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Tangible resources can be divided into financial

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Unformatted text preview: ment Accounting 2 – Semester 2 2010 6 The Internal Environment The Internal Environment Background After looking at the Opportunities and Threats, we now examine the Strengths and Weaknesses of an entity. The internal environment is defined by looking at the resources, capabilities and competencies of an entity. Together, these can combine to become a sustainable competitive advantage, which will put the entity at an advantage against others in the market. Tangible Resources One of the areas we look at in an internal analysis are the resources the entity possesses. All resources are divided into tangible and intangible resources and are described with nouns. Tangible resources can be divided into: • • • • Financial Resources This includes anything related to finance such as an entity’s ability to raise more funds, generate funds and invest those funds. Ratio analysis is usually used here. Physical Resources This looks at the physical assets of the entity. Usually, the flexibility of the entity’s property, plant and equipment, and access to raw materials, are looked at when assessing this resource. Technological Resources These are things such as patents, copyrights, trademarks, trade secrets and slogans. Organisational Resources This is the formal reporting structure including planning, controlling and coordination. Looking at evaluation and control systems within the entity usually assesses this. Intangible Resources Intangible resources are much harder for an entity to identify than tangible resources. As such, it is usually hard for competitors to imitate. These are separated into: • • • Human This is the workforce of the entity and includes their knowledge, expertise, capabilities and skills. We identify this through pay rates and training etc. Innovation and Creativity This is the capacity of the entity to innovate and create with their technological and scientific skills. The amount of innovation can be generally found by looking at the number of ideas made, the development of ideas and the skills people in the entity possess. Reputation This is how the entity is perceived in the stakeholder’s eye but mostly with the customer and the supplier. This can be deduced by looking at the amount of repeat customers, product performance and consistency. Management Accounting 2 – Semester 2 2010 7 The Internal Environment Capabilities Capabilities are a group of resources that are purposefully integrated together to achieve a specific task. Resources themselves do not provide a capability for an entity. Capabilities are usually formed over the life of the entity and are a mix of both tangible and intangible resources. They are described using verbs. Value Chain Analysis Porter’s Value Chain Analysis looks at the steps necessary to create a product/service and then sell it (the primary activities), plus, all the support activities. The primary activities are: • • • • • Inbound Logistics Inbound logistics does all the receiving, storing, handling and scheduling of all incoming goods such as raw materials. This should not be confused with Procurement, which will be covered later. Operations Operations deals with all the activities required to transform the inputs into outputs, such as plant and machinery operations. Outbound Logistics This deals with the collection, storing and distribution of the final product or service to the consumer. These processes include shipping processes and warehousing. Sales and Marketing This is the inducement of potential customers to buy the product/service by using promotion, advertising, and identification of the needs of the target market. Services These are the services given after the sale of a product to enhance and maintain the value of the product to the customer. This can be responding to customer warranty claims and needs. The supporting activities are: • • • • General Administration In this sense, general administration does not mean things such as paperwork for stationary. It means those that support the entire company, not just one area, such as the CEO. Human Resource Management This section is self ­explanatory. This section works to hire, train, develop and remunerate employees through effective recruiting, retention and relations. Technology Development This is the development of technology, most usually research and development. Pro...
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