1. Submitted by: BSBA – 4 (S.Y. 2012 – 2013)
Vladimir Amadeus Felizco Medina
Paulo Dosalla
Nico Gonzales
Submitted to:
Mr. Ronaldo Poblete

2. Understanding a business in depth is the
goal of internal analysis. A business internal
analysis is similar to a competitor analysis,
but it has a greater focus on performance
assessment and is much richer and deeper.
It is more detailed because of its importance
to strategy and because much more
information is available. The analysis is
based on specific, current information on
sales, profits, costs, organizational
structure, management style, and other
factors.

3. FINANCIAL PERFORMANCE-SALES
AND PROFITABILITY
Internal analysis often starts with an analysis of current
financials, measures of sales and profitability. Changes in
either can signal a change in the market viability of a product
line and the ability to produce competitively.

4. Sales and Market Share
- A sensitive measure of how costumers regard a product or service can be sales or market share.
After all, if the relative value to a customer changes, sales and share should be affected, although
there may be an occasional delay caused by market and customer inertia.
Profitability
- The ultimate measure of a firm’s ability to prosper and survive is its profitability.
ROA = profits X sales
sales assets
Measuring Performance: Shareholder Value Analysis
- The concept of shareholder value, an enormously influential concept during the past two decades,
provides an answer to this question. Each business should earn an ROA (based on a flow of profits
emanating from an investment), that meets or exceeds the costs of capital, which is the weighted
average of the cost of equity and cost of debt.

5. PERFORMANCE
MEASUREMENT-BEYOND
PROFITABILITY
One of the difficulties in strategic market management is
developing performance indicators that convincingly represent
long-term prospects. The temptation is to focus on short-term
profitability measures and to reduce investment in new
products and brand images that have long-term payoffs.

6. Figure 7.1 Performance Measures Reflecting Long-term Profitability
Customer Satisfaction/
Brand Loyalty
Product/Service Quality
Brand/Firm Associations
CURRENT LONG-TERM
Relative Cost PERFORMANCE PROFITS
New Product Activity
Manager/Employee
Capability and
Performance

7. Customer Satisfaction/Brand Loyalty
- Perhaps the most important asset of many firms is the loyalty of the customer
base. Measures of sales and market share are useful but potentially inaccurate
indicators of how customers really feel about a firm.
- Guidelines for Measuring Satisfaction and Loyalty
1. Problems and causes of dissatisfaction that may motivate customers to
change brands or firms should be identified.
2. Often the most sensitive and insightful information comes from those who
have decided to leave a brand or firm.
3. There is a big difference between a brand or firm being liked and the absence
of dissatisfaction.
4. Measures should be tracked over time and compared with those of
competitors.

8. Product and Service Quality
- A product (or service) and its components should be critically and objectively compared both
with the competition and with customer expectations and needs.
- Product and service quality are usually based on several critical dimensions that can be
identified and measured overtime.
Brand/Firm Associations
- An often overlooked asset of a brand or firm is what customers think of it. What are its
associations? What is its perceived quality?
- Perceives quality, sometimes very different from actual quality, can be based on experience
with past products or services and on quality cues, such as retailer types, pricing strategies,
packaging, advertising, and typical customers.
- Associations can be monitored by regularly asking customers in focus groups to describe their
use experiences and to tell what brand or firms means to them.

9. Relative Cost
- A careful cost analysis of a product (or service) and its components, which can
be critical when a strategy is dependent on achieving a cost advantage or cost
parity, involves tearing down competitors’ products and analysing their systems
in detail.
• Sources of Cost Advantage
The many routes to cost advantage will be discussed in Chapter 10. They
include economies of scale, the experience curve, product design
innovations, and the use of no-frills product offering.
• Average Costing
In average costing, some elements of fixed or semi variable costs are not
carefully allocated but instead are averaged over total production.

10. New Product Activity
- One measure of new product innovation is the number of patents
awarded.
Manager/Employee Capability and Performance
- Also key to a firm’s long-term prospects are the people who must
implement strategies.
- An organization should be evaluated not only on how well it obtains
human resources but also how well it nurtures them.

11. DETERMINANTS OF
STRATEGIC OPTIONS

12. Past and Current Strategies
- To understand the bases of past performance and attempt to
sort out new options, it is important to be able to make an
accurate profile of past and current strategies. Sometimes a
strategy has evolved into something very different from what
was assumed.
- Benchmarking – Comparing the performance of a business
component with others is called benchmarking. The goal is to
generate specific ideas for improvement, and also to define
standards at which to aim.

13. Strategic Problems
- Another relevant and helpful construct is the strategic problem – that is, a
problem with strategic implications.
- A strategic problem differs from a weakness or liability, which is the absence of
an asset (such as good location) or competence (for example, new product
introduction skills.
Organizational Capabilities/Constraints
- The internal organization of a company – its structure, systems, people, and
culture – can be an important source of both strengths and weaknesses.
- Internal organization can affect the cost and even the feasibility of some
strategies. There must be a fit between a strategy and the elements of an
organization.

14. Financial Resources and Constraints
- Ultimately, judgements need to be made about whether or not to invest in a
business or withdraw cash from it.
- A financial analysis to determine probable, actual, and potential sources
and uses of funds can help provide an estimate of this ability. A cash flow
analysis projects the cash that will be available from operations and
depreciation and other assets.
Organizational Strengths and Weaknesses
- A key step in internal analysis is to identify the strengths and weaknesses
of an organization that are based on its assets and competencies. In fact,
much of internal analysis is motivated by the need to detect strengths and
weaknesses.

15. FROM ANALYSIS
TO
STRATEGY

16. In internal analysis, organizational strengths and weaknesses need to
be not only identified, but also related to competitors and the market.
Organizational Competitor
Strengths and Strengths and
Weaknesses Weaknesses
Strategic Decision
• Strategic Investment
• Value Proposition
• Assets and Competencies
• Functional Strategies and Programs
Market Needs,
Attractiveness,
and Key Success
Factors

17. Business Portfolio Analysis
- Business portfolio analysis provides a
structured way to evaluate business units on
two key dimensions: the attractiveness of the
market involved and the strength of the firm’s
position in that market.