18 May There ??should be 5 strategic factors for Strengths and 5 strategic factors for ??Weaknesses. Internal ??factors are those the firm has control over. ?’Does Amazon control this
There should be 5 strategic factors for Strengths and 5 strategic factors for Weaknesses.
Internal factors are those the firm has control over. "Does Amazon control this activity or not?" For instance, Amazon has control over the dates to release new products, or what products to sell each year. But Amazon does not control the economic conditions that would determine the demand for those products.
Fill in the table in TemplateSA-EXH2-IFAS. The table has five columns: Internal Factors, Weight, Rating, Weighted Score and Comments.
Use short names for the factors but flesh them out in the comments so they make sense when you approach them later on. A generically named factor can be listed on both the EFAS and IFAS so long as the comments made the difference clear between the two. You should modify the names, so this situation does not arise.
Your comments make all the difference in the quality of the EFAS.
Use the template for Exhibit 2 – IFAS
Use the TemplateSA-EXH2-IFAS.docx as the template for your work. Ensure that your format displays correctly and is readable. Do NOT copy from the text or from the Template IFAS text! Use your own critical analysis and critical thinking. The template is provided to assist you with the layout–i.e., make it easy for you to construct the chart. The template also gives you a good idea of the appropriate explanations required in the Comments blocks about the why an SF, potential quantified impact, how weighted, and how rated.
Comments Column
Comments are expected to be 4-5 sentences in length and depth and offer a clear explanation of the strategic factor (SF) in 4 aspects:
- Why it is a strategic factor (SF), core competency (CC) or distinctive competency (DC); (1-2 sentences only)
- A quantified estimate of the potential impact (QPI) of the SF; (1 sentence only)
- How you assign the weight; (1 sentence only) and
- How you assign the rating. (1 sentence only)
Keep the 4-5 sentences of your Comments in order for clarity and ease of understanding. The recommended order is: Why SF comments; QPI comments; Weight comments; and finally Rating comments.
How to write the Why SF and QPI comments: For the Why SF, explain WHY you selected this SF, WHY it is important to Amazon, and WHAT is the potential impact on Amazon in the future. Clearly identify your Core Competencies (CC) and Distinctive Competencies (DC) in the IFAS Comments column.
For the QPI comments, estimate the potential impact on Amazon in the future in a quantitative manner using some metric: sales, revenues, costs, market share, profits, logistics pipeline, CSI, etc. Express the quantitative potential impact (QPI) in Dollars $$. If you express the potential impact in $$, that makes each strategic factor comparable against the other strategic factors. And expressing the impact in sales makes them even more easily comparable. Make sure you are making significant estimates based on the size of your company based on annual revenue values in your 5-Y financials. You develop this estimate.
The monetary value of the QPI is useful to compare the strategic factors and rank them in relevance. Ranking them will help you to assign the Weights (2nd column in the table) to each strategic factor. Use a positive analysis (quantitative) rather than a normative analysis (feelings, desires). Focus on what is the potential gain for your SF opportunities or the potential loss from a SF threat in the future. History lessons are not needed nor applicable. You should estimate and predict the impact in the future. Be creative.
Don’t develop future actions or alternatives here in the IFAS about how a firm may or should take action on a particular SF. The brainstorming development of those alternative actions comes with the TOWS Analysis that we will start presenting in Module 4.
HINT: To focus your thinking on addressing “why” you selected each SF and “why it is important,” start your “why select/important” sentence with words like this: “I selected this SF because…..” or “This SF is important because…” By using this lead-in phrase you should be able to concisely state why that particular SF is important.
HINT: To focus your thinking on addressing the quantitative potential impact (QPI) in the future of each SF, be sure your QPI sentence contains words like this: “potential impact of $____” or “potential increases to ____ are $____ per year” or “reduction in sales by $____ per year.” Be sure to state the potential impact in dollars so you can compare the potential impacts of your various SF.
How to write the Weight and Rank comments: To assign weights, explain the importance of the SF to the firm’s future survival. Is the SF of vital importance or low importance on a scale of 1 to 0? What is the impact of the SF on the future survival of the firm? What SF has the biggest impact? Which one(s) are the Big Dogs? Make a logical explanation of why the weight you have assigned is what it is. Comparison and ranking between SF is a useful technique to assign the weight. See your potential $$$ impacts from your “Why” analysis above. The bigger the $$$ impact is, the bigger the weight should be. Remember the weight column adds to 1.0.
HINT: To focus your thinking on addressing the importance of the SF to Amazon’s future survival, be sure to include the key word “survival” in your weight sentence.
To assign ratings provide an explanation of how well, or how badly, Amazon is handling each specific external SF RIGHT NOW – not in the future or not in the distant past – but right now. Use the scale of 1 – 5, poor to outstanding; comparing the firm’s performance against the industry standard rating of 3. Give a logical explanation of why the rating you have assigned is what it is. Do they handle it well or are they lost? Are they performing in average way as other competitors are? Remember the industry average performance is rated at 3.
HINT: To focus your thinking on addressing how well your firm is handling each SF, understand what the 1-5 scale means and then use your rating number from the rating column with matching words (low, average, above average, high, etc) in your rating sentence.
Example of a good comments block:
SF - Competent Senior Leadership
This SF was chosen because of its significant positive impact on corporate performance in sales, costs, and industry leadership. Senior leadership is considered a core competency. Top management adds significant benefit to OPC’s profit posture and stockholder satisfaction. Effect on the top line future sales revenue is estimated at 25% ($100M-$150M/YR). This SF is weighted very high at .15 as leadership is very important to survival in the world economy. OPC is rated highly at 4.5 as an industry leader with a highly competent management team.
Point of View
Remember to keep your decision-making at the strategic level –the Big Picture level. You are acting at the CEO/SVP level. But you are also acting at the lower levels to brainstorm, generate alternatives, perform critical analysis, and make recommendations to the CEO/SVP levels. The decision-maker CEO/SVP decides on the most important strategic factors.
Use TemplateSA-EXH 4-FinRatio.docx as Reference
The financial ratios are explained in Chapter 13 and at the end of Understanding Financial Statements, the reading we used in Module One.
The TemplateSA-EXH4-FinRatio.docx is only a reference because you will perform the calculations of your financial ratios in Excel. In fact, the 5-Y financials of the firm you are working about has a sheet that connects the financial ratio formulas with respective data in Balance Sheets and Income Statements for the five years of analysis in the same workbook.
.
INTERNAL FACTOR ANALYSIS SUMMARY (IFAS) on OLALLIEBERRY PIE COMPANY (OPC)
|
Internal Factors |
Weight: |
Rating: |
Weighted Score |
Comments |
|
Strengths: |
||||
|
S1: Competent Senior Leadership |
.15 |
4.5 |
.675 |
This SF was chosen because of its significant positive impact on corporate performance in sales, costs, and industry leadership. Affect on the top line future sales revenue is estimated at 25% ($100M-$150M/YR). Top management adds significant benefit to OPC’s profit posture and stockholder satisfaction. Senior leadership is considered a core competency. This SF is weighted very high at .15 as leadership is very important to survival in the world economy. OPC is rated very high at 4.5 as an industry leader with a highly competent management team. |
|
S2: Supplier Relationships |
.10 |
4.5 |
.45 |
This SF was selected because it is a core competency and directly impacts OPC’s low raw material cost structure and high quality product. Suppliers work seamlessly with OPC Operations to deliver quality raw materials in a highly efficient just-in-time logistics system. Resource and production costs are maintained at a level about 20% below the industry average; saving OPC about $20-$40M/YR in the future. Weight is relatively high as this core competency is important to OPC’s survival and competitive position. Rating is 4.5 as OPC is performing at a level high above the industry norm. |
|
S3: Product Quality and Uniqueness |
.05 |
4.0 |
.20 |
This SF was added because of the olallieberry’s uniqueness and quality as it is formed into a quality consumer product by OPC. No other pie company can match OPC for its olallieberry pies. OPC pies can command a 10% premium price point over other brands because of proven and consistent quality and uniqueness. Potential impact on future sales revenue is positive at $5-$10M/YR. This SF is weighted low at .05 as not very important to firm’s survival. Rating is high at 4.0 since OPC’s pies are above industry quality. |
|
S4: Employee Relations |
.05 |
4.6 |
.23 |
I selected this SF because OPC has a very strong and supportive employee management, training, and development program which results in a very highly motivated, efficient and effective workforce. This restrains production and operating costs as 60% of COGS vice industry standard of 75%. Future savings projected in range of $10M – $15M/YR. This impacts very favorably on the overall cost structure and ensures that OPC can be competitive. Weight is low as costs are important to competitive position but SF is less important to survival than other SF. Rating is high at 4.6 as OPC sets the standard. |
|
S5:Corporate Culture |
.20 |
5.0 |
1.0 |
This SF is important because it is a distinctive competence that reverberates throughout the entire organization and provides a 20-30% cost and productivity advantage for OPC over its competitors. Future advantage is estimated at $125M – $200M/YR in cost savings. Maintaining the positive corporate culture is essential to survival in the increasingly competitive environment. Weight is high at .20 because of the importance of culture to the future survival of OPC. Rating is highest at 5.0 because OPC is the indisputable industry leader. |
|
Weaknesses: |
||||
|
W1: Management Information System (MIS) |
.20 |
2.0 |
.40 |
This SF is important because OPC’s MIS is outdated and behind times since they have not invested in a new enterprise resource planning (ERP) system. This weakness could have a very negative impact on future revenues and costs, 30-40% of sales ($120M – $160M/YR), since a modern MIS is not in use. Competitors have invested in modern ERP systems. Weight is high at .20 as this is very important to corporate survival. Rating is low at 2.0 since OPC has fallen behind its competition. |
|
W2: Corporate Marketing |
.05 |
1.5 |
.075 |
I selected this SF because Marketing is a weakness since OPC has not expanded its capabilities or strategic reach. OPC marketing is focused only on current market geographical and market share segments. Expanding sales/revenues is impossible with the current marketing orientation. Poor marketing is estimated to result in future lower sales by $15m – $30M/YR. Weight is low as this SF is important to drive future sales increases and attract new customers but not as important to corporate survival as other SF. Rating is low at 1.5 as OPC is lagging behind other competitors. |
|
W3: Distribution Channels / Economies of Scale |
.10 |
2.5 |
.25 |
I selected SF because OPC’s product distribution channels are focused only on the western states. It lacks all structure to expand domestically and internationally. OPC’s economies of scale are sufficient for current sales/revenues but woefully inadequate for expansion. Poor distribution may result in loss of $100M/YR in future sales. This SF is vitally important for the future survival of OPC since it needs to grow to remain competitive against other domestic and international pie producers. Weight is high at .10 as firm survival depends on improving capabilities. Rating is below industry standard at 2.5 since OPC has not taken the necessary strategic planning steps to prepare for future competition. |
|
W4: Financial Position |
.05 |
2.0 |
.10 |
This SF is important because OPC’s financial position has deteriorated over the recent past year as its ROI has fallen from 15% to 7% and the debt to asset ratio has ballooned. Stockholders are concerned. This recent poor financial position is a very important SF for OPC’s future as such a position may put OPC in a non-competitive position in the marketplace, stock market and bond market. Future costs to OPC may include higher borrowing costs of $10-$30M/YR and/or reduction in sales of $20M – $30M/YR. Weight is low at .05 since financial integrity and balance is important to survival but not as important as other SF. Rating is low at 2.0 as OPC is not executing up to industry standard. |
|
W5: R&D System |
.05 |
2.0 |
.10 |
I selected this SF because OPC’s R&D function is very poor. Developing new products has not been on the firm’s radar. Some market share may be lost to new products from competitors potentially losing OPC about $15-$20M/YR in sales. Weight is low at .05 as R&D competitiveness is important to survival but not as important as other SF. Rating is low at 2.0 as OPC’s R&D performance is below industry standard. |
|
Total Scores: |
1.00 |
3.48 |
1
4
,
EXHIBIT 4 RATIO ANALYSIS ON OLALLIEBERRY PIE COMPANY (OPC)
Historical for the Fiscal Years 1994-1998
|
1998 |
1997 |
1996 |
1995 |
1994 |
|
|
Liquidity Ratios |
|
||||
|
Current Ratio |
1.82 |
2.01 |
1.89 |
1.76 |
2.02 |
|
Quick Ratio |
1.52 |
1.67 |
1.55 |
1.33 |
1.80 |
|
Inventory to Net Working Capital |
0.18 |
0.15 |
0.17 |
0.19 |
0.13 |
|
Cash Ratio |
7.22 |
8.30 |
4.52 |
1.55 |
1.02 |
|
|
|
||||
|
Profitability Ratios |
|
||||
|
Net Profit Margin |
4.0% |
4.3% |
4.5% |
4.8% |
4.9% |
|
Gross Profit Margin |
23.0% |
24.1% |
26.3% |
27.5% |
27.9% |
|
Return on Investment (ROI) |
8.7% |
9.6% |
9.9% |
10.0% |
9.9% |
|
Return on Equity (ROE) |
16.3% |
15.6% |
9.1% |
17.6% |
16.3% |
|
Earnings Per Share (EPS) |
$0.67 |
$0.88 |
$1.02 |
$1.29 |
$1.55 |
|
|
|
||||
|
Activity Ratios |
|
||||
|
Inventory Turnover |
3.4 |
4.7 |
5.5 |
6.6 |
6.4 |
|
Days of Inventory |
91.6 |
81.2 |
78.4 |
74.3 |
75.2 |
|
Net Working Capital Turnover |
12.0 |
10.5 |
12.3 |
13.6 |
9.3 |
|
Asset Turnover |
2.2 |
2.1 |
2.1 |
2.2 |
2.0 |
|
Fixed Asset Turnover |
3.7 |
3.6 |
3.5 |
3.7 |
3.9 |
|
Average Collection Period |
5.3 |
6.5 |
8.2 |
13.2 |
23.8 |
|
Accounts Receivable Turnover |
69.4 |
56.1 |
44.5 |
35.8 |
26.5 |
|
Accounts Payable Period |
20.5 |
20.4 |
19.5 |
19.9 |
20.6 |
|
Days of Cash |
1.7 |
2.0 |
4.3 |
5.9 |
4.0 |
|
|
|
||||
|
Leverage Ratios |
|
||||
|
Debt to Asset Ratio |
63.01% |
64.55% |
68.22% |
60.00% |
60.00% |
|
Debt to Equity Ratio |
75.00% |
76.02% |
83.44% |
75.00% |
75.00% |
|
Long Term Debt to Capital Structure |
23.05% |
26.33% |
19.56% |
33.88% |
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