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Group 4 advantage of distinctive competencies.

Strategies are designed in part to


Leader: Allen Bulan improve on a firm’s weaknesses, turning
them into strengths-and maybe even
Members: into distinctive competencies.
Irish Barcelon
Frances Arielle Ramirez THE PROCESS OF GAINING
COMPETITIVE ADVANTAGE IN A
Anna Kathleen Santiago FIRM
Ephraim Reyes Weakness Strengths Distinctive
Competencies Competitive
John Kenneth Samson
Advantage
This illustrates that all firms should
“THE INTERNAL ANALYSIS” continually strive to improve on their
weaknesses, turning them into
This topic focuses on identifying and strengths, and ultimately developing
evaluating a firm’s strengths and distinctive competencies that can
weaknesses in the functional areas of provide the firm with competitive
business, including management, advantages over rival firms.
marketing, finance/accounting,
production/operations, research and THE PROCESS OF PERFORMING
development, and management INTERNAL AUDIT
information systems. The process of performing an internal
audit parallels the process of performing
an external audit. The internal audit
THE NATURE OF AN INTERNAL requires gathering and assimilating
AUDIT information about the firm’s
Internal strengths/weaknesses, coupled management, marketing,
with external opportunities/threats and a finance/accounting,
clear statement of mission, provide the production/operations, research and
basis for establishing objectives and development (R&D), and management
strategies. Objectives and strategies are information systems.
established with the intention of Compared to external audit, the process
capitalizing upon internal strengths and of performing an internal audit provides
overcoming weaknesses. more opportunity for participants to
KEY INTERNAL FORCES understand how their jobs, departments,
and divisions fit into the whole
A firm’s strengths that cannot be easily organizations. This is great benefit
matched or imitated by competitors are because managers and employees
called distinctive competencies. Building perform better when they understand
competitive advantages involves taking
how their work affects other areas and resources that can be grouped into
activities of the firm. three encompassing categories:
For example, when marketing and  Physical resources – include all
manufacturing managers jointly discuss land and equipment, location,
issues related to internal strengths and technology, raw materials,
weaknesses, they gain a better machines.
appreciation of the issues, problems,  Human resources – includes all
concerns, and needs of all the functional employees, training, experience,
areas. Performing internal audit thus is intelligence, knowledge, skills,
an excellent vehicle or forum for abilities.
improving the process of communication  Organizational resources –
in the organization. Communication may includes firm structure, planning
be the most important word in processes, information systems,
management. patents, trademarks, copyrights,
databases, etc.

Financial Ratio Analysis exemplifies the RBV theory asserts that resources are
complexity of relationship among the actually what helps firm exploit
functional areas of business. A declining opportunities and neutralize threats.
return on investment or profit portion For a resource to be viable, it must be
ratio could be the result of ineffective either:
marketing, poor management policies,
research and development, or a weak  Rare
management information system. The  Hard to imitate
effectiveness of strategy formulation,  Not easily substitutable
implementation, and evaluation activities Often called imperical indicators, these
hinges upon clear understanding of how three characteristics of resources
major business functions affect one enable a firm to implement strategies
another. For strategies to succeed, the that improve its efficiency and
coordinated effort among all the effectiveness and lead to a sustainable
functional areas of business is needed. competitive advantage. The more a
resource is rare, non-imitable, and non-
substitutable, the stronger a firm’s
THE RESOURCE BASE VIEW (RBV) competitive advantage will be and the
The research base view (RBV) longer it will last.
approach to competitive advantage
contents the internal resources or more
important for a firm than external factors INTEGRATING STATEGIES AND
in achieving and sustaining competitive CULTURRE
advantage. Proponents of RBV view Organizational Culture can be defined
contend that organizational performance as “a pattern of behavior that has been
will primarily be determined by internal
developed by an organization as it  Metaphors – a shorthand of
learns to cope with its problem of words used to capture a vision or
external adaptation and internal to reinforce old or new values.
integration, and that has work well  Symbols – any object, act, event,
enough to be considered valid and to be quality or relation used to convey
thought to new members as the correct meaning.
way to perceive, think and feel.” This  heroes, and heroines –
definition emphasizes the importance of individuals greatly respected.
matching external with internal factors in
making strategic decisions. These products or dimensions are
levers that strategist can use to
Cultural Products include: influence and direct strategy
formulation, implementation and
 Values – life directing attitudes
evaluation activities. An organization’s
that serve as behavioral
culture compares on individual’s
guidelines.
personality in a sense that no two
 beliefs – an understanding of a
organizations have the same culture
particular phenomenon.
and no two individuals have the same
 Rites – planned sets of activities
personality.
that consolidate various forms of
cultural expressions in one event.
 Rituals – a standardized set of
FUNCTIONS OF MANAGEMENT
behaviors used to manage
societies. 1. Planning – consist of all those
 Ceremonies – several rites managerial activities related to
connected together. preparing for the future. Specific
 Myths – a narrative of imagined tasks include forecasting,
events, usually not supported by establishing objectives, revising
facts. strategies, developing policies,
 Stories – a narrative usually and setting goals. (Strategy
based on true events. Formulation)
 Legends – a handed down 2. Organizing – includes all those
narrative of some wonderful managerial activities that result in
event, usually not supported by a structure of task and authority
facts. relationships. Specific areas
 Sagas – a historical narrative include organizational design, job
describing the unique specialization, job description, job
accomplishment of a group and specification, span of control,
its leaders. unity of command, coordination,
 Language – the manner of which job design, and job analysis.
members of a group (Strategy Implementation).
communicate. 3. Motivating – involves effort
directed toward shaping human
behavior. Specific topics include
leadership, communication, work  Comparing actual
groups, behavior modification, performance to planned
delegation of authority, job performance standards.
enrichment, job satisfaction,  Taking corrective actions.
needs fulfillment, organizational
change, employee morale, and
managerial morale. (Strategy MANAGEMENT AUDIT CHECKLIST
Implementation). OF QUESTIONS
4. Staffing – staffing activities are
centered on personnel or human 1. Does the firm use strategic
resource management. Included management concepts?
are wage and salary 2. Are company objectives and
administration, employee goals measurable and well
benefits, interviewing, hiring, communicated?
firing, training, management 3. Do managers at all hierarchical
development, employee safety, levels plan effectively?
affirmative action, equal 4. Do managers delegate authority
employment opportunity, union well?
relations, career development, 5. Is the organization’s structure
personnel research, discipline appropriate?
policies, grievance procedures, 6. Are job descriptions and job
and public relations. (Strategies specifications clear?
Implementation). 7. Is employee morale high?
5. Controlling – refers to all those 8. Are employee turnover and
managerial activities directed absenteeism low?
toward ensuring that actual 9. Are organizational reward and
results are consistent with control mechanisms effective?
planned results. Key areas of
concern include, quality control,
financial control, sales control, MARKETING
inventory control, expense Marketing can be described as the
control, analysis of variances, process of defining, anticipating,
rewards, and sanctions. (Strategy creating, and fulfilling customer’s
Evaluation). needs and wants for products and
services. There are 7 basic functions
Controlling consist of four basic of marketing:
steps:
 Establishing performance 1. Customer Analysis- the
standards examination and evaluation of
 Measuring individual and consumer needs, desires, and
organization performance. wants—involves administering
customer surveys, analyzing
consumer information, evaluating
market positioning strategies, retail site locations, sales
developing customer profiles, and territories, inventory levels and
determining optimal market location, transportation carriers,
segmentation strategies. The wholesaling, and retailing. Most
information generated by producers today do not sell their
customer analysis can be goods directly to consumers.
essential in developing an Various marketing entities act as
effective mission statement. intermediaries; they bear a
2. Selling Products/Services - variety of names such as
successful strategy wholesalers, retailers, brokers,
implementation generally rests facilitators, agents, vendors—or
upon the ability of an organization simply distributors.
to sell some product or service. 6. Marketing research - is the
Selling includes many marketing systematic gathering, recording,
activities, such as advertising, and analyzing of data about
sales promotion, publicity, problems relating to the
personal selling, sales force marketing of goods and services.
management, customer relations, Marketing research can uncover
and dealer relations. critical strengths and
3. Product and service planning - weaknesses, and marketing
includes activities such as test researchers employ numerous
marketing; product and brand scales, instruments, procedures,
positioning; devising warranties; concepts, and techniques to
packaging; determining product gather information.
options, features, style, and 7. Cost/benefit analysis- which
quality; deleting old products; and involves assessing the costs,
providing for customer service. benefits, and risks associated
Product and service planning is with marketing decisions. Three
particularly important when a steps are required to perform a
company is pursuing product cost/benefit analysis:
development or diversification.  compute the total costs
4. Pricing - 5 major stakeholders associated with a decision,
affect pricing decisions:  estimate the total benefits
consumers, governments, from the decision, and
suppliers, distributors, and  compare the total costs
competitors. Sometimes an with the total benefits
organization will pursue a forward
integration strategy primarily to When expected benefits exceed total
gain better control over prices costs, an opportunity becomes more
charged to consumers. attractive.
5. Distribution - includes FINANCE/ ACCOUNTING
warehousing, distribution
channels, distribution coverage,
The functions of finance/accounting 1. Liquidity ratios measure a firm’sability
comprise three decisions: the to meet maturing short-term obligations.
investment decision, the financing
Current ratio
decision, and the dividend decision.
Quick (or acid-test) ratio
Financial ratio analysis is the most
widely used method for determining an 2. Leverage ratios measure the extent to
organization’s strengths and which a firm has been financed by debt.
weaknesses in the investment, Debt-to-total-assets ratio
financing, and dividend areas.
Debt-to-equity ratio
The investment decision, also called
capital budgeting, is the allocation and Long-term debt-to-equity ratio
reallocation of capital and resources to Times-interest-earned (or coverage)
projects, products, assets, and divisions ratio
of an organization. Once strategies are
formulated, capital budgeting decisions 3. Activity ratios measure how
are required to successfully implement effectively a firm is using its resources.
strategies. Inventory turnover
Fixed assets turnover

The financing decision determines the Total assets turnover


best capital structure for the firm and Accounts receivable turnover
includes examining various methods by
which the firm can raise capital. The Average collection period
financing decision must consider both 4. Profitability ratios measure
short-term and long-term needs for management’s overall effectiveness as
working capital. Two key financial ratios shown by the returns generated on
that indicate whether a firm’s financing sales and investment.
decisions have been effective are the
debt-to-equity ratio and the debt-to-total- Gross profit margin
assets ratio. Operating profit margin
Dividend decisions concern issues Net profit margin
such as the percentage of earnings paid
to stockholders, the stability of dividends Return on total assets (ROA)
paid over time, and the repurchase or
Return on stockholders’ equity (ROE)
issuance of stock. Three financial ratios
Earnings per share (EPS)
that are helpful in evaluating a firm’s
dividend decisions are the earnings-per- Price-earnings ratio
share ratio, the dividends-per-share
5. Growth ratios measure the firm’s
ratio, and the price-earnings ratio.
ability to maintain its economic position
Key financial ratios can be classified in the growth of the economy and
into the following five types: industry.
Sales
Net income The Basic Functions (Decisions)
Within Production/Operations
Earnings per share
1. Process- These decisions include
Dividends per share
choice of technology, facility layout,
process flow analysis, facility location,
line balancing, process control, and
The analysis should be conducted on transportation analysis. Distances from
three separate fronts: raw materials to production sites to
1. How has each ratio changed over customers are a major consideration.
time? This information provides a 2. Capacity- These decisions include
means of evaluating historical trends. It forecasting, facilities planning,
is important to note whether each ratio aggregate planning, scheduling,
has been historically increasing, capacity planning, and queuing analysis.
decreasing, or nearly constant. Capacity utilization is a major
2. How does each ratio compare to consideration.
industry norms? A firm’s inventory 3. Inventory- These decisions involve
turnover ratio may appear impressive at managing the level of raw materials,
first glance but may pale when work-in-process, and finished goods,
compared to industry standards or especially considering what to order,
norms. Industries can differ dramatically when to order, how much to order, and
on certain ratios. materials handling.
3. How does each ratio compare with 4. Workforce- These decisions involve
key competitors? Oftentimes managing the skilled, unskilled, clerical,
competition is more intense between and managerial employees by caring for
several competitors in a given industry job design, work measurement, job
or location than across all rival firms in enrichment, work standards, and
the industry. When this is true, financial motivation techniques.
ratio analysis should include comparison
to those key competitors. 5. Quality- These decisions are aimed
at ensuring that high-quality goods and
services are produced by caring for
PRODUCTION/ OPERATIONS quality control, sampling, testing, quality
assurance, and cost control.
The production/operations function of a
business consists of all those activities IMPLICATIONS OF VARIOUS
that transform inputs into goods and STRATEGIES ON
services. Production/operations PRODUCTION/OPERATIONS
management deals with inputs,
transformations, and outputs that vary
across industries and markets. 1. Low cost provider
2. A high quality provider stores, synthesizes, and presents
information in such a manner that it
3. Provide great customer service
answers important operating and
4. Be the first to introduce new products strategic questions. The heart of an
information system is a database
5. Become highly automated containing the kinds of records and data
6. Minimize layoffs important to managers.

RESEARCH AND DEVELOPMENT Value Chain Analysis (VCA)

The fifth major area of internal Value chain analysis (VCA) refers to the
operations that should be examined for process whereby a firm determines the
specific strengths and weaknesses is costs associated with organizational
research and development (R&D). activities from purchasing raw materials
to manufacturing product(s) to
Organizations invest in R&D because marketing those products. VCA aims to
they believe that such an investment will identify where low-cost advantages or
lead to a superior product or service and disadvantages exist anywhere along the
will give them competitive advantages. value chain from raw material to
Effective management of the R&D customer service activities. VCA can
function requires a strategic and enable a firm to better identify its own
operational partnership between R&D strengths and weaknesses, especially
and the other vital business functions. as compared to competitors’ value chain
analyses and their own data examined
R&D in organizations can take two basic over time.
forms: (1) internal R&D, in which an
organization operates its own R&D Substantial judgment may be required in
department, and/or (2) contract R&D, in performing a VCA because different
which a firm hires independent items along the value chain may impact
researchers or independent agencies to other items positively or negatively, so
develop specific products. there exist complex interrelationships.
For example, exceptional customer
service may be especially expensive yet
Management Information Systems may reduce the costs of returns and
increase revenues. Cost and price
Information represents a major source differences among rival firms can have
of competitive management advantage their origins in activities performed by
or disadvantage. suppliers, distributors, creditors, or even
A management information system’s shareholders. Despite the complexity of
purpose is to improve the performance VCA, the initial step in implementing this
of an enterprise by improving the quality procedure is to divide a firm’s operations
of managerial decisions. An effective into specific activities or business
information system thus collects, codes, processes.
Benchmarking Task Analysis
Benchmarking is an analytical tool used
to determine whether a firm’s value
chain activities are competitive 1. For a group composed of 6-7
compared to rivals and thus conducive members
to winning in the marketplace. 2. Choose a certain a company in a
Benchmarking entails measuring costs certain industry and assume that you
of value chain activities across an are part of the management team.
industry to determine “best practices”
among competing firms for the purpose 3. Determine the cost associated with
of duplicating or improving upon those organizational activities of that entity
best practices. using Value Chain Analysis (VCA), and
explain how the VCA works for that
company
4. Kindly use 1/4 illustration board for
your answers.

Deepening

1. Form a group composed of 6-7


members.
2. Choose a company and assume that
you are the manager in that entity.
3. Explain how would you apply these
basic management functions to that
company.
4. Kindly use yellow paper for your
answers

Synthesis

What are the basic management


functions? Among these functions,
which function should the company give
the most importance? Explain.