The Strategic Audit - a SWOT Approach

The strategic audit is concerned with identifying the organizations current position
relative to its industry, the economy, and other major variables such as its
stakeholders it involves a management audit of the organization in conjunction
with an environmental analysis. In this appendix, the general format of the analysis
follows this pattern: Determine the organizations current position in terms of its
mission, objectives, master policies, and threats (SWOT ). By employing this
audit, we are fulfilling the role of organizational strategists examining mission,
policy, and information in order to determine SWOT.
Management Audit
Mission
1. Has the organization identified its mission? If so, how appropriate is it?
2. What is its mission?
Objectives
1. Does the organization have strategic objectives? If so, how good are they?
2. What are they?
Enterprise Strategy ( Societal Response)
Known Contingencies
1. What is the history of the organizations social responsibility
efforts?
Consider responses to consumerism, community and pressure
groups, and so on.
2. Is the organization ethical?
3. What is the organizations relationship with government?
Unknown Contingencies
1. What possible surprises might occur for this organization-for
example with government, competition, the economy,
pressure groups, and so forth? What weak signal exist?
Corporate Strategy ( Mission Determination )
1. Is this competing or seeking a niche? Is this action
appropriate?
2. Does this organization have a plan for growth? How good is it?
What type of growth is it? How appropriate is it?

3. Have the following been considered or are they being used:

diversification, vertical or horizontal integration, retrenchment,
stability, investment reduction, turnaround, service expansion,
service concentration, combinations, and the like? If any are
being considered or used, are they appropriate?

4. Does the organization really know what business it is in?

5. Is the organizations location strategy sound?
6. Is the organizations service quality strategy sound?
7. Are the organizations basic action strategies appropriate to the
industry, the economy, its resources? What else should be
considered or undertaken?
8. Does the organization have a strategic advantage? What is it?
How good is it?
Business Strategy ( Primary Mission )
Competitive Strategies
Economic Functional Strategies-Marketing
1. Service:
a. Has the organization identified the basic consumer need it
wishes to satisfy? Is it appropriate? Is introduction of new
services advisable?
b. Are width, depth, differentiation, service life cycle, image
packaging, and the like satisfactory?
c. Is technical support satisfactory?
d. Is the service competitive? If not, why?
e. Are any changes to the service necessary?

2. Distribution:
a. Are purchasing, inventory control, and final distribution
coordinated? Are they standard for the industry? If not,
why? Are they too costly, too burdensome on the effort, or
the like? Is a make-or-buy decision necessary?
b. Does the organization really know who its customers are and
how to distribute the service to them? Would vertical
integration, help, hinder?
c. Does the organization use sound management techniques in this
area ( EOQ, ROP, ABC, modeling, simulation )?
d. Are service distribution channels appropriate, effective, too
long, too short, fully developed?
e. Does the organization shop for better prices, discounts, and
so on?
f. Does it keep control of the flows and stocks at various
points in the process? Are they sufficient?
g. Does the organization evaluate systems, distributors, results?
3. Promotion:
a. Is promotion strategy relevant to service life cycle, target
market, packaging, available funds?
b. Is promotion push or pull, and which would be best?
Both?
c. Does selling emphasize personal selling, mass marketing, or
sales promotion? Which would be best? All? How are salespersons and media selected and evaluated?
d. How are salespersons rewarded? How effective are
territories, sale goals, sales managers?
e. Is the promotion strategy effective? If not, why?

4. Price:
a. What is the basis for the organizations pricing strategy? Is this strategy
satisfactory given the industry, economy, and so
on?
b. Is the service price sensitive? Has the organization considered this?
5. Target Market:
a. Does the organization know the service market? Is it a correct
target market?
b. Has the organization established a marketing mix (service,
distribution, promotion, and price) appropriate to this
market?
c. Has the organization correctly segmented the market? What is
the future of its markets?

d. How do the organizations customers make purchasing

decisions? Does it know how its customers make such
decisions?
Functional Strategy (Mission-Supportive)
Economic Functional Strategies
Operations
1. Facilities and Equipment:
a. What factors have determined where facilities have been
located? Are these factors appropriate?
b. In what condition are organizational facilities and
equipment?
How does their condition compare with conditions typical
in the industry? What implications can be drawn?
c. Are buildings properly designed and equipment arranged
according to major relevant variables?
d. What is the impact of Occupational Safety & Health
Administration on buildings and equipment?
2. Work Design:
a. Is work design satisfactory? What options exist?
b. Do service standards exist for workers? If not , why?
If so, how good are they?
c. Is satisfactory use made of operating leverage?
3. Operations Control:
a. Is the organization properly scheduled, routed, in coordination
with materials acquisition? If not, why?
b. What types of cost controls and service controls exist?
How good are they?
4. Quality Assurance (QA):
a. Does the organization have QA programs for design, inputs,
production, distribution, installatio? How good are they?
b. Does the organization use appropriate QA methods? What are
its rejection rates? How do they compare with industry
averages?
c. What is the organizations customers opinion of its services?
Does the organization know customers opinions for sure?
What implications can be drawn?

Finance

1. Performance Measurements:
a. Are any trends in balance sheet items, income statement
items, cash-flow statement items apparent? What implications can be drawn?
b. Are there any unusual items in financial statements? Why?
c. Are there any trends in company fortunes? Is this fact
significant?
d. Is the organization aware of profit per service, per line, and so on? How
good are these profits?
e. Does the organization target for ROI, gross margin, profit or the like?
2. Policies:
a. What is the organizations policies and how appropriate are
they for the following: debt, dividends, cash usage,
liquidity, taxes, growth, working capital, capital assets
acquisition, budgets,depreciation, accounts receivable,
accounts payable, credit, collections, funds acquisition,
transfer pricing?
3. Overall Situation:
a. What is the organizations working capital situation?
b. Does the organization have sufficient working capital for
growth? If not, why?
c. Is the organization sales oriented or profit oriented?
d. Can it acquire funds? If not, why? Does it have a funds
strategy? How good is this strategy?
e. Is stock ownership an important factor? How?

f. What external factors affected the organizations profits in

recent years, and how well did the organization handle those factors?
g. Does the organization use appropriate analysis techniques in the financial
area?
Personnel
1. Overall Personnel Practices:
a. Does the organization have a personnel department? If not,
who handles personnel funtions?
2. Employment Planning:
a. Does the organization have employment planning? How
good is it?
b. Do job descriptions and specifications exist? Are they upto- date and realistic?

3. Recruitment and Selection:

a. Does the organization recruit appropriately?
b. Does it select on some scientific basis or does it just seem
to guess? Is its testing valid & reliable?
c. Are interviews performance ratings valid & reliable?
4. Employee Rewards and Benefits:
a. How are employees rewarded? Is this method appropriate?
b. How do pay and benefits compare with those in the
industry? In the organizations geographic area? What
implications can be drawn.?

5. Orientation and Development:

a. Does the organization have an orientation program? How good is it?
b. Does the organization have employee and
managerial development programs? How good are they?
6. Employment Security, Evaluation, and Control:
a. How does the company perform in these areas:
absenteeism, turn-over, safety, pensions, profit sharing,
insurance, layoffs, terminations?
b. How is employee performance rated, controlled for various
jobs? Are these systems appropriate?
7. Labor Relations:
a. How good are the companys labor relations?
b. Is the organization unionized? What are the impacts of
unionization? What is the organizations relationship with the union?
c. Could this organization be unionized? Why?
d. What do employees think of this organization? What impacts
does their opinion have?
8. Equal Employment Opportunity (EEO):
a. Does the organization have an EEO program? If not, why? If so, how good
is it?
9. How good is the organizations productivity management program?

Information Systems
1. Do managers get the information they need to make decisions?
Is this information accurate and timely? Is the information
related to objective accomplishment? Does the organization have a
human resources information system?
Other
1. What else in the economic functional area should be
considered?
For example, what role does R&D play in the industry and
how sound is the organizations R&D program? What is the
status of its market research effort?
Management Functional Strategies

Planning
1. Does the organization have objectives and plans to reach those
objectives for each of the major economic functional and
management functional areas? For its major services? How
good are those plans and objectives?
2. Does this organization have a plan for the planning function
vs. a haphazard approach?
3. Do its plans meet the criteria suggested in the text?
4. Are planning studies, feasibility studies performed? How good
are they?
5. How are planning and control coordinated? How well?
Organizing
1. Division of Labor, Establishment of Roles:
a. How are roles established? Is this procedure appropriate?
b. What evidence, if any, is there that employees are
dissatisfied with their jobs? What impact does this have?
2. Distribution of Authority:
a. Is the distribution of authority correct for this organization? If
not, what distribution would be better?
3. Structure:
a. How do size, technology, environment, geographic factors,
informal organization, management prerogatives and
philosophy, and strategy affect the organizations
structure?
What impacts do these effects have?
b. Does a better structure exist for this organization? What is it?
Implementing
1. Staffing:
See comments under personnel.
2. Leading:
a. What is the dominant leadership style of the organization?
Of its top managers? Are these styles appropriate?
b. Should there be some change in the distribution of

authority?
c. What is the climate of the organization? What impact does
this climate have on productivity?
3. Motivating:
a. How does the organization motivate its employees? Is this
method appropriate?
b. Does the organization rely on organizationwide systems such as
compensation, or do managers also provide motivation?
c. What recognition be a useful form of motivation in this
organization?
Controlling
1. How does the organization control each of the economic and
management functional areas? Are these control appropriate?
2. Are strategic management and operational controls
satisfactory?
Communicating
1. Does the organization have a communication strategy, policies, and
so on? Are they satisfactory?
Decision Making
1. Does the organization use appropriate decision techniques? To
what extent are decisions determined by social relations?
What impacts does this have?

Integrating
1. How does the organization integrate and coordinate? Are its
actions in this area effective and efficient?
Other Considerations
Management and Key People
1. Are managers providing the necessary leadership?
2. Are managers performing the management functions?
3. How would you rate the top managers? Based on what
criteria?

4. What impact do coalitions have on this organization?

5. What changes in top management have occured recently?
How do they affect the organizations performance?
6. How do value orientations affect managers decisions? What
impact does this have?
7. Is top management keeping up with changes in the
environment, management techniques, and the like?
8. How is integration accomplished at top levels?
9. Has top management been making the correct strategic
decisions?
10. What impact does ownership/family have on this organization?
11. Is there a management development program in this organization?
If so, how good is it?
12. Are managers adequately compensated and motivated? What
impact does this have?
Overall Performance (Nonfinancial)
1. Does the organization use appropriate human resources, social,
and environmental performance measures?
2. How good is their performance in these areas?
Environmental Analysis
Marketing Environment
1. Who are the organizations major competitors and what are their
strategies, market shares, ROIs? Has a competitor analysis
been performed? Results?
2. What distinguishes the good performers in this industry from
the poor performers?
3. What is the industrys service life cycle stage? Is the organizations
strategy appropriate to this stage? What are the implications
of the life cycle stage?
4. What trends can be discerned in the economy and the

industry? What are the organizations plans for coping with

them? Are the plans appropriate? What is the relationship
between the economy and service demand?
5. What are the major relevant factors with respect to
demography, technology, style, culture, income, and
government? What will the organization do about these factors?
Are its actions sound?
6. How important are market segmentation, service
differentiation, customer loyalty, new service introduction?
7. What other major factors characterize the industry?
8. What are relationships with suppliers, customers, and
creditors? Possibility of new entrants?
Marketing Management vis-a-vis the Environment
1. Does the organization have a marketing plan? How well is it
implemented?
2. Does the organization use appropriate market research and
forecasting methods?
Performance of Marketing Effort
1. What is companys market share? Its profit margin on sales?
2. What is companys image with consumers, customers? Is the
company aware of this image? Is the image consistent with
company intents?
3. What is the recent history of the companys services? How is
this history related to the economy, to industry activity?
Other Environmental Factors
1. What other major environmental factors not previously
mentioned are likely to affect this organization? What are
these impacts? Examine: pressure groups, government,
international aspects, cultural phenomena, unions,
technology, society, and national resources.