Company Situation Analysis

Questions to Answer:

How well is the present strategy working?What are the company’s SWOT?Are the prices and costs competitive?How strong is the competitive position?What strategic issues does the company face?

How Well Strategy Is Working

Based on competitive approachLow-cost leaderDifferentiationMarket niche

How Well Strategy Is Working

Qualitative analysisCompletenessInternal consistencyRationaleSuitability to the situation

vs. Quantitative analysisAchieving stated financial and strategic objectivesWhether considered an industry leader

How Well Strategy Is Working

Indicators of performanceMarket shareAttraction and retention of customersProfit marginsNet profit and ROICredit ratingSales growthTrends in stock priceImage and reputationMeasures of continuous improvement

SWOT

StrengthsSkill or important expertiseValuable physical assetsValuable human assetsValuable organizational assetsValuable intangible assetsCompetitive capabilitiesPosition of market advantageAlliances and cooperative ventures

SWOT

WeaknessesDeficiencies in skills or needed expertiseLack of physical, organizational or intangible assetsMissing competitive capabilities in key areas

SWOT

OpportunitiesNot every industry opportunity is a company opportunityOffer avenues for profitable growthOffer potential for competitive advantageMatch well with company’s financial and organizational capabilities

SWOT

ThreatsEmergence of new productsEmergence of new technologiesEntry of new competitorsNew regulationsVulnerability to interest rate fluctuationsVulnerability to FX rate fluctuationsDemographic shiftsPolitical upheaval

SWOT Example: Panera, p. C85

StrengthsAn attractive and appealing menu (see case Exhibit 6)—Panera offers high quality food at a good price (the company delivers good value for the money); moreover, it has menu offerings for the more health/weight-conscious diner Bread-baking expertise (definitely a core competence)—artisan breads are Panera’s signature product Panera Bread is the nationwide leader in the bakery-café segment Panera Bread has high ratings in customer satisfaction studies A good brand name that management is continuing to strengthen

SWOT Example: Panera, p. C85

Strengths (cont.)The fresh dough operations and sales of fresh dough to franchised stores is a source of revenue and profit (see case Exhibit 1 showing that fresh dough cost of sales to franchisees run well below the revenues from fresh dough sales to franchisees) Initial success in catering—extends the company’s market reach Has attracted good franchisees—sales at franchised stores run a bit higher than those at company-owned stores (see case Exhibit 2) The financial strength to fund the company’s growth and expansion (see case Exhibit 1) without burdening the company’s balance sheet unduly with debt

SWOT Example: Panera, p. C85

WeaknessesA less well-known brand name than some rivals (Applebee’s, Starbucks) Sales at franchised stores run a bit higher than those at company-owned stores—why is this occurring? Are franchisees better operators?

SWOT Example: Panera, p. C85

OpportunitiesOpen more outlets, both company-owned and franchised—there is untapped growth potential in a number of suburban markets as shown in case Exhibit 3 Open Panera Bread locations outside the U.S. as market opportunities in the U.S. begin to dry up

SWOT Example: Panera, p. C85

ThreatsRivals begin to imitate some of Panera’s menu offerings and/or dining ambience, thus stymieing to some extent Panera’s ability to clearly differentiate itself from rival chains New rival restaurant chains grab the attention of consumers and draw some patrons away from Panera—in other words, competition from other restaurant chains (either those in the fast-casual segment or other restaurant categories) becomes more intense Panera Bread begins to saturate the market with outlets, such that it becomes harder to find attractive locations for new stores and the company’s growth slows

Company Competencies

Company competenceProduct of experience and learningReal proficiencyConsciously built and developed

Competitive capabilityValuable and beneficial to customersDifferentiate company from competitorsEnhances competitiveness

Company Competencies

Core competenceInternal activities performed wellCentral to competitiveness and profitabilityResides in people, not assets

Distinctive competenceActivities performed well compared to competitorsBasis for competitive advantage

Distinctive Competence

ImportanceCompetitive capability providedCornerstone of strategy

Sustainable competitive advantageResource is hard to copyLongevity of resourceResource is competitively superiorNot easily trumped

Differences in Costs

Items purchased from suppliersBasic technology and age of plantsEconomies of scaleExposure to inflation and FX ratesMarketing, sales and promotionTransportation and shippingForward channel distribution

Value Chains

Activities that create value for the customerStrategy criticalBased on core competenciesBenchmarking costs of key activities“Best practices”

Value Chains

Primary activitiesPurchases and inbound logisticsOperationsOutbound logisticsSales and marketingService

Support activitiesR & D, technology and systems developmentHuman resources managementGeneral administration

Strategic Options

UpstreamNegotiateIntegrateTrain suppliersUse substitutesMake up the difference elsewhere

DownstreamPush to reduce markupTrain distributorsDevelop more economical distribution strategyMake up the difference elsewhere

Strategic Options

CompanyStreamline OperationsReengineer processes and practicesEliminate cost activitiesRelocate activities geographically

OutsourcingTechnological improvementsInnovationSimplify product design (Value Engineering)Achieve backward and forward savings

Company’s Competitive Position

Competitive strength assessmentList industry’s key success factorsRate firm and rivals on each factorSum individual ratingsDetermine net advantage or disadvantage

Weighted vs. unweighted

Company’s Strategic Issues

Whether current strategy is adequate to meet trends in competitive forcesAdjust to respond to driving forces of industryIndustry’s future key success factorsVulnerability to efforts of rivalsCapitalize on strengthsPrioritize opportunitiesProtection against threats and weaknesses

Company’s Strategic Issues

Competitive advantage or disadvantageStrong and weak spots in current strategyAdditional actions needed

Improve cost positionCapitalize on emerging opportunitiesStrengthen competitive position