Strategic Audit of a Corporation Analysis

Subject: Strategy
Pages: 12
Words: 3311
Reading time:
13 min
Study level: PhD

Strategic audit tools can be of major assistance to a company due to their ability to provide comprehensive assessments of strategic decisions (Grant, Macdonald, & Sharifi, 2011; Wheelen, Hunger, Hoffman, & Bamford, 2017). As a result, their study is of interest to any person who is involved in the theory or practice of business. The present essay reviews the Strategic Audit of a Corporation framework that is proposed by Wheelen et al. (2017). The framework has been developed as a strategic decision-making tool, and it offers the opportunity for a comprehensive assessment of a corporation. The present essay reviews the goals of the framework, as well as its content, while searching for the possible improvements that would enhance its ability to fulfill its purpose. It can be suggested that the framework is a very helpful tool that can be employed by some corporations without any changes. However, the tool can also be enhanced by considering the needs of a specific business type that has the aims or perspectives which somehow differ from those of Wheelen et al. (2017). Given the advantages and potential weaknesses of the framework, it is reasonable to improve it by preserving or altering its specific elements for the best outcomes in a given situation.

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Audit Analysis

Goals of the Framework

To determine whether the proposed audit is an appropriate tool for various businesses, it is first necessary to establish its intended applications. According to Wheelen et al. (2017), strategic audits are meant to be the tools that enable “a systematic analysis to be made of various corporate functions and activities” with the ultimate aim of making strategic decisions (p. 58). In other words, the authors intended to develop a system of criteria that would perform the role of a guide for analyzing an organization and making relevant decisions within it. If these goals have been attained, it can be suggested that the tool serves its purposes and can, therefore, be employed by the corporations that are interested in the same goals.

In order to organize and systematize their criteria, the authors use the elements of the strategic decision-making process, which they have developed. For example, the first phase of the decision-making process chosen by the authors is the evaluation of the performance of the organization, and the audit’s first set of questions is devoted to the same goal. By employing a specific decision-making framework for the development of their audit, the authors ensure that the latter can guide a decision-making process. Therefore, the framework is technically adapted to serving its intended purpose. However, it is also important to check if the guide is capable of producing high-quality analysis and offering sufficient guidance for decision-making.

In general, both the decision-making process and audit that have been developed Wheelen et al. (2017) consist of the features that the authors view as most important for strategic analysis. First, the authors suggest analyzing the current situation present in the organization, including its performance and strategic posture (that is, its mission, objectives, and so on). Second, corporate governance is supposed to be discussed in detail; the authors suggest paying particular attention to the board of directors and top management. As the third and fourth elements, Wheelen et al. (2017) recommend reviewing the external and internal environment of the organization from the perspective of positive and negative factors. In its next (fifth) element, the audit suggests examining the outcomes of the analysis and assessing the mission and objectives to determine whether they are appropriate for the needs of the organization. The sixth element requires evaluating the possible alternatives and recommending a strategy for future development (that is, making the decision). Finally, the seventh and eighth components suggest implementing the decision and evaluating and controlling it. It should be pointed out that the final component is concerned with the assessment of evaluation and control mechanisms rather than the review of the outcomes of the implementation. Still, the mentioned features offer a rather comprehensive review of a decision-making situation, and the application of the framework is bound to produce a thorough analysis of an organization from multiple perspectives. This fact implies that the framework offers a relatively high-quality analysis.

It is also noteworthy that the mentioned elements comprise a relatively standard approach to business decision-making. Indeed, as pointed out by Franklin (2013) and Shepherd and Rudd (2014), the typical method of making decisions consists of determining the possible options, evaluating them, and implementing the selected one. Franklin (2013) points out the fact that the approach can be enhanced, but it remains a valid and traditional framework that is used by modern businesses. A review of the elements of the audit by Wheelen et al. (2017) suggests that it follows a similar structure. Indeed, the first five components provide an opportunity for the analysis of the situation (the organization and its context), and their application should result in the collection of the data that would be sufficient for the determination of the options for decision-making. The latter process is directly reflected in the audit as its sixth element, and the result of making the decision is expressed through implementation, which is the seventh point of the audit. Finally, the authors decide to single out the evaluation and control, and this element enhances the typical decision-making procedure.

It can be concluded that the design and content of the framework reflect its intended use, which makes it appropriate for its purpose. The audit follows the classic procedures of strategic decision-making and offers a comprehensive coverage of all the key stages, which implies that the tool is capable of performing its primary goal. The analysis of the advantages of the framework can support this idea.

Advantages of the Framework

The framework has a number of advantages, which help it in fulfilling its purpose and make it convenient for use. First of all, the proposed audit specifically focuses on ensuring a comprehensive review of the chosen elements, which is a significant advantage for a strategic tool (Wright, Paroutis & Blettner, 2013). Essentially, this fact is reflected in the number of questions offered by the audit: each of the mentioned elements is supposed to be described and evaluated from multiple perspectives. For example, the internal environment of the organization is represented through the analysis of the structure, culture, and resources, and the latter element is supposed to incorporate six more components, each of which should be considered in great detail. Wright et al. (2013) highlight the fact that comprehensive and concrete tools are particularly helpful, which indicates that the detailed questions of the proposed audit are its notable advantage.

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It is also important that the audit proposed by Wright et al. (2013) is an analytical tool: it ensures that its application results in an analysis of the features of interest rather than their description. For instance, in the first element contains the questions that directly prompt the evaluation of the clarity of the company’s mission and objectives. In the same way, the component that is devoted to the board of directors requires determining the contribution of the members and evaluating their competence and experience. Moreover, the framework suggests analyzing the internal and external environment from the perspective of their potential strengths and weaknesses, which is a significant advantage for a strategic tool (Wright et al., 2013). Such evaluative questions appear to be the focus of the framework, and they can be viewed as its major plus.

The proposed audit also makes the appropriate decision of incorporating several assessment tools that have been proven to be trustworthy and reliable (Grant et al., 2011; Mayer & Vambery, 2008; Wheelen et al., 2017). In particular, the analysis of the environment in the framework is carried out with the help of both SWOT and Porter’s five forces. Apart from that, the PESTEL elements are present in the audit. It is noteworthy that Wheelen et al. (2017) adjust and expand the tools: they embed Porter’s five forces into the external environment element of their SWOT analysis and extend the latter by specifying the features of the environment that, in their view, need to be considered. For instance, their list of threats and opportunities include those relevant for the societal and physical environments. In other words, the authors use some of the previously developed instruments to enhance the one that they create, and to achieve this aim, they modify the instruments, tailoring them to a specific purpose. The sensible use of reliable tools can be viewed as an advantage of the framework.

Some other features that are incorporated into the audit are also worth noting as its advantages. For example, strategic alignment, which is an essential element of the framework, can be viewed as a requirement for a corporation’s success (Baker, Jones, Cao, & Song, 2011; Rashidirad, Soltani, & Syed, 2013; Wright et al., 2013). Similarly, the focus of the decision-making process on the competitiveness of the firm (the factors and decisions that contribute to it) can be explained by the fact that a successful strategy needs to be geared towards making a company competitive (Rashidirad et al., 2013). Also, an important advantage of the framework is that it includes ethical considerations (Keifer & Keifer, 2009; Shaukat, Qiu, & Trojanowski, 2015). In particular, the corporate governance element suggests checking if the top management has been making the decisions that can be viewed as ethically and socially responsible. All these details are some of the notable advantages of the framework, and they illustrate the fact that it is indeed comprehensive and appropriate for strategic decision-making.

In summary, the framework can be most helpful due to its beneficial features. Its design reflects its goals, and it is capable of guiding a decision-making process. It is most comprehensive and thorough and offers sufficient coverage of the key elements to be considered in a strategic audit. It is also a tool that explicitly promotes the analysis of an organization rather than its description. All the mentioned advantages support the idea that the framework is capable of fulfilling its purpose. However, the framework still has a potential for improvement, which should be taken into account for the benefit of a company’s analysis.

Potential Improvements

An examination of the audit suggests that its certain aspects can and should be improved if required by the specific circumstances of analysis. First of all, it should be pointed out that Wheelen et al. (2017) explicitly state that their audit is meant for corporations. In other words, they do not intend it to be appropriate for any business type. This factor should not be viewed as a disadvantage, but it is a limitation that must be taken into account when employing the framework.

As a specific example of the elements that might be adjusted depending on the type of business that is analyzed, the corporate governance component can be mentioned. For instance, a sole proprietorship firm does not require a board of directors (Malla, 2013), which is why the first part of the second element of the audit cannot be applied to this business type. Similarly, the limitation of the analysis of corporate governance to the board and top management does not take into account modern approaches that are less centralized and involve a greater number of people from various levels of an organization (Li & Zhang, 2013). As a result, different types of business may need to take into account the general aim of the discussed audit element (that is, the consideration of the aspects of corporate governance) while adjusting the specific questions to be considered.

Secondly, some of the major advantages of the framework may be not applicable to all of its elements. For instance, the first few parts of the audit appear to receive a more comprehensive coverage than the implementation component. In fact, it can be suggested that the implementation element is not covered very extensively, although it still contains some important questions. However, this issue can be connected to the fact that the framework is meant to be a decision-making tool, but it is not expected to guide the process of implementation directly. If additional guidance is needed for the implementation procedures, it is possible to employ a specific implementation model that can be adjusted to the nature of the decision and the industry of interest. For example, if the decision consists of the introduction of an innovative practice, Roger’s theory of innovation diffusion may be of use (Wisdom, Chor, Hoagwood, & Horwitz, 2013). Therefore, this feature of the framework should not be viewed as a disadvantage; rather, it is connected to the specific aims of the tool. Still, when employing the framework, it may be reasonable to augment the implementation section by introducing questions and tools that depend on the specific needs of the organization and the type of decision made.

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Thirdly, as it was mentioned, the proposed audit contains the required elements of a decision-making process, but the approach that it uses can be improved (Franklin, 2013). In general, decision-making frameworks are rather diverse (Franklin, 2013; Grant et al., 2011), and the specific features of other approaches might be used to the benefit of the audit proposed by Wheelen et al. (2017). The particular solutions that other frameworks can offer for the improvement of the framework vary, but a feature that seems to be worth noting is the need for iterative decision-making. Indeed, iterative, adaptive, and flexible decision-making has been proven to result in superior outcomes (Franklin, 2013). However, the audit by Wheelen et al. (2017) does not seem to exhibit the mentioned features: it is rather linear, and there is no indication in its final element that it can be connected to the next cycle of decision-making. Naturally, such indications can be assumed to be inferred (especially due to the presence of the final, evaluative element), but stating them directly could be helpful for the management of a decision-making process. Therefore, by indicating the need for the iteration of particular features, the prosed framework can be improved.

An appropriate component that can offer the opportunity for making the framework iterative and more flexible is the final element that focuses on evaluation and control. As it has been mentioned, the element is limited to the assessment of respective mechanisms. Naturally, the procedure is essential for a successful implementation of a decision because it ensures the presence of the means of evaluation and control. However, the absence of outcome-focused questions seems to be a drawback of the framework because they are necessary for the adjustment of a decision to the needs of the organization (Franklin, 2013; Wisdom et al., 2013). Thus, the final component of the audit can be enhanced by including the questions on the outcomes of the decision and their possible reasons, prompting a decision-maker to review their work and improve it if necessary. The specific items that should be considered may depend on the needs of the organization, details of the decision made, and the outcomes of the implementation.

Another aspect of the final element of the audit that can be enhanced is its consideration of the evaluation mechanisms. The audit focuses on the assessment of the mechanisms from the perspective of the types of data that they provide, but it does not suggest reviewing the uses of the data. At the same time, it is apparent that the collected data needs to be employed, and it may be helpful to assess the procedures that ensure its employment. The most evident example of the use of the data is the above-mentioned improvement of the decision made, but additional methods of application can also be considered. For instance, the learning aspect of decision-making is crucial for the continuous refinement of the process (Franklin, 2013). Therefore, the introduction of the questions that would examine the evaluation mechanisms from the perspective of the use of the gathered information seems to be an option that will improve the proposed audit.

Finally, the ethical element of the audit can also be improved. Indeed, corporate social responsibility (CSR) and ethical considerations are mentioned in the framework, but they only appear in the corporate governance element. It should be pointed out that there are direct connections between corporate governance and responsible conduct (Shaukat et al., 2015), but the limitation of ethical considerations to one component of the decision-making process seems to be a detrimental choice (Keifer & Keifer, 2009). For instance, the framework does not include an explicit requirement for reviewing ethical considerations and CSR in the sixth component, which consists of analyzing and comparing the alternatives. Admittedly, it can be inferred that ethical considerations might have been indirectly implied in the sixth element: for instance, the term “problem” that appears in the component may involve ethical issues. Similarly, it can be suggested that some of the responsibilities of an organization towards its employees are covered by the Human Resource Management element of the internal analysis. However, since the direct references to CSR and ethics are not present, the businesses that focus on CSR may choose to make ethics-related adjustments in the framework to promote ethics-based decision-making.

Moreover, the fact that no direct references to CSR and ethics can be encountered in the element of the framework that guides the process of choosing an option (the sixth component) seems to be a problem. Keifer and Keifer (2009) highlight the fact that decision-making tools need to incorporate ethical considerations (especially those related to CSR) to provide the frameworks for ethically appropriate decisions. The absence of the ethical criterion in the decision-making element of the framework offers an opportunity for neglecting CSR and ethics. While it is apparent that Wheelen et al. (2017) do not overlook CSR and ethical considerations, inferring the presence of the issues that need to be reviewed is inferior to specifically stating them. Therefore, it can be suggested that the sixth element of the framework will be improved if the questions pertinent to CSR and ethical considerations are included in it.

In summary, the framework apparently has some limitations and may also have the weaknesses that should be eliminated. The former include the need to adjust the framework to non-corporation types of business while the latter is predominantly concerned with ethical issues. Apart from that, certain improvements can be made to the decision-making process proposed by the framework. Thus, there is a potential for the development of the audit, and its users should employ it by preserving or changing the various elements of the framework as they see fit.

Conclusion

Having reviewed the advantages and disadvantages of the framework, the present essay can suggest the following conclusions. The framework by Wheelen et al. (2017) is capable of fulfilling its goals, including the assistance in strategic analysis and the guidance of decision-making. In fact, the tool has some notable advantages, including its focus on analysis, the use of well-established strategic instruments, and the comprehensiveness of its coverage with respect to the majority of elements. As a result, the tool can be employed as it is by some businesses. However, the framework also has some limitations and weaknesses. In particular, it is developed for a specific type of business and does not offer a very comprehensive coverage of ethical considerations. Apart from that, its decision-making structure is not directly flawed, but it can be improved by introducing more iterative elements. As a result, the framework may be modified by its users depending on their needs, goals, and preferences. It is noteworthy that in the framework, Wheelen et al. (2017) employ certain additional tools (for example, SWOT), but they adjust them to fit their purposes better. It appears logical to treat the framework by Wheelen et al. (2017) in a similar fashion: it can be used as it is if appropriate, but it also can and should be adjusted to the needs of a specific business and improved with additional questions and elements if seen fit.

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