Strategic Audit

Strategic Audit
i. How has your company done relative to its competitors – does it have competitive advantage
1. Key financial metrics for the industry are important (See Table 1.1)
2. There are often important non-financial metrics for a given industry (e.g. occupancy rate for hotel chains, new customer activations for

wireless network carriers, new product releases/patents for technology companies, etc.)
3. Don’t forget metrics that are more important to your industry (it’s OK to use more common metrics like ROA/revenue growth/TWCC, but don’t

only present these)
4. Make sure to benchmark (against competitors, against the company’s past performance, and against stated goals (when available; theses may be

disclosed in annual reports or investors’ meetings)
ii. How has the current strategy affected performance (remember that some long term strategies entail short-term sacrifices early in their

implementation)?

For the Strategic Audit you will be performing a check-up on the condition of a company of your choosing and using what you learn to make

strategic recommendations going forward. The link between the past (in particular: how the company has performed over time with an emphasis on

competitive advantage-which means you have to think of performance relative to others), the present (in particular: the current strategy and

trajectory), and the future (in particular: what type of strategy would best enable the company to achieve or maintain competitive advantage in

light of the internal and external environment) is key. For each section make sure you tie back to the company’s strategy.

For the presentation you can think of yourselves as a team of consultants who are presenting your strategic audit to the company’s board of

directors and top management team (CEO, CFO, COO etc.). Presentations should be about 10 minutes long and cover the four main parts (strategy,

performance, external, and internal analysis) and the conclusions and recommendations.

For the written report, each section should be about a page long (excluding tables and figures) with 1-2 pages for the conclusion and

recommendations for a total of 6-7 pages.

Below is a guideline of what you can include in each section. You do not have to stick to this guideline rigidly, but everyone should address

points with bold typeface.

I. Executive Summary
i. A brief description of the company and industry (present general facts you think here and try not to include them in the rest of the

report)
ii. An overview of the industry/industries in which your company operates
iii. Key information from the 4 parts of the audit that you will expand on in the body
iv. A short description of your conclusion (to be linked with the strategy/performance/internal/external analyses later, and expanded upon

in the conclusion)
II. Audit
a. Strategy Analysis
i. What is the company’s current strategy?
1. Try to go a more in depth than the two generic strategies (differentiation/cost leadership)
2. For diversified firms think about major business units’ strategies, the overall corporate strategy, and how they fit together
ii. How does your company’s strategy compare to the strategies of its competitors?
iii. How well has the company done in pursuing its strategy/has it changed parts of its strategy?
b. Performance Analysis
i. How has your company done relative to its competitors – does it have competitive advantage
1. Key financial metrics for the industry are important (See Table 1.1)
2. There are often important non-financial metrics for a given industry (e.g. occupancy rate for hotel chains, new customer activations for

wireless network carriers, new product releases/patents for technology companies, etc.)
3. Don’t forget metrics that are more important to your industry (it’s OK to use more common metrics like ROA/revenue growth/TWCC, but

don’t only present these)
4. Make sure to benchmark (against competitors, against the company’s past performance, and against stated goals (when available; theses

may be disclosed in annual reports or investors’ meetings)
ii. How has the current strategy affected performance (remember that some long term strategies entail short-term sacrifices early in their

implementation)?
c. External Analysis
i. What is the current industry structure/level of competition (perfect competitionmonopoly) and what are the consequences (See Table 2.7)
ii. Use at least one of tools described in our textbook (6 category description ofthe general environment in Figure 2.1, Porter’s 5 Forces,

PEST,GDPest, etc.)
iii. What are the opportunities and threats related to the external environment?
iv. How does the external environment influence the company’s strategy?
d. Internal Analysis
i. What are the key resources and capabilities for your company and are there resources/capabilities it needs to acquire/develop? In what

part of the supply chain are resources/capabilities deployed?
ii. Analyze whether the key resources are VRIOand the consequences (See Table 3.3)
iii. What strengths and weakness exist due to the internal environment?
iv. How does the internal environment influence the company’s strategy?
III. Conclusion
a. Strategic Options Identifications and Evaluation
i. What works what doesn’t and potential fixes?
ii. Try to describe a couple different paths the company could pursue and what the advantages, disadvantages, and risks exist for them?
b. Recommendations to the Board of Directors
i. What should the company do going forward?

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