Prateek Thakur MBA E4B

36080003918

24-03-2020 SM ASSIGNMENT
Q. Highlight the importance of Strategic Audit in an organisation. Also write down the process
of Strategic Audit.

An important part of business strategy is concerned with ensuring that these resources and
competencies are understood and evaluated - a process that is often known as a "Strategic
Audit".

A strategic audit is an examination and evaluation of areas affected by the operation of a

strategic management process within an organization. A strategy audit may be needed under
the following conditions:

 Performance indicators show that a strategy is not working or is producing negative

side effects.
 High-priority items in the strategic plan are not being accomplished.
 A shift or change occurs in the external environment.

Importance of strategic Audit

It Evaluates Your Current Strategy

The strategic audit asks you to look at how your business views itself currently in the
marketplace, and where it wants to view itself. As part of this, a SWOT analysis will be done
to reassess the strengths, weaknesses, opportunities and threats, ensuring your current
strategy are working towards success based on these. If the findings are different and your
current strategy is no longer in line with these, then it needs to be re-evaluated.

It Highlights Strategic Risks

Failing to recognise risks has proven to be the undoing of many businesses, and traditional
audits rarely incorporate risk identification in the process. It’s important to highlight the risks
to your success, which could include a drop-off in demand for your products/services or a
critical manager leaving the company to work with a competitor. A strategic audit sheds light
on these risks, allowing you to decide which ones are the most significant and how you can
act to avoid a critical situation down the line.

It Assesses the Need for Resource Changes

If your business goals don’t match up with the resources you currently have available, then
you must either change your goals or adjust the resources available. For example, if you want
to open up a new store in the next year, but you currently have negative cashflow at your
current store, you have to assess if the goal is realistic. Another example would be if your
goal was to bring a new innovative product to market, but have no research and development
dedicated to discovering innovative products.

Implementing the Strategic Audit

Prateek Thakur MBA E4B
36080003918

The findings of the strategic audit will need to be implemented, but it isn’t as simple as that.
You also need to consider how you will measure and evaluate the performance of the
implemented changes. It’s advisable to create a plan for how you intent to measure the
effectiveness of the implementation, to evaluate whether or not the changes worked as
intended. 

Steps of strategic Audit

Step 1: Situation Assessment

 What is our purpose? What is our "strategic intent"?

 How do we rank in our business and why?
 What is our fiscal condition and why?
 What is the relationship between the business strategy, organization environment, and overall
performance?
 What is our sustainable competitive advantage? What core competencies do we possess?
 What are our strengths? Do we use these fully?
 What are our weaknesses? How can we solve or mitigate these?
 What are our opportunities? How can we exploit these?
 What are the threats to us? What can we do about them?

Step 2: Strategic Managers

 What is our collective strategic vision?

 Do the executives possess the right leadership skills and abilities?
 Are the top managers entrepreneurial and creative?
 Are they willing to take risks?
 Are they analytical?
 Do they possess necessary organization talents?
 Do they possess necessary interpersonal skills?
 Are they willing to change?
 What are their values? What is our social responsibilities and business ethics?

Step 3: Environmental Scanning

 How do we evaluate the scope of our operations and primary competitors?

 What industry forces work for and against us? What strategic group are we in, and what are
the mobility barriers?
 Whom do we serve and who has a stake in our actions? What are their needs and
requirements?
 What major products and services do we provide these stakeholders?
 How do we provide these products and services?
 How can we improve these products and services?
 Based on the above, do you think stakeholder support will remain about the same?
 Based on the above, what is the scenario for the future?

Step 4: Strategy Evaluation

 What business(es) should we be in to add shareholder value? What is our generic business
strategy? How about our international strategy?
 How do you evaluate this current strategy?
 What really makes the difference between success and failure in our business? What are the
industry key success factors?
Prateek Thakur MBA E4B
36080003918

 Is the strategy consistent with the foregoing analysis?

 Is the strategy consistent with desired risk, available resources, and timing?

Step 5: Administrative Considerations

 What is the role of headquarters? How are we creating a "learning organization"?

 How are our value-creating activities organized? How should we measure and re-organize
these processes?
 What kind of structure characterizes our organization?
 In what ways and in what directions do our systems focus people’s attention and energy?
 What are the guiding concepts or fundamental ideas around which we have built our
organization?
 What are the basic management characteristics in this organization?
 Describe our approach to human resource management.
 To what extent do the above structure, systems, and processes uniquely reinforce and support
our strategy?
 Can we change and transform the organization?

Step 6: Action Planning

 Which activities will enhance our organization’s performance?

 What are the planning premises?
 What are the expected fiscal results?
 What are the feasible alternatives to these activities?

Step 7: Implementation

 What resources will this action plan require from finance, human resources, marketing,
operations, and other functional areas and departments?
 What changes will have to occur for us to be successful in 2 to 5 years?
 Are there other organizations or individuals we might collaborate with?
 What training is necessary?

Step 8: Performance Evaluation and Control

 When and how will we evaluate performance?

 What are the desired quantitative and qualitative measurements of success?
 Will this strategy justify the needed time and resources?
 Can we afford it?
 Realistically, can we implement this action plan?
 Have we included all supporting programs?
 Can we clearly establish accountability?