Genesis Management Services Pty Ltd
CUSTOMER TYPES
Business
Government
Property
Education
OUTLINE FOR
EVALUATION OF A FIRM What
strengths and weakness in products (or services) have been
dominant in this firm’s history – design features,
quality-reliability, prices, patents, proprietary
position? What
share of its market(s) does the firm now hold, and how
firmly? Is this
share diversified or concentrated as to number of
customers? In what
phases of their life cycles are the present chief products and
what is happening to prices and margins? How do
customers and potential customers regard this firm’s
products? Are the
various product lines compatible marketing-wise,
engineering-wise, manufacturing-wise? If not,
is each product line substantial enough to stand on its own
feet?
1.PRODUCT LINES AND BASIC
COMPETITIVE POSITION
1.1 Past
1.2 Present
1.3 Future
Is the market(s) as a whole expanding or contracting, and at what rate?
What is the trend in this firm’s share of the market(s)?
What competitive trends are developing in numbers of competitors, technology, marketing, pricing?
What is its vulnerability to business cycle (or defence spending) changes?
Is management capable of effectively integrating market research, R & D, and market development into a development program for a new product or products?
2. R & D OPERATING DEPARTMENTS
2.1 R & D and Engineering
What is the nature and the depth of its R & D capability?
Of engineering capability?
What are engineering’s main strengths and weaknesses re creativity, quality-reliability, simplicity?
Is the R & D effort based on needs defined by market research, and is it an integral part of an effective new product and development program?
Are R & D efforts well planned, directed, and controlled?
What return have R & D dollars paid in profitable new products?
Have enough new products been produced?
Have schedules been met?
2.2 Marketing
Nature of the Marketing Capability – What channels of distribution are used?
How much of the total marketing job (research, sales, service, advertising and promotion) is covered?
Is this capability correctly tailored to match the nature and diversity of the firm’s product lines?
Is there a capability for exploiting new products and developing new markets?
Quality of the marketing capability – Is market research capable of providing the factual basis that will keep the firm, especially its new product development and R & D programs, truly customer-oriented?
Is there a capability for doing broad economic studies and studies of particular industries that will help management set sound growth and/or diversification strategies?
2.3 Manufacturing
What is the nature of the manufacturing processes, the facilities and the skills – are they appropriate to today’s competition?
How flexible are they – will they be, or can they be made, appropriate to tomorrow’s competition?
What is the quality of the manufacturing management in terms of planning and controlling work schedule-wise, cost-wise, and quality-wise?
Is there evidence of an industrial engineering capability that steadily improves products and methods?
Does manufacturing management effectively perform its part of the process of achieving new products?
2.4 Summary on R & D and Operating Departments
Is this a complete, integrated, balanced operation; or have certain strong personalities emphasised some functions and neglected others?
What is the quality of performance of key R & D and operating executives; do they understand the fundamental processes of management, namely planning, controlling, organising, staffing and directing?
Are plans and controls in each department inadequate, adequate or overdeveloped into a “paperwork mill”?
Is there throughout the departments a habit of steady progress in reducing overhead, lowering breakeven points and improving quality?
Are all departments future-minded?
Do they cooperate effectively in developing worthy new products geared to meet the customer’s future needs?
3. Financial analysis and financial management
3.1 Financial Analysis
What main strengths and weaknesses of the firm emerge from analysis of the trends in the traditional financial data: earnings ratios (to sales, to tangible net worth, to working capital) and earnings-per-share; debt ratios (current and acid tests, to tangible net worth, to working capital, to inventory); inventory turnover; cash flow; and the capitalisation structure?
What do the trends in the basic financial facts indicate as to the firm’s prospects for growth in sales volume and rate of earning?
Does ‘quality of earnings’ warrant compounding of the earnings rate?
3.2 Financial Management
What is the quality of financial management?
Is there a sound program for steadily increasing return on investment?
Do the long-range financial plans indicate that management understands the cost of capital and how to make money work hard?
Have balance sheets and operating statements been realistically projected for a number of years into the future?
Is there careful cash planning and strong controls that help the operating departments lower breakeven points?
Are capital expenditures inadequate or excessive with respect to insuring future operating efficiently?
Are capital investment decisions based on thorough calculations?
Does management have the respect of the financial community?
Is the firm knowledgeable and aggressive in tax administration?
4. Top Management
4.1 Identification of Top Management and Its Record
What person or group constitutes top management?
Has present top management been responsible for profit-and-loss results of the past few years?
4.2 Top Management and the Future
What are top management’s chief characteristics?
How adequate or inadequate is this type of management for coping with the challenges of the future?
Will the present type and quality of top management continue?
Will it deteriorate, will it improve, or will it change its basic character?
4.3 Board of Directors
What influence and /or control does the Board of Directors exercise?
What are the capabilities of its members?
What are their motivations?
5. Summary and evaluation strategy
What other factors can assume major importance in this particular situation? (Use a check list.) Of all the factors studied, which if any, is overriding in this particular situation?
Which factors are of major importance by virtue of the fact that they govern other factors?
What are the basic facts-of-life about the economics and competition of this industry now and over the next decade?
In view of this firm’s particular strengths and weaknesses, what are the odds that it will succeed and at what level of success, in this industry?
What are the prospects of its succeeding by diversifying out of its industry?