Strategic Audit Questions
Strategic Audit Questions
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Strategic Audit Questions
A strategy can be a plan or methods taken by an organization to bring about desired future. These can be methods taken towards achievement of goal or solutions to a problem. Strategy as an art and science involves planning and marshaling resources towards their most effective and efficient use. Organizations usually have limited resources towards achieving of their goals. Strategic management helps in setting of business goals and determining the necessary actions required to achieve these goals. A strategy taken will also define the mobilization of resources to execute these goals. A strategy will set priorities, strengthen operations, focus energy on resources, give guidelines and policies to the employees and stakeholders to work towards the common goals of an organization. All strategies aim at generating successful outcome in an organization and they should and are always in line with missions and visions of organizations.
Strategies aim at obtaining an advantage over adversaries and exploitation of emerging possibilities. For a business to grow and increase its share of the competitive market, marketing plan starts with overall strategic plan of a company. A good strategy will also help in strengthening the financial resources of an organization and lead an organization towards reduction of waste, production time, and making better products that will increase customer satisfaction and loyalty. A strategy is like an action plan which helps an organization to identify its top objectives and then develop corporate goals that are specific, achievable, measurable, realistic and timely. With this an organization can meet its business specific objectives along the way. A well-defined strategy will help a business have an end state of success. CITATION Fre102 l 1033 (Freeman, 2010)There are ideas that are always implemented by military organizations to pursue desired strategic goals. These set of ideas are the military strategies. Military strategy deals with disposition and movement of forces, planning and conduct of campaigns and deception of the enemy. Military strategy is divided into offensive and defensive strategies. Offensive strategies include Air Superiority, Attrition warfare, Bait and Bleed, Battle of Annihilation among others. Defensive strategies include Choke Point, Defense in Depth, Fortification, Withdrawal, Turtling, among others. Strategy is derived from a Greek word Strategos meaning military leaders with political authority. Strategy is the relationship between means and ends and it goes beyond war. However much it is rooted in war it has been used with reference to business. The principal similarity between business and military strategy is that they are both concerned with tactical maneuvers that establish positions of advantage. CITATION Gus13 l 1033 (Gustavsson, 2013)As a manager of a business entity you are tasked with looking at financial statements on a monthly, quarterly, and yearly basis. You should have good understanding of economic and accounting profits of your entity. The revenue of a company minus the explicit cost of a company is known as the Accounting Profit. Operating expenses that are easily identified and accounted for are the explicit costs. Economic profit measures the effectiveness of the firm’s decision making strategies and the financial status of the firm. If the total income of a company is subtracted together with the total monetary cost of all business activities and the opportunity costs of alternative business activities, the amount remaining is known as Economic profit. It compares the net operating profit to the total cost of capital. Economic profit includes things like opportunity costs which are the source of profit that is lost when pursuing other courses of action and is always known as implicit costs. The major difference between economic profit and accounting profit is that economic profit consists of revenue collected deducted from explicit costs (monetary) and implicit cost (opportunity), while accounting profit is revenue minus explicit costs, and therefore the principal difference between accounting profit and economic profit is that Economic profit is pure surplus and accounting profit includes normal return to the providers of equity CITATION Bie12 l 1033 (Biermman, 2012).
Employee performance management includes planning work and setting objectives, continually monitoring performance, developing the capacity to perform, rewarding good performance, and periodically rating performance in a summary fashion. Performance management is a continuous and systematic process by which an organization involves its employees in improving organizational effectiveness towards accomplishment of its missions and goals. The major purpose of performance management is improvement of quality. Many organizations look upon their performance management systems as existing in the background and are not expected to add value. Performance management if well designed and implemented can have positive impact on financial results and individual performance. Performance management systems have faced opposition from some managers claiming that communication between the employees and getting people to talk to one another is all that is required. This is not realistic as it enables managers to avoid confronting incompetence and leads to people escaping accountability. Performance appraisal has been opposed by quality movement. Performance management systems have been criticized to be of poor quality; however this is not an indictment of the concept of performance management itself CITATION Gri11 l 1033 (Griffin, 2011). The fundamental problem of any type of performance management system is the tendency of performance management system to be based entirely on financial targets.
Forecasting profitability and sales especially on a short term basis is very essential to planning business success. This involves estimation of future business performance according to the actual results of prior performance CITATION Aud12 l 1033 (Audzeyeva, 2012). This process enables the owners of businesses to modify operation on a timely basis. Forecasts can from income statements and pro forma invoices can provide persuasive management tools for loan application and lead to attracting of investor money. To forecast industry profitability consistently accurately, professionals have to look at the link between the industry and structure performance and then use the information on major trends in industry structure in order to predict their effects on the forces of competition.
A key or critical success factor is an element that is important and considered necessary by a project or an organization towards achieving its mission and plan. These are activities that are very critical to an organization towards achievement of success. They are few things that must be well defined and planned, should go well to ensure success for an organization or a manager. They can be functions that are viewed by the customer and defined by the market, that are critical to the customer/vendor relationship. It is important to view a business from a market and customer perspective. A business should put into much consideration the practices that are valued and demanded by the market and the overall need of the customers. Therefore analyzing key success factors leads one to ask the following two questions; what do customers want and what type of operation changes should a firm implement to survive competition? CITATION Mcl10 l 1033 (Mclvor, 2010)Competitive intelligence has deep roots in business history and it has been around as long as the business. It is based on critical analysis and directed by managers as it is a process of reviewing and making sense from the information. Competitive analysis also helps a business to see outside itself into the larger/broader market and competitive landscape. It can be viewed as legitimate tactical and strategic research and analysis designed identify threats and opportunities to a business entity CITATION Whr13 l 1033 (Whright, 2013). So what is competitive intelligence? It means learning and understanding the environment outside your business in order to remain as competitive as possible. It is the process of gathering information on your business competitive environment. It involves definition, gathering, analyzing, distribution of intelligence about a product’s competitors, customers and the necessary aspects needed to make strategic decisions for an organization. Therefore competitive intelligence, the systematic collection and analysis of information about rival firms is a useful activity that forms an important element of firm’s environmental scanning and strategic analysis.
Many companies strive towards increasing sales volume by utilization of products, place, promotion, and price, the 4 components of marketing mix. This leads to competition as firms try to outdo each other ideologically CITATION Whi12 l 1033 (Whish, 2012). Competition therefore can be defined as the rivalry between companies that produces and sells products and services of similar nature and form and that are used for the same purpose with the goal of achieving market share growth, revenue and profit. When a company has weaknesses relative to competitors among strategic important resources and capabilities, the appropriate strategic response to take is to diversify in order to find new areas of business where these resources and capabilities are unimportant to competitive advantage.
Strategic planning is used to determine vision, mission, objectives, goals, values, responsibilities and roles of an organization. It is management tool periods used for helping an organization do a better job, that is, ensuring that members of the organization are working towards the same goal, to check, access and adjust organization’s course in response to changing environment. Strategic planning aims at producing fundamental actions and decisions which shapes and gives guidelines to an organization in accordance to what an organization is, what business it does and why it does it with a focus on the future. The most valuable contribution of strategic planning process to the success of companies is introducing the tools and techniques of strategic analysis into company’s decision making process CITATION Bry11 l 1033 (Bryson, 2011).
Causal ambiguity is a situation where the exact cause of a certain effect or situation is not known. It is a situation where the cause cannot be related to the effect. In business casual ambiguity can be defined as a tool used to determine the strategic resource that a company might have readily available. It seeks to identify if these resources are valuable, in-imitable, rare, and non-substitutable. Causal ambiguity allows a firm’s competitive advantage to be sustained because potential rivals are; deterred from competing with the advantaged firm, unable to identify the resources of the advantaged firm’s superior performance, and unable to acquire the resources needed to compete against the advantaged firm CITATION Bar12 l 1033 (Barney, 2012).
Reference
Barney, J. B. (2012). How a firm’s capabilities affect boundary decisions. Sloan Manage.
Bryson, J. M. (2011). Strategic planning for public and nonprofit organizations: A guide to strengthening and sustaining organizational achievement (Vol. 1). John Wiley & Sons.Whish, R. (2012). Competition law. Oxford University Press.Wright, S. (2013). Competitive intelligence, analysis and strategy: creating organisational agility. Routledge.McIvor, R., Humphreys, P., & McKittrick, A. (2010). Integrating the critical success factor method into the business process outsourcing decision. Technology Analysis & Strategic Management, 22(3), 339-360.
Audzeyeva, A., Summers, B., & Schenk-Hoppé, K. R. (2012). Forecasting customer behaviour in a multi-service financial organisation: A profitability perspective. International Journal of Forecasting, 28(2), 507-518.
Griffin, R., & Moorhead, G. (2011). Organizational behavior. Cengage Learning.
Bierman Jr, H., & Smidt, S. (2012). The capital budgeting decision: economic analysis of investment projects. Routledge.Gustavsson, P. M., de Oliveira, L. R., Lindergårdh, L., & Karlsson, L. (2013). Learning Priorities and the Role of Computer-Based Training and Simulation on Military Supply Chain Logistics.Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.
