chinese proverb
Chapter 6 - Internal Analysis PPT 6-15
“The successful man is the one who finds out what is the matter with his business before his competitors do.”
- Roy L. Smith
Chapter 6 - Internal Analysis PPT 6-16
Six Rules for Success 1. Face reality as it is, not as it was or as you wish it were.
2. Be candid with everyone.
3.
Don’t manage, lead.
4. Change before you have to.
5.
If you don’t have a competitive advantage, don’t compete.
6. Control your own destiny, or someone else will.
- Jack Welch former Chairman, General Electric
Chapter 6 - Internal Analysis PPT 6-17
“It’s not companies that fail, it’s their leaders who fail.”
- Warren Bennis
Chapter 6 - Internal Analysis PPT 6-18