Asset Management Ratios

Once you have organizedprocess, the next step in the process is to assess your current situation. organization needs to take a hard look at itself - Where are we going? Where are we now? What are our choices? In order to assess your current situation, you will need to collect information so that everyone understandscurrent situation. This will involve a review of past history, a critique ofcurrent mission statement, analysis of organizational strength's, weaknesses, opportunities, and threats. You also need to understandexternal environment - current competition, customer trends, technology trends, demographic changes, etc.

Information can be collected through surveys, questionnaires, interviews, and other analytical techniques. planning team will conduct situational analysis by following a series of steps, such asfollowing:

1. Collect background information to assess the situation. Start with a history oforganization, current mission, significant changes, stages of growth, etc. Have someone give a presentation on the history of the organization. Reach consensus on how successful the organization has been inpast few years.

2. Assess the strengths and weaknesses oforganization. Confine your list to the most significant strengths and weaknesses. Reach agreement on a good list. This list will help indevelopment of strategic objectives.

3. Next, develop a list of significant opportunities and threats facingorganization's future. You will need to gather information about external forces - customers, competition, social trends, technology, political, etc. Ifplanning team comes up with a long list, ask everyone to listmost significant eight and reach consensus on a list of eight opportunities and threats.

4. Now that you have identified strengths, weaknesses, opportunities, and threats, you need to review the mission statement. Does it fit? Should it be broader or more narrowly focused? A good mission statement should captureessence of why your organization exists. A good mission statement includes the following characteristics:

- Provides overall direction and vision fororganization.
- Conveys an image of success for addressing the future.
- Defines the competitive boundaries oforganization.
- Usually is expressed in relation to marketplace served and products / services.
- Avoids being too specific so as to allow room for change.

EXAMPLE 3 - PPC Software - Strengths and Weaknesses Strengths:
Research & Development is finding new product innovations.
Customer loyalty is strong - high repeat customers.
Good reputation for quality software programs.
Weaknesses:
Organization is top heavy with Managers.
Market share is declining from new competition.
Internal production facilities need upgrading.

EXAMPLE 4 - Excaliber Corporation - Opportunities and Threats

Customers:
Customers are demanding a personal level of service in several areas - technology, consulting, planning, etc.
Competition:
Larger organizations have more resources for providing a better diversity of services to customers.
Technology:
Internet will become a major channel for distributing services.

main output from situational analysis is to compile a list of critical issues. A list of six to eight critical issues isbasis for preparing a formal strategic plan. It is helpful to categorize critical issues in relation to significance and probability of occurrence. table below categorizes four different critical issues:



(1) diversity of products we offer is not wide enough to meetdemands of customers.
(2) Overseas competition can produce similar products at much lower costs.
(3) Customers are seeking fabrication services in addition to products only.
(4) There is a shortage of highly skilled operating personnel.

Situational Audits

One way to assess a situation is to conduct a situational audit. Situational audits represent an analysis of past, present, and future aspects oforganization - production, marketing, financial, competition, etc. objective of a situational audit is to identify key trends and events that will impactorganization. Situational audits also provide a way of discussing major issues. This can help jump-startcreative process when there is internal resistance.

Just like situational analysis, situational audits gather basic information for preparingStrategic Plan - Mission Statement, Strengths, Weaknesses, Opportunities, Threats, and Critical Issues. Situational audits also includeexpectations of stakeholder groups - executive management, operating personnel, investors, employees, customers, etc. Past performance is reviewed - sales, market share, product profitability, customer trends, etc. Situational Audit is similar to situational analysis except that it is more formal and structured. Outside consultants are sometimes used to conduct situational audits.

Making Situational Analysis Work

Atheart of situational analysis isneed to better understand what is going on and to properly account for what is happening. This look inside and outsideorganization leads to a list of 6 to 8 critical issues. Before we proceed to develop a strategic plan for dealing with these critical issues, it is imperative that we find some degree of overlap or matching with:

- What it is you are trying to accomplish (Mission)
- What are you capable of doing (Strengths and Weaknesses)
- What is required and possible (Opportunities and Threats)

If there is no overlap between these three elements of strategic planning, then you should not proceed to develop a formal strategic plan. For example, suppose your organization has following mission statement:

We want to beglobal leader inmanufacture of automotive spark plugs.
However, your resources are limited to production and distribution in North America and certain parts of Europe. This lack of overlap or fit precludes a strategic plan. You need to go back and findright fit before moving tonext phase inprocess - developingstrategic plan.