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STRATEGIC MANAGEMENTUNIT 3

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Corporate Performance Evaluation

Environmental Scanning

O

T

S

WVision

Mission

Goals

Objectives

STRATEGIES

BusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation

STRATEGIC MANAGEMENT PROCESS

ExternalEnvironment

Internal

Environment

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Strategic Management Process

Environmental

Scanning

Strategy Formulati

on

Strategy Implementati

on

Evaluation

&Control

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Strategic Management Process

EnvironmentalScanning

Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies

Strategy Formulation

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UNIT 3ENVIRONMENTAL SCANNING AND INDUSTRY

ANALYSIS

The environmental scan includes the following components: Analysis of the (external) Macro-environment (Societal

Environment) Analysis of the firm's (external) Task Environment ( Industry

Environment) Analysis of the firms Internal Environment (OrganizationalEnvironment)

The societal environment is composed of political-legal,economic, socio-cultural and technological forces ( known asPEST factors)

The task environment (industry) contains stakeholder groupsthat have an impact or are heavily impacted by the organization.These are governments, local communities, suppliers, creditors,

employees/labor unions, special interest groups, and tradeassociations.

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Environmental Analysis

Analyse EXTERNAL Environment Conditions

Analyse INTERNAL Company Situation

IdentifyStrategicOptionsfor the

Company

Select theBest

Strategyfor the

Company

Competencies,Capabilities,

Resource strengths and weaknesses,Competitiveness

TASK ENVIRONMENT

SOCIETAL ENVIRONMENTo

T

W

S

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E nvironmental Variables

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M ACROENVIRONM ENTLegislation and

Regulation

COMP ANY

Suppliers Substitutes

Buyers

NewEntrants

RivalFirms

IMM EDIATE INDUSTRYAND COMP ETITIVE

ENVIRONM ENT

Legislation andRegulation

The Components of a Companys Macro-Environment

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M ACROENVIRONM ENTLegislation and

Regulation

COMP ANY

Suppliers Substitutes

Buyers

NewEntrants

RivalFirms

IMM EDIATE INDUSTRYAND COMP ETITIVE

ENVIRONM ENT

Legislation andRegulation

The Components of a Companys Macro-Environment

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The Components of a Companys Macro-Environment

M ACROENVIRONM ENT

Suppliers Substitutes

Buyers

NewEntrants

Strat.Group

1

IMM EDIATE INDUSTRYAND COMP ETITIVE

ENVIRONM ENT

Strat.Group

2Strat.Group

3

Legislation andRegulation

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Strategic GroupsFirms in same strategic group have two or more competitivecharacteristics in common(eg. Nokia, Motorola, Ericsson)

Sell in same price/quality rangeCover same geographic areasBe vertically integrated to same degreeHave comparable product line breadth

Emphasize same types of distribution channelsOffer buyers similar servicesUse identical technological approaches

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A scan of the external macro (societal) environment in which the firmoperates reveals the business opportunities lying ahead and the threatsthe organization will have to face in future.

Developments or trends in a corporation's societal environmenttypically do not affect the corporation directly but indirectly throughtheir impact on one or more stakeholder groups in the corporation's taskenvironment . This can be expressed in terms of the following factors:

Political/LegalEconomic

SocialTechnological

The acronym PEST (sometimes also labeled as SLEPT") is used todescribe a framework for the analysis of these macro-environmentalfactors.

PEST Analysis

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PEST Factors ( Detailed )

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A PEST analysis fits into an overall environmental scanas shown in the following diagram:

Political factorsinclude government regulations and legal

issues and define both formal and informalrules under which the firm must operate.

Some examples include

tax policy employment laws

environmental regulations

trade restrictions andtariffspolitical stability

Economic factorsaffect the purchasing power of potential

customers and the firm's cost of capital. Thefollowing are examples of factors in the

macro-economy

economic growthinterest rates

exchange rates

inflation rate:

Social factorsinclude the demographic and cultural aspects

of the external macro-environment. Thesefactors affect needs and the size of potential

markets. Some social factors include:

population growth rateage distributioncareer attitudes

health consciousness

Technologicalfactors

can lower barriers to entry, reduce minimumefficient production levels, and influenceoutsourcing decisions.

Some technological factors include:

R&D activity automation

technology incentives

rate of technological change

PEST

FACTORS

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H ow to identify the strategic factorsin the External Environment?

List the major trends or developments emerging in each of the four forces of a firm's

societal environment.Then estimate the likely impact of these general trends upon the primarystakeholders, e.g., communities, creditors, competitors, etc. These data form a seriesof strategic inputs - those trends and developments that are very likely to determinethe future environment.

Plot these strategic issues on an issues priority matrix .

Those issues judged to have a high probability of occurring and a high probableimpact on the corporation are strategic factors.

Categorize these factors as opportunities or threats. (Keep in mind that somestrategic factors may be both opportunities and threats depending upon how oneviews them.)

Example : The trend toward dual-career couples is a development in the societal environment of any

company operating in the U.S or Canada. Socio-cultural forces linked to the changing role of womenplus the trend toward single family households combined with the economic forces of high interestrates and inflation in the 1970s to send both men and women searching for full-time jobs in additionto their being parents. This development in the societal environment affected companies through itsimpact on employee/union groups (who asked for parental leave and/or company-sponsored daycare centers), customers (employed parents who increasingly shop for convenience goods because oftime constraints), and special interest groups and even governments (who asked business firms to

help support local schools and deal with community social problems).

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Prentice Hall, Inc. 2008

4-16

Issues Priority Matrix(External Strategic Factors of a firm are those that fall under High or Medium priority)

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Forecasting Techniques- Trend Extrapolation Vs Scenario Writing

Extrapolation is simply the extension of present trends into the future. It relies on theassumption that the environment is reasonably consistent and changes slowly in theshort run. As a result, extrapolation is fairly easy to do - as witnessed by its being themost widely used form of forecasting. Nevertheless, extrapolation is like driving a carwithout using a mirror or twisting one's head to look around and backward.Everything will be fine until a sudden new formation occurs! Like driving a car in thisway, extrapolation is fine if the time frame to be predicted is short and one is lucky.

Scenario-writing, in contrast, is based upon a series of historical data plus informedhunches from key people in the company who have access to environmentalinformation or from a Delphi panel of outside experts. Like extrapolation, scenario-writing is a very popular forecasting technique, but unlike extrapolation, it can get verycomplicated and time consuming . It has at least one clear-cut advantage overextrapolation: It encourages forecasters to make their assumptions explicit. One is thusmore likely to recognize the dangerousness of moving forward without information.Scenario writing, if done conscientiously, could thus be seen as an attempt to constructa mirror to use in hazardous driving!

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Why is environmental uncertainty an importantconcept in strategic management?

It can be argued that without environmental uncertainty, therewould be no need for strategic management. The Arab oil embargoof 1973 is said to be the single most influential event causing theformation of planning departments in most U.S. corporations. The

embargo showed managers just how vulnerable their companieswere to environmental change.

A key part of strategic management, environmental scanning is atool used to help avoid strategic surprise and cope with an uncertainenvironment. If the environment was certain and predictable,environmental scanning would be a rather easy chore. Simpleextrapolation would be the only type of forecasting needed. In acomplex and changing world, however, those corporations whichengage in environmental scanning and strategic planning tend todeal better with environmental uncertainty and to be more

successful than their non-planning brethren.

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What can a corporation do to ensure that information about strategicenvironmental factors gets to the attention of strategy makers?

This is a very real problem in most large corporations given the usual obstacles togood communication. The very people who are in the best positions to gather thisdata are often the ones who either fail to pass it on because it's too much of a choreor they fail to notice it because no one told them how important certain developmentsare to top management.

Since proper information dissemination is an important part of environmentalscanning, corporations attempt to schedule a series of analytical reports for topmanagement's information. The purchasing department, for example, might betasked with the job of compiling a quarterly analysis of the availability andreliability of present and future suppliers. The market research department mightprepare analyses of present and future customers for certain products and serviceswith special attention to demographic shifts.

Each report would need to conclude with a list of strategic factors to monitor in thecoming months or years. Other approaches are, of course, possible to get neededinformation to the attention of strategy makers.

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The task (industry) environment contains stakeholder groups that have an impact onor are heavily impacted by the organization. These are governments, localcommunities, suppliers, creditors, employees/labor unions, special interest groups, andtrade associations.

H owever, the level of competitive intensity present in an industry is more closely feltand determined by the industry structure in which the firm operates.

The model of pure competition implies that risk-adjusted rates of return should beconstant across firms and industries. H owever, numerous economic studies haveaffirmed that different industries can sustain different levels of profitability; part ofthis difference is explained by industry structure.

Michael Porter provided a framework that models an industry as being influenced byfive forces. The strategic business manager seeking to develop a competitive edge overrival firms can use this model to better understand the industry context in which the firmoperates

An industry analysis can be performed using a framework developed by MichaelPorter known as Porter's five forces. This framework evaluates entry barriers, suppliers,

customers, substitute products, and industry rivalry

Industry Analysis: Porters Five-Forces Model

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SUPPLIER POWER Supplier concentrationImportance of volume to supplierDifferentiation of inputsImpact of inputs on cost ordifferentiationSwitching costs of firms in theindustry Presence of substitute inputsThreat of forward integrationCost relative to total purchases in

industry

THREAT OFNEW ENTRANTS(BARRIERSTO ENTRY)

Absolute costadvantagesProprietary learning curve

Access to inputsGovernmentpolicy Economies of scaleCapitalrequirementsBrand identity Switching costs

Access todistributionExpectedretaliationProprietary products

THREAT OFSUBSTITUT

ES

-Switchingcosts-Buyerinclinationto substitute-Price-

performancetrade-off of substitutesBUYER POWER Bargaining leverage

Buyer volumeBuyer informationBrand identity Price sensitivity Threat of backward integrationProduct differentiation

DEGREE OFRIVALRY

-Exit barriers-Industry concentration-Fixed costs/Value added-Industry growth-Intermittent overcapacity

Diagram of Porter's 5 Forces Determinants of Industry Attractiveness

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Describe the importance of entry barriers in anindustry.

Entry barriers are a key variable determining the threat of new entrantsinto an industry. To the extent that entry barriers are low, it will berelatively easy for a new company to enter the industry and raise thelevel of competitive intensity.

Some of these barriers are: Economies of scale, productdifferentiation, capital requirements, switching costs, accessto distribution channels, cost disadvantages independent ofsize, and government policy.

These six forces are not just constraints, but are, in effect, variables thatcan be partially controlled by industry participants

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Porters Model : Example

According to Porter's discussion of industry analysis, is Pepsi Cola a substitute forCoca Cola?

According to Porter, substitute products are those products that appear to bedifferent but can satisfy the same need as another product. The identification of

possible substitute products or services means searching for products or servicesthat can perform the same function, even though they may not appear to beeasily substitutable. Pepsi and Coke are, therefore, not substitutes for each other.They are merely different brands of the same cola product. The real questionhere is: what is the product? If the product is colas, then a lemon-lime drink likeSeven Up could be a substitute product. If the product is carbonated soft drinks,then other beverages which might perform the same function could be identified,such as coffee, tea, beer, or wine.

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According to Miles and Snow, competing firms within a singleindustry can be classified as four basic strategic types.

Within each strategic group in which a company operates are keycompetitors. Many of these can be characterized as a strategic type:defender, prospector, analyzer, or reactor. Each of these types has its owncombination of structure, culture, and processes to complement its dominantstrategic orientation. If one can categorize a firm into one of these fourtypes, then it will be easier to predict their likely reaction to futureenvironmental changes.

Defenders are companies with a limited product line that focus onimproving the efficiency of existing operations. (Toyota, Microsoft)

Prospectors are companies with fairly broad product lines that focus onproduct innovation and market opportunities ( H P, SONY).

Analyzers are companies that operate in at least two different product-markets, one stable and one variable, and are able to adjust theirorientation based on the industry they are in (Panasonic).

Reactors are companies that lack a consistent strategy-structure-culturerelationship and seem to switch strategies on a piecemeal basis in anattempt to better adjust to environmental change

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EFAS Table : External Factors Analysis SummaryExternalFactors

(Societal/ Industry)

Weight(Impact

)0.0 -1.00

Rating(Respons

e)1 5

Weighted Score

(Strategic

Efficienc y

Level)

Comments

Opportunities

O1

O2

O3

O4

O5

ThreatsT1

T2

T3

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M aytag: EFAS Table: External Factors Analysis SummaryExternalFactors

Weight

Rating

(Mgmt.

Response)

WeightedScor

e

Comments

Opportunities

Economic integration of European Community ( O1)

.20 4 .80 A cquisition of Hoover

Demographics favor quality appliances( O2 )

.10 5 .50 M aytag quality

Economic Development of A sia( O3 )

.05 1 .05 L ow M aytag presence

Emergence of Eastern

Europe(O4

)

.05 2 .10 N ew markets (Will take

time)Trend to Super Stores ( O5 ) .10 2 .20 M aytag weak in this

channel

ThreatsIncreasing Govt. regulations (T 1) .10 4 .40 Well positioned

Strong US competition(T 2 ) .10 4 .40 Well positioned

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Corporate Performance Evaluation

Environmental Scanning

O

T

S

WVision

Mission

Goals

Objectives

STRATEGIES

BusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation

STRATEGIC MANAGEMENT PROCESS

External

Environment

Internal

Environment

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UNIT 4INTERNAL SCANNING: ORGANIZATIONAL ANALYSIS

The analysis of a corporation's internal environment reveals the strengths andweaknesses of the firm. It includes an assessment of a firm's structure and culture,and its functional areas (such as marketing, finance, research & development,operations, human resources, and information systems )

Quite a number of techniques and concepts are available to analyze the internalenvironment of the organization.

According to the resource-based view of the firm, a company's sustained competitiveadvantage is primarily determined by its resource endowments that are often revealedthrough the competencies the firm possesses.( Dell, Toyota, Sony, Apple)

The internal competencies of a firm is best explained by Prahlad and H ammelsconcept of Core Competencies . Core competencies are the collective learning andcoordination skills behind the firm's product lines. Core competencies are the sourceof competitive advantage and enable the firm to introduce an array of new productsand services.

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Prentice Hall,Inc. 2008

5-29R esource-Based Approach to Organizational Analysis

Internal Strategic Factors(R esources, Capabilities & Competencies )

R esources-Assets that are the building blocks of an organization. These include:

-Physical assets ( plant, equipment, location, etc .)-Human assets (employees and their skills )-Organizational assets (structure, culture and reputation )

Capabilities- A corporations ability to exploit the above resources: These comprise business processesand routines that manage the interaction among resources to turn inputs into outputs. E .g..M arketing capability, R&D capability, production capability.

Competency-It is the cross-functional integration and coordination of capabilities. E ach division may

have its own competencies. E .g.. One division may have competency in New productdevelopment while another division may have competency in recruiting human resources

Core competency- Collection of competencies that crosses divisional boundaries , is widespread within the

corporation, and something that the corporation can do exceedingly well. E .g. Fedexcompetency in its application of information technology to all its operations.

Distinctive competency- When a core competency is superior to that of the competition it is called distinctive

competency. E .g. General E lectrics distinctive competency in management development

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Core competencies lead to the development of core products.Core products are not directly sold to end users; rather, they are used tobuild a larger number of end-user products by the various business units ofthe firm. For example, motors are a core product that can be used in widearray of end products. The business units of the corporation each tap intothe relatively few core products to develop a larger number of end userproducts based on the core product technology. Some classic examplesinclude Philip's expertise in optical media and Sony's ability to miniaturizeelectronics

The intersection of market opportunities with core competencies forms the

basis for launching new businesses. By combining a set of corecompetencies in different ways and matching them to market opportunities,a corporation can launch a vast array of businesses .

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There are three tests useful for identifying a core competence. A corecompetence should:

1. provide access to a wide variety of markets, and2. contribute significantly to the end-product benefits, and3. be difficult for competitors to imitate

Without core competencies, a large corporation is just a collection of discrete

businesses. Core competencies serve as the glue that bonds the business unitstogether into a coherent portfolio.

Core competencies tend to be rooted in the ability to integrate and coordinatevarious groups in the organization.

A firms distinctive competencies can also be identified using the VRIOframework in terms of a companys value, rareness, imitability, andorganization .The two basic characteristics of a company's resources andcapabilities that determine the sustainability of its distinctive competencies aredurability and imitability

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What is the relevance of the resource-based view of the firm tostrategic management in a global environment?

The resource-based view of the firm is an attempt to bring attention to the importance of acorporation's resources in strategic management. For much of the 1980s, Porter's concepts of industryanalysis and competitive strategy dominated the field of strategic management to such an extent thatmany felt that industry structure alone seemed to determine a firm's profit potential.

Unfortunately, this emphasis on the industry tended to ignore a firm's core skills and competencies.What good is the knowledge that a niche in the market exists that can be reached through a focused

differentiation competitive strategy if a corporation doesn't have the resources to implement such astrategy? Experts on the resource-based view suggest that differences in performance amongcompanies may be explained best, not through differences in industry structure identified by industryanalysis, but through differences in corporate assets and resources and their application.

The resource-based view of the firm is compatible with the traditional concepts of S.W.O.T. anddistinctive competence popular in the field since the 1960s.

The only danger with the resource-based approach is that people may go overboard again and tend

to put too much emphasis on internal factors and not enough on external factors.Nevertheless, the idea that the durability and imitability of corporate resources determine competitive

advance is a very useful one.The movement toward a more global environment simply accentuates the need to assess and to build

a firms competencies so that it can successfully compete world-wide. A competency may bedistinctive in ones home country, but only be a core competency (or less) in another location in theworld

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The Experience Curve Advantage(Bruce H enderson BCG)

Based on the assumption underlying the BCG growth-share portfolio matrix, H enderson

argues that the key to profits lies in market share. Results from PIMS research supports thisnotion. If a corporation is able to sell a very large number of new products by offeringthem at a very low price (actually below unit cost unless vast quantities are sold), it willgain a dominant market share and pre-empt competition by keeping the price too low forpotential competitors to earn profits. This forms a formidable entry barrier.

The corporation successfully using the experience curve will earn large profits either as astar or when it eventually becomes a cash cow. Model-T Fords and Bic ball point pens arejust two examples. The experience curve thus is a basis for using financial and operatingleverage to achieve a low cost business-level strategy

The experience curve concept does have its limitations, however. For one thing, it does notconsider that a corporation can be very profitable with very low leverage by occupying adependable niche in the marketplace based upon some differentiating strategy such asquality or snob appeal. Rolls Royce automobiles and Maytag washers are just twoexamples of firms ignoring the experience curve by pricing at a cost above the market priceand still achieving solid profits. Differentiation and focus strategies can be very successfulwithout using the experience curve. Another limitation of the experience curve is that muchof its success is based upon economies of scale. The use of computers and robots,however, negates much of the experience curve advantages

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The Value Chain

To analyze the specific internal activities through which firms can create acompetitive advantage, it is useful to model the firm as a chain of value-creatingactivities. Michael Porter labels this as the value-chain of the firm.

A value chain is a linked set of value-creating activities beginning with basic rawmaterials coming from suppliers, to a series of value-added activities involved inproducing and marketing a product or service, and ending with distributors gettingthe final goods into the hands of the ultimate consumer. Industry value-chainanalysis can identify which firms are strongest (and weakest) in each stage of theindustrys value chain. Assuming the firm under consideration operates at variousstages of the industry value chain, a comparison with other firms at each stage can

help identify a firms strengths and weaknesses. The systematic examination of anindividual firms value activities in corporate value-chain analysis can lead to abetter understanding of a corporations strengths and weaknesses - thus identifyingany core or distinctive competencies. According to Porter, Differences amongcompetitor value chains are a key source of competitive advantage.

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Corporations Value Chain

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Porter classifies value-chaininto

Primary Value Chain Activities and Support Activities

Primary Value Chain Activities:

Inbound Logistics > Operations > Outbound Logistics > Marketing & Sales > Service

The goal of these activities is to create value that exceeds the cost ofproviding the product or service, thus generating a profit margin

Inbound logistics include the receiving, warehousing, and inventory controlof input materials.

Operations are the value-creating activities that transform the inputs into thefinal product. (Contd.)

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Outbound logistics are the activities required to get the finishedproduct to the customer, including warehousing, order fulfillment,etc.

Marketing & Sales are those activities associated with gettingbuyers to purchase the product, including channel selection,advertising, pricing, etc.

Service activities are those that maintain and enhance the product'svalue including customer support, repair services, etc.

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Support ActivitiesThe primary value chain activities described above are facilitated by supportactivities. Porter identified four generic categories of support activities, thedetails of which are industry-specific.

Procurement - the function of purchasing the raw materials and other inputsused in the value-creating activities.

Technology Development - includes research and development, processautomation, and other technology development used to support the value-chain activities.

H uman Resource Management - the activities associated with recruiting,development, and compensation of employees.

Firm Infrastructure - includes activities such as finance, legal, qualitymanagement, etc.

Support activities often are viewed as "overhead", but some firms successfullyhave used them to develop a competitive advantage, for example, to developa cost advantage through innovative management of information systems.

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Industry Vs Corporate Value Chain

The focus of value-chain analysis is to examine the corporation in the context of

the overall chain of value-creating activities, of which the firm may only be asmall part. In industry value-chain analysis, the value chain is split into twosegments, upstream and downstream parts with the corporation underexamination being the focal point. In analyzing the complete value chain of aproduct, note that even if a firm operates up and down the entire industry chain, itusually has a center of gravity - an area of primary expertise where its primaryactivities (and core competencies) lie. One goal of industry value-chain analysisis to identify where on the chain is the activity providing the greatest return oninvestment. This might be an activity which a corporation might want to expandwhen doing strategic planning.

In corporate value-chain analysis, each corporation has its own internal valuechain of activities. Each of a companys product lines has its own distinctivevalue chain. Because most corporations make several different products orservices, an internal analysis of the firm involves analyzing a series of differentvalue chains. The systematic examination of individual value activities can leadto a better understanding of a corporations strengths and weaknesses - thussupporting strategic planning.

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The Value SystemThe firm's value chain links to the value chains of upstream

suppliers and downstream buyers. The result is a larger stream ofactivities known as the val ue system. The de velopment of a com petiti vead vantage de pends not onl y on the f irm-s peci f ic value chain, but also onthe value system of which the firm is a part

Value chain analysis can be used at both the industry level and atthe corporate level to assess a corporation's strengths (competencies)and weaknesses

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Organizational Structure

The specific ways in which the value-chain is organized andmanaged result in a specific organizational structure. The basicorganizational structures are simple, functional, divisional, SBU, andconglomerate

If a corporation's structure is compatible with present and potential

strategies, it can be viewed as an internal corporate strength. If,however, the structure is not compatible with either present or potentialstrategies, it is a definite weakness and will act to constrain strategyformulation. For example, if a corporation is structured on the basis offunction, this may be a weakness if the firm wishes to grow byacquiring other profitable corporations. In order to implement such astrategy, the strategy formulators may have to reorganize on adivisional basis.

To the extent that top and middle managers have no experience withsuch a structure, a lot of unforeseen problems can emerge which may

seriously effect the success of the strategy

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Prentice Hall,Inc. 2008

5-42Organizational Structures

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Organizational CultureCorporate culture is the collection of beliefs, expectations, and values

learned and shared by a corporation's members and transmitted from onegeneration of employees to another

Corporate culture, a collection of beliefs, expectations, and values sharedby a corporation's members, acts to shape the behavior of people in acorporation. Since corporate culture has a powerful influence on thebehavior of managers as well as other employees, it may strongly affect acorporation's ability to shift its strategic direction.

Acting in a manner similar to structure, to the extent that a corporation'sculture is compatible with present and potential strategies, it can be viewed

as an internal corporate strength. To the extent that it is not compatible, itmay spell disaster for a strategic change in the implementation stage. Astrategy which contradicts an entrenched culture may find itself beingquietly (or not so quietly) sabotaged by the corporation's most loyal andcompetent employees .

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M aytag IFAS Table: Internal Factors Analysis SummaryInternalFactors

Weight

Rating Weighted Score

Comments

StrengthsQuality M aytag culture (S 1) .15 5 .75 Quality key to success

Experienced topmanagement(S 2 )

.05 4 .20 K now appliances

Vertical integration(S3

) .10 4

.40

Dedicated factoriesEmployee relations(S 4 ) .05 3 .15 Good, but deteriorating

Hoovers internationalorientation(S 5)

.15 3 .45 Hoover name incleaners

Weaknesses

Research & Development (W 1) .05 2 .10 Slow on new productsDistribution channels(W 2 ) .05 2 .10 Superstores replacing

small dealers

Financial position(W 3 ) .15 2 .30 High debt load

Global positioning(W 4 ) .20 2 .40 Hoover weak outsideUK and A ustralia

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H ow to create the SFAS M atrix?(Strategic Factors Analysis Summary M atrix)

IFAS TABLE

SFAS MATRIX

EFAS TABLE

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M aytag IFAS Table: Internal Factors Analysis SummaryInternalFactors

Weight Rating Weighted Score

Comments

StrengthsQuality M aytag culture (S 1) .15 5 .75 Quality key to success

Experienced topmanagement(S 2 )

.05 4 .20 K now appliances

Vertical integration(S 3 ) .10 4 .40 Dedicated factories

Employee relations(S 4 ) .05 3 .15 Good, but deteriorating

Hoovers internationalorientation(S 5)

.15 3 .45 Hoover name incleaners

Weaknesses

Research & Development(W 1)

.05 2 .10 Slow on new products

Distribution channels(W 2 ) .05 2 .10 Superstores replacingsmall dealers

Financial position(W 3 ) .15 2 .30 High debt load

Global positioning(W 4 ) .20 2 .40 Hoover weak outside

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M aytag EFAS Table: External Factors Analysis SummaryExternalFactors

Weight

Rating Weighted Score

Comments

OpportunitiesEconomic integration of European Community ( O1)

.20 4 .8 0 A cquisition of Hoover

Demographics favor quality appliances( O2 )

.10 5 .50 M aytag quality

Economic Development of A sia( O3 )

.05 1 .05 L ow M aytag presence

Emergence of EasternEurope( O4 )

.05 2 .10 N ew markets

Trend to Super Stores ( O5 ) .10 2 .20 M aytag weak in this

channelThreatsIncreasing Govt. regulations(T1)

.10 4 .40 Well positioned

Strong US competition(T 2 ) .10 4 .40 Well positioned

Whirlpool and Electrolux 15 3 .45 Hoover weak globally

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M aytag SFAS M atrix: Strategic Factors Analysis SummaryK ey Strategic

Factors Weight

Rating

Weighted

Score

Short

Duration

Intermedia

teDrati

on

LongDuration

Comments

Quality M aytagculture (S 1)

.10 5 .50X

Quality key tosuccess

Hoovers

internationalorientation(S 5)

.10 3 .30 X Hoover name in

cleaners

Financialposition(W 3 )

.10 2 .20 X High debt load

Globalpositioning(W 4 )

.15 2 .30 X Hoover weak outside U K and A ustralia

Economic integrationof EuropeanCommunity ( O1)

.10 4 .40 X A cquisition of Hoover

Demographics favor

quality

.10 5 .50 X M aytag quality