In performing your analysis, you should put your team in
the position of a consulting group. You have been hired by the Board of
Directors to conduct this strategic audit. You are to determine whether the
organization’s strategy is effective, and to provide specific advice and implementation
ideas on how to improve the firm’s strategy.
There is no one right way to conduct a strategic audit. How
you conduct the audit depends largely upon the company, the industry, and the
level of analysis. You should tailor your audit to your specific firm. The
general guideline is that you should conduct an internal and external analysis
of the organization and external environment in order to suggest the strategic
choices the leaders of the organization should make. At a minimum your audit
should provide detailed answers to the following questions:
1. Provide an analysis of the external environment. Tools to
consider using for the external analysis include the PESTEL analysis and
Porter’s Five Forces model. Questions to answer may include: 1) How attractive
is the primary industry this firm operates in based on the 5 forces? 2) Does the structure of this industry suggest
the firm will be able to generate above average returns in the future? 3) What
variables in the PESTEL analysis should be carefully monitored and managed as
they will likely affect the future success of this organization?
2. Provide a detailed financial analysis of the firm and at
least two of their closest competitors. You should gather data from at least
the past 5 years for this analysis. Using the Compustat data base from the
library to acquire the data is strongly recommended. In your analysis you
should assess how a firm can improve its financial performance on measures such
as ROE, ROA, profit margin, sales growth, etc. You should consider doing a
Dupont Identity analysis along will other relevant financial analyses that you
have learned in your accounting and finance classes.
3. Provide an analysis of the internal environment of the
firm. Tools to consider using include a SWOT analysis and VRIO analysis.
Possible questions to address include the following. What has been the firm’s
primary strategy, how well has it been working, and why has it been performing
such? What are the firm’s key resources and drivers of performance? Are these
resources VRIO and likely to provide a competitive advantage? Describe and
analyze the basic business model the firm has been using to generate profits. Analyze
why this firm’s business model and strategy have been generating below,
average, or above-average profitability and how well this model and strategy
are likely to work in the future environment.
4. Based upon your analyses of the industry and the
organization, offer specific recommendations and an action plan concerning
what this organization should do over the next 2-5 year time period. The conclusions
and recommendations you make should be backed up by logical arguments supported
by rigorous quantitative and qualitative arguments. Where possible, use the tools
you have been taught to strengthen your argument. Continually ask yourself,
“does this argument make sense,” and, “if this were my money would I follow
this advice?”
Page Guidelines – Your paper should adhere to the
following maximum page guidelines:
1. Executive Summary – 1 page – this should summarize the
entire paper in one page with a preview of the recommendations and the
rationale behind for the recommendations.
2. Introduction – 1 page – a brief intro to the
organization.
3. External Environment / Industry Analysis – 3 pages
4. Internal Environment Analysis – 3 pages
5. Strategic Recommendations and Action Plan – 4 pages
Your paper should not exceed 12 pages (single or
double spaced, excluding cover page, tables, charts, references, etc.). Please
take note of the page guidelines for each section as they convey the importance
I place on each section. The most important section, and the one you should
give the most thought to, is strategic recommendations. I am most interested in
the strategies you think this organization should pursue going forward. Your
paper should not be a report of what the organization has done in the past,
rather it should be a thoughtful argument of what the organization should do in
the future. Strategy is about the future while reports are about the past. It
is important that you pick an organization for which you can gather detailed
financial and strategic information. If you do not have access to all the
relevant information your analysis will suffer. You will not face this problem
if you pick a Fortune 500 company. I would recommend you pick a company that is
primarily focused in one business segment. Library Resources. The library has
some very useful resources such as Standard and Poor’s Industry Surveys, Moody’s,
Compustat, Mintel, and various other materials. I strongly encourage you to
utilize the resources of the library and do not assume that a Google search
will get you everything you need. Your paper is required to have at least 20
unique sources/references; use APA guidelines to cite.
