1.

Describe the “process of performing an external audit” in an

organization doing strategic planning for the first time.

To perform an external audit, the company should get as many managers and
employees involved as possible. This fosters understanding and commitment
throughout the organization.

In general, the process is conducted in three steps:

1. Gathering of competitive intelligence and information concerning:

 Economic forces
 Social, cultural, demographic, and natural environment forces
 Political, governmental, and legal forces
 Technological forces
 Competitive forces

2. Assimilating and evaluating intelligence/information for opportunities

and threats. Managers should meet to rank and prioritize these factors
with the following guidelines:

 Importance to achieving long-term and annual objectives

 Measurable
 Applicable to competing firms
 Hierarchical within the organization

3. Distributing and communicating the final list of the most important

external factors throughout the organization.

4. Do you feel the advantages of a low value of the dollar offset the
disadvantages for (1) a firm that derives 60 percent of its revenues from
foreign countries and (2) a firm that derives 10 percent of its revenues
from foreign countries? Justify your opinion.

A low valued dollar can cause a significant increase in exports to foreign

countries. Imports slow down and prices of foreign competitors go up, creating a
more ideal competitive environment for the U.S. company.

A company with 60 percent of its revenues coming from foreign countries would
be able to offset the slowdown in demand/revenues at home in the U.S. and
spread its risk across more than one economy/market. A company with only 10
percent would be much more affected by the U.S. economy and exposed to
greater risk.
6. If you and a partner were going to visit a foreign country where you
have never been before, how much planning would you do ahead of
time? What benefit would you expect that planning to provide?

I would do extensive planning: all logistics, research on history and points of

interest, contacts of mutual friends living in the country, etc. I would have an
itinerary of every day mapped out, down to times for lunch and dinner. We travel
a lot and I do this for every trip.

The planning gives me confidence that I’ll maximize my travel and experience
every possible thing I can and want to. It also gives me a sense of security,
knowing what to expect and where to go if an emergency or issue pops up.
Finally, it helps me set a budget and know generally how much to plan for and set
aside for the trip – knowing what each attraction or special point of interest costs
before I get there helps me decide what’s important and triage what’s not. This
way, I keep within budget and don’t stress about a huge Amex bill when I return
home. So, the biggest benefits are stress free travel with no huge surprises on
the back end!

9. List the three ways that financial ratios should be

compared/utilized? Which of the three comparisons do you feel is most
important? Why?

1. Historical trends - over time

2. Against industry averages
3. Against key competitors

Comparing financial ratios against those of key competitors would be the most
important to me. This would help me identify their strengths and weaknesses
and create a strategy for where I will improve my own ratios and leverage and
exploit theirs to my advantage.

26. Why do you think production/operations managers often are not

directly involved in strategy-formulation activities? Why can this be a
major organizational weakness?

Perhaps they are left out because production/operations are considered by

organizations to be more execution, transaction, and implementation functions.
Organizations see them as carrying out the strategy and really having no need
to be involved in actually forming it.

This can be a major weakness in an organization. Production/operations

activities represent the greatest share of an organization’s assets: materials and
inventory, facilities and plants, equipment and machinery, and often a large
workforce. Without production/operations managers’ input into strategy
 formulation, the organization runs the risk of implementing strategies that aren’t
cost effective and counter-productive.

41. Define and explain value chain analysis (VCA).

VCA is the process used to determine the costs associated with an organization’s
activities from purchasing raw materials to manufacturing products to marketing
those products.

The process is designed to identify areas of low-cost advantage or disadvantage

anywhere along the chain, and enables an organization to identify its own
strengths and weaknesses, especially compared to competitors’ VCA.