STRATEGIC AUDIT OF

A CORPORATION
GROUP 8
 LEARNING OBJECTIVES
Upon completion of this chapter, you should be able to:
1. Describe the three primay sections of strategic
audit.
2. Explain the importance of conducting external
environmental assessment.
3. Describe the components of understanding an
organization from a strategic perspective.
4. Describe the four elements that managers should
consider when introducing organizational changes.
 STRATEGIC AUDIT OF A
CORPORATION
When srategic direction is clearly understood by everyone
throughout an organization, the following benefits occur:
Organization capabilities are aligned to suppoert the
achievement of the strategy.
Resources are allocated in priority order according to a
process' contribution to competitive advantage.
A company can excel in the marketplace.
 STRATEGIC AUDIT OF
A CORPORATION
The purpose of the strategic audit is to arm
managers with the necessary information,
tools, and commitment to evaluate the
degree of an organization's advantage and
focus provided by their current strategies.
 STRATEGIC AUDIT OF
A CORPORATION
3 Primary Section of Strategic Audit:

Conducting an environmental assessment

Conducting an organizational assessment
Integrating and implementing the findings
from the two assessments.
PART 1: THE EXTERNAL ENVIRONMENT ASSESSMENT

The assessment of the external environment provides any business

with a critical external link between its competitors, customers, and
the products and services that it offers.
The environment is where distinctiveness is created and where it is
eliminated.
The success or failure of a company often depends on its ability to
make minor changes in the environment and meet the needs of its
customers and prospective customers.
 IMPORTANCE OF
EXTERNAL ASSESSMENT
The environmental assessment will help
improve analysis by providing validation that
this study of the environment is carried out
strictly and accurately and will safeguard that
external analysis is geared toward achieving
the company's strategy.
THREE MAIN INDUSTRY COMPONENTS:
Direct providers of goods or services
(producers - for both the company and its
competitors).
Direct user of goods or services
(customers).
Indirect influencers on customers and
producers (Stakeholders).
 WHY SHOULD CONDUCT
THE ASSESSMENT?
Various researchers found that the steps are
best accomplished through study teams. Four
teams or analysis groups are needed to conduct
the environmental assessment. A leadership
team has the task of overseeing the entire
processes; it should complete the first and
third steps. Three separate study teams should
be organized to look at the issues in greater
detail as part of the second step.
 STEP 1 - UNDERSTANDING THE
ENVIRONMENT AT A MACRO LEVEL
The first step in the environmental
assessment is to develop a basic
understanding of the trends and
issues that will significantly change,
influence, and affect the industry.
 TEAM STAFFING
The leadership team should be made up of
representative managers or leaders of different
functions or groups within the company. The
inclusion of key technical players, "natural"
leaders, and idea leaders from within the
organization enhances the team's ability to look
at the broad environmental picture presented by
these elements.
STEP 2-UNDERSTAND THE INDUSTRY
COMPONENTS IN DETAIL
This section focuses on the future and long-term viability
of the industry, focusing on three components: company
and competitors, customers, and other stakeholders. Study
teams must understand the elements of strategy audit and
environmental assessment before beginning their work.
Preliminary findings and identification of important issues
are necessary.
 TEAM TASK
First is to use the industry analysis questions to
analyze where each group sees the industry heading.
The research of each of these teams should be
analyzed at the same level and should use the same
framework for industry segmentation.

(a) What information is needed?

(b) How is the information obtained and from whom?
(c) How should the information be analyzed?
1.COMPETITION AND MARKETS
The purpose of studying competitors in the industry is to
understand how they intend to create or maintain
competitive advantage in comparison to other players in
the industry.

Current Distinctiveness is determined by assessing a

competitor's current strength and position in the
marketplace.
Positioning for future distinctiveness stems from the
capabilities a company has today that will enable it to
excel in the future.
 WHAT INFORMATION IS NEEDED?
business, financial and organization

WHAT IS THE INFORMATION OBTAINED AND FROM WHOM?

Obtaining information from competitors is difficult
since they are not in the practice of volunteering
information to each other. However, much of the
information is publicly available from annual
reports, investments presentations, journal
articles, financial reports and reviews (internal and
external), interviews with customers, industry
analysts or experts, and former employees of
competitors, and other published information.
HOW SHOULD THE INFORMATION
BE ANALYZED?
It is helpful to organize the information
into two matrices: one that reflects the
current position of competitors and one
that projects their future positioning.
 CUSTOMERS
Studying customers is an essential aspect of business and marketing. The
purpose of studying customers is to gain a deep understanding of their
needs, preferences, behaviors, and attitudes in order to develop effective
strategies and provide better products or services.

By studying customers, businesses can identify pain points and areas of

improvement in the customer journey. Competitive Advantage:
Understanding customers better than competitors gives businesses a
significant competitive advantage
WHAT INFORMATION IS NEEDED?

How customers affect the company Customers have

a significant impact on a company in various ways.
Their actions, preferences, and behaviors can shape
the success or failure of a business.
By prioritizing customer-centric strategies and
continuously engaging with customers, companies
can position themselves for growth and competitive
advantage.
 UNDERSTAND THE CUSTOMER ENVIRONMENT
OR ITS INDUSTRY AT A MICRO LEVEL.

Understanding the customer environment or industry at a micro level refers

to gaining detailed knowledge and insights about the specific market,
industry, or context in which a customer operates.

By understanding the customer environment at a micro level, businesses

can tailor their strategies, offerings, and marketing approaches to
effectively meet customer needs and differentiate themselves from
competitors.
 THREE LEVELS OF ANALYSIS WITHIN THE
ORGANIZATION

The strategic level. One key aspect of analyzing value at the

strategic level is assessing how the company's products, services, or
solutions meet the needs and requirements of its customers.
The operation levels. This is done by a buyer's purchase criteria.
The ease of doing business level. Understanding the factors of
doing business with the company is a crucial aspect of the
strategic-level analysis of value creation.
HOW IS THE INFORMATION OBTAINED?

The best source of information varies for each segment

of the customer analysis.
1. FINANCIAL
2. STRATEGIC
3. ENVIRONMENTAL
4. BUSINESS STRATEGY
 STAKEHOLDERS

The purpose of conducting stakeholder and stakeholder analysis is

to identify, understand, and manage the stakeholders involved in a
particular project, initiative, or organization. The ease of doing
business level. Understanding the factors of doing business with the
company is a crucial aspect of the strategic-level analysis of value
creation.
Stakeholders are individuals, groups, or organizations that have an
interest or are affected by the outcome of a project or decision.
WHAT INFORMATION IS NEEDED?

The questions that needs to be asked of

stakeholders include the following.

1. What does the stakeholder need from the company?
2. What does the stakeholder value about the company?
3. What is the stakeholder’s role in relation to the
business?
4. What are some potential roadblocks for the company
as it pursues its business objectives?
5. What opportunities should the company pursue that
differ from what it is doing today?
 HOW IS THE INFORMATION
OBTAINED AND FROM WHOM?

The stakeholders that a company needs to understand include the

stockholder, end user, environmental group, politician or public

policy experts, regulatory agencies, joint ventures, partners,

companies.
technologies, and corporate holding
Interviews, surveys, and interactions with representatives from each
stakeholder group can provide valuable insights into their
perspectives, needs, and expectations.
HOW SHOULD THE INFORMATION BE ANALYZED?

Interview responses from stakeholders should be

grouped into three categories: expectations,

opportunities, and threats.
Paying attention to these concerns is valuable as they

can provide critical insights and perspectives that may

have been overlooked.
This analysis helps the company prioritize actions, align
strategies, and build mutually beneficial relationships
with stakeholders as it moves forward with its business
objectives.
 STEP 3 - INTEGRATE THE
COMPONENTS INTO AN
ENVIRONMENTAL PICTURE.

Once the findings of stakeholder, customer, and competitor analysis

have been collected and processed, it is crucial for the leadership team

to step back and integrate this data to gain a holistic understanding of

the overall environment in which the business operates.
This involves looking at market dynamics, emerging technologies,

regulatory changes, and other external factors that can shape the
industry landscape

Strategic auditing is a comprehensive process that involves evaluating a

company's internal and external factors to assess its competitive
position within the industry. It provides a systematic framework for
examining data and identifying key changes in the business environment
that can influence the company's strategic direction.
 ORGANIZATIONAL
ASSESSMENT
Once the company’s environment has been examined and analyzed,
managers should consider the characteristics and qualities of the
organization that influence what it can be accomplished. This process is
called “organizational assessment”

It maybe represented in visual and detailed overview

Some of the details in the model will be removed or added, depending on

the audit objectives and needs of the organization.

Most of the information should be gathered before moving into the

organization design and resourcing phase of the audit since the information
is essential to design.
COMPONENTS OF UNDERSTANDING AN
ORGANIZATION FROM A STRATEGIC
PERSPECTIVE
STEP 1: CLARIFY THE STRATEGY

Clarification of the strategy helps the leadership team to determine

what business they are in, the business direction, and framework or
criteria for making strategic decisions, in the future.

If people at any level of a business are unclear about any of these

areas, there are difficulties to focus their attention, cooperate with
other teams, and organize their efforts to gain competitive advantage
in the market place.
STEP 1: CLARIFY THE STRATEGY
Description of the Business

Includes important information about the business what industry the company is
in, what niche(s) the company competes in, what part of the industry
management has decided to focus on, the strategic objectives of the business,
and the mission, vision, and values of the firm.

Management usually describe or provide written documentation about each of

the above areas.

The audit team should also ask some of the questions below about what
business does and what it does not do.

By determining what the business does not do, the business direction and the
decision to focus become clearer.
 STEP 1: CLARIFY THE STRATEGY
Description of the Business

Includes important information about the business what industry the company is in, what niche(s) the
company competes in, what part of the industry management has decided to focus on, the strategic
objectives of the business, and the mission, vision, and values of the firm.

Management usually describe or provide written documentation about each of the above areas.

The audit team should also ask some of the questions below about what business does and what it does
not do.

By determining what the business does not do, the business direction and the decision to focus become
clearer.

♦What products do we offer, and what products do we not offer?

♦What customers do we pursue, and what customers are we not interested in?
♦What Market do we focus on, and what market do we avoid?
♦What have we stopped doing in the last few years and why?
STEP 1: CLARIFY THE STRATEGY
The audit team should try to determine if the stated goals of the business
depict what happens in day-to-day operations. If discrepancy exists, it
should be noted for future design.

If strategy is unclear, or if managers want to change the company’s

strategy, the leadership team may find it helpful to examine its own
beliefs and assumptions, along with beliefs and assumptions that are held
industry wide about how competitive advantage is gained.

If traditional ways of doing things are limiting a company’s performance,

then challenging either industry or organizational beliefs and assumptions
by doing business differently can lead to competitive advantage.
STEP 1: CLARIFY THE STRATEGY
Strategy Description & Clarity

Aside from illustrating the description of the business, the leadership team
should also describe what strategy the company is pursuing in the business.

Without strategy, managers will have no structure to make strategic decisions,

making it difficult to prioritize initiatives, determining the value of initiatives,
decide where to commit resources, and decide when to say “no” to
opportunities and developments.

The easiest way to determine an organization’s strategy is to find the strategic

direction and strategic objective statements often issued by the upper
management.
STEP 1: CLARIFY THE STRATEGY
It is also important to determine which products or market the organization has
retired from, especially when getting out of a market has affected the company’s
direction.

Another aspect of strategy clarification is the determination of how clear the

strategy is in the minds of the people throughout the organization.

Unless the strategy is clear to those who implement it, the process of developing
a strategy will be nothing more than an academic exercise with little benefit in
the business.

It is possible that the lack of focus in the problems in the communication

process, or in the organization design and not because of the strategy itself.
 STEP 1: CLARIFY THE STRATEGY
Distinctiveness and Advantage

One mark of a winning strategy is that it distinguishes a company from its competitors to create a
competitive advantage in the marketplace.

If organizations do not make a particular attempt to determine how to concentrate on initiatives

and commitment of resources, they become distracted, and their performance become
unexceptional.

Organizations that spend all their resources and time trying to do everything will end up being
viewed by customers as following a “me too” strategy that offers nothing different, unique, or better
in comparison to the other players in the market.
Businesses that have a competitive advantage in the marketplace have usually made a deliberate
effort to achieve world-class performance in a certain area.

Businesses that are ambiguous about their strategy are also uncertain about how to focus
resources and management effort to become world class.
 STEP 1: CLARIFY THE STRATEGY
Sources for finding strategy clarification information.

The audit team should determine what kind of information is needed to complete the strategic
audit.

Depending on the objectives of the audit and the available time and resources, the team might
decide to use all possible sources or very few of them.

For instance, the culture of a certain company caused people to feel uncomfortable with analysis
and decision making processes that weren’t based on large amounts of data, almost to the point
of excess,

In this case, a strategic clarification survey might have been unsuitable for this organization since
it would have been viewed by employees “ just another survey to keep me from doing my work”

As such, the audit team should focus more on interviews of people outside of organization and
document analysis as ways on gather data needed
STEP 2: MEASURE VIABILITY AND
ROBUSTNESS
Measuring Viability and robustness helps the leadership team to assess strategies and
ideas against future world scenarios to ascertain whether the strategies can be
accomplished and maintained by the organization. By looking at both the market and
financial viability and robustness in different scenarios, management team can see what will
create advantage in the future and what key actions need to be employed to observe
changes in business conditions.

As industries change, so must business objectives and strategies. Strategies should not
be completely changed every year, but it should steadily progress to keep pace with the
new requirements. Testing viability and robustness helps the audit teams verify the current
performance and future industry requirements.

Current Viability refers to the current market share, success ratios, and return of
investment of the present strategy.
Future Viability and Robustness refer to testing of business strategies against future
industry or world scenarios.
STEP 2: MEASURE VIABILITY AND
ROBUSTNESS
Current Performance and Viability

Current performance and viability look at the alignment between the organization, its
environment, and strategy.

Should be reviewed against the organization’s goals and objectives.

To determine the current performance, the audit team should ask the following questions
●Is the organization meeting its strategic objectives?
●What areas in the business have exceeded expectations? Why?
●Which areas need improvement?
●How does the performance of the business compare to that of comparison?
●How does the company’s current performance compare to the past performance?
STEP 2: MEASURE VIABILITY AND
ROBUSTNESS
Future Performance and Viability
The current(or a new) strategy’s future performance should be also be
determined. The capacity of a strategy to perform in the future under different
scenarios makes a strategy viable and robust. To determine robustness, the
leadership team should come up with different scenarios that describe possible
changes in the future business environment. They should brainstorm contrasting
scenarios, as the purpose of this exercise is to develop unique scenarios that
describe possible changes in the business environment.

The next step is to test the business strategy, in each of the generated scenario,
The audit team should ask questions such as “Will competitive density increases
or decreases? Amongst other questions.
STEP 2: MEASURE VIABILITY AND
ROBUSTNESS
Afterwards, future financial viability should be also determined by looking at the
returns received or investments required to do business. To help determine future
financial viability, the team should ask the following questions:

●Is The firm making more money that it is investing in daily operations? If not, why?
●To increase these returns, what must be done?
●What are the factors that influence return on investments?
●Which factors need to be emphasized or improved?
●In which scenario will this strategy led to more sales, lower entry costs, or decreased lead
time?
STEP 3: OUTLINE BUSINESS PROCESS
Refers to the overall workflow within an organization and
include elements such as product design, prototype and
testing, manufacturing, and shipping and logistics.

A good process analysis will help the leadership team to

visualize what must be done given the company's strategy,
and how those processes can be improved.
MACRO WORKFLOW
To decide which processes a business should focus on, the
audit team should construct a macro workflow for
delivering the organization's products and services to its
customers.

A macro workflow includes everything from the initial

conceptualization of a product idea all the way through to
sales and service.

Operations in Coca-Cola are activities and procedures that

transform raw materials into finished products.
MACRO WORKFLOW
PROCESS ANALYSIS & IMPROVEMENT
The processes in the macro workflow can be divided into the
following four categories
Unit of competitive advantage (UCA) work – Distinguishes a
company from its competitors and creates an advantage for it in the
market.

Value-added support work – Facilitates the accomplishment of the

UCA work.

Essential support work – Does not create advantage nor facilitate

the work that creates advantage but must be done if businesses are
to continue to operate.

Non-essential work - Creates disadvantage for a business because

it is work that has lost its usefulness but continues to be done
because of tradition.
PROCESS ANALYSIS AND
IMPROVEMENT WORK
PROCESS IMPROVEMENT THROUGH
BEST PRACTICES ANALYSIS
Best practices analysis is used to learn about analogous
processes from similar organizations, or from organizations
engaged in similar activities.

An interchange is devised in a best practices analysis

whereby businesses can exchange good ideas about what
has and has not worked for them.

Best practice analysis focuses more on how things get

done than on what gets done.
STEP 4: DETERMINE CAPABILITIES

Capabilities are collections of separate skills that are

essential in the delivery of products or services that
give a business its competitive advantage.

Two parts of capability assessment:

1. The capabilities needed to execute the strategy

must be determined.
2. The current level of ability in terms of those
capabilities must be assessed
 CAPABILITIES NEEDED AND CURRENT
STATE
Review its processes that give its customers the products and services they want by
examining the process analysis completed in the earlier steps.

Ascertain the level of capability an organization has in these core processes by speaking
to a variety of people that are involved with the business

In addition, many companies continue to do what they do very well without determining
whether those capabilities fit the requirements of their customers.
STEP 5 - DETERMINE APPROPRIATE ORGANIZATIONAL
DESIGN AND RESOURCING

This part of the analysis looks at the alignment issues

between the environment, the strategy, the skills
required to achieve that strategy, and the
organizational structure.

In this step, the management team can design an

organization with aligned systems that will allow then
to execute its strategy.
 ALIGNMENT

To diminish the loss of organizational energy that

normally occurs when organizational structures and
systems are misaligned with strategy
GATHERING ALIGNMENT DATA

The Objective of the leadership team is to find

misalignments and propose modifications in the
organizational design that will ensure continued
alignment.

Ways of determining how well the organization is

aligned with its strategy and environment:

• Focus groups discussion

•Surveys
•Interviews
ORGANIZATIONAL STRUCTURE

system that outlines how certain

activities are directed in order to
achieve the goals of an
organization.
RESOURCING DECISIONS

Resourcing involves the attraction

and recruitment of individuals into
the right role at the right time and
cost.
 BENEFIT OF OUTSOURCING

it allows managers to concentrate its

resources on improving the source of the
company's competitive advantage.
it allows access to exceptional products
and services offered by firms that make
those offerings their core work.
BENEFIT OF OUTSOURCING

it allows managers to concentrate its

resources on improving the source of
the company's competitive advantage.
it allows access to exceptional
products and services offered by
firms that make those offerings their
core work.
STEP 6- ASSES THE COMPANY'S CULTURE

Culture refers to the set of shared

values that influence behavior and
direction over time.
STEP 6- ASSES THE COMPANY'S CULTURE

Culture refers to the set of shared

values that influence behavior and
direction over time.
STEP 7- INTEGRATE THE ELEMENTS OF THE
ORGANIZATIONAL ASSESSMENT

Organizational component Findings Impact

• What is your strategy? How has it changed in the past 5 years?
How is it likely to change in the future?

• How viable and robust is our business? How does our current
strategy hold up under various future scenarios? What measures
determine viability and robustness

• What are our major business processes? What aspects of those

processes should be emphasized given our strategy?

• What capabilities do we have now? Given or currents strategy,

what capabilities do we need to develop? What will it take to
develop or acquire those capabilities?

• How well is our structure aligned with our strategy? Do our

systems support our strategy? Are there systems that could be
contracted out to others?

• Do our values and beliefs support the implementation of our

strategy? How difficult will it be to accomplish the goals dictated
by our strategy given the way things are done in our company?
PART 3: INTEGRATION AND IMPLEMENTATION

4 Elements that managers should consider when

introducing organizational changes:

Structure follows strategy

Plans for change must be widely
owned
Implementation should start start with
what is core to gaining advantage
Avoid committing the following
common mistakes
THANK YOU!