Strategic AnalysisStrategic Analysis

Strategic AnalysisStrategic Analysis

Answer Three QuestionsAnswer Three Questions– Where is the organization now?Where is the organization now?– Where will the organization be in a Where will the organization be in a

few years – if no changes are madefew years – if no changes are made– What specific actions should What specific actions should

management take if they don’t like management take if they don’t like the answer to #2the answer to #2

Decision Making ProcessDecision Making ProcessP. 12-13P. 12-13

EvaluateCurrentPerformance

Examine &Evaluate theCurrent: - Mission - Objectives - Strategies - Policies

InterviewStrategicManagers: - BOD - Top Mgmt

Decision Making ProcessDecision Making Process

ScanExternalEnvironment - Societal - Tasks

ScanInternalEnvironment - Structure - Culture - Resources

SelectStrategicFactors- Opportunities - Threats

SelectStrategicFactors- Strengths- Weaknesses

AnalyzeStrategicFactors(SWOT) in light ofCurrentSituation

Decision Making ProcessDecision Making Process

Review andRevise asNecessary: - Mission - Objectives

Generate &EvaluateStrategicAlternatives

Select &RecommendBestAlternatives

Decision Making ProcessDecision Making Process

ImplementStrategies: - Programs - Budgets - Procedures

Evaluate AndControl

GoBack ToStep 1 Evaluate

CurrentPerformance

Decision Making ProcessDecision Making ProcessCustomers

Revenue

Operations

P & LBal SheetS & U F

SalesMarketing

HRMIS

Admin

External EnvironmentExternal Environment

General

Envi

ronm

ent

General

Environment

Gen

eral

Environment

Socio-culturalSocio-cultural

Global

Global

TechnologicalTechnologicalPo

litica

l/Leg

al

Polit

ical/L

egal

Dem

ogra

phic

Dem

ogra

phic Econom

ic

Economic

IndustryIndustryEnvironmentEnvironment

Threat of new entrantsThreat of new entrantsPower of suppliersPower of suppliersPower of buyersPower of buyers

Product substitutesProduct substitutesIntensity of rivalryIntensity of rivalry

CompetitorCompetitorEnvironmentEnvironment

External EnvironmentExternal Environment

A continuous process which includesA continuous process which includes• ScanningScanning: Identifying early signals of : Identifying early signals of

environmental environmental changes and trendschanges and trends

• MonitoringMonitoring: Detecting meaning through : Detecting meaning through ongoing observations of environmental ongoing observations of environmental changes and trendschanges and trends

• ForecastingForecasting: Developing projections of : Developing projections of anticipated outcomes based on monitored anticipated outcomes based on monitored changes and trendschanges and trends

• AssessingAssessing: Determining the timing and : Determining the timing and importance of environmental changes and importance of environmental changes and trends for firms’ strategies and their trends for firms’ strategies and their managementmanagement

Industry Industry EnvironmentEnvironmentThreat of New Entrants

Threat of New Entrants

Barg

aini

ng P

ower

Barg

aini

ng P

ower

of

Sup

plie

rsof

Sup

plie

rs

Bargaining Power Bargaining Power of Buyersof Buyers

Threat of Threat of

Substitute Substitute

ProductsProducts

Rivalry Among

Rivalry Among

Competing Firms

Competing Firms

Five Forces ofFive Forces ofCompetitionCompetition

Threat of New EntrantsThreat of New EntrantsBarriers to EntryBarriers to Entry

Economies of scaleEconomies of scale Product differentiationProduct differentiation Capital requirementsCapital requirements Switching costsSwitching costs Access to distribution channelsAccess to distribution channels Cost disadvantages independent of Cost disadvantages independent of

scalescale Government policyGovernment policy Expected retaliationExpected retaliation

Bargaining Power of SuppliersBargaining Power of Suppliers Dominated by a few large companiesDominated by a few large companies Satisfactory substitute products are not Satisfactory substitute products are not

availableavailable Industry firms are not a significant customer Industry firms are not a significant customer

for the supplier groupfor the supplier group Suppliers’ goods are critical to buyers’ Suppliers’ goods are critical to buyers’

marketplace successmarketplace success Effectiveness of suppliers’ products has Effectiveness of suppliers’ products has

created high switching costscreated high switching costs Suppliers are a credible threat to integrate Suppliers are a credible threat to integrate

forward into the buyers’ industryforward into the buyers’ industry

Bargaining Power of Buyers Bargaining Power of Buyers (Customers)(Customers) They purchase a large portion of an They purchase a large portion of an

industry’s total outputindustry’s total output Sales of the product being purchased Sales of the product being purchased

account for a significant portion of the account for a significant portion of the seller’s annual revenuesseller’s annual revenues

They could easily switch to another productThey could easily switch to another product The industry’s products are undifferentiated The industry’s products are undifferentiated

or standardized, and buyers pose a credible or standardized, and buyers pose a credible threat if they were to integrate backward into threat if they were to integrate backward into the seller’s industrythe seller’s industry

Threat of Substitute ProductsThreat of Substitute Products

Customers face few switching costsCustomers face few switching costs Substitute product’s price is lowerSubstitute product’s price is lower Substitute product’s quality and Substitute product’s quality and

performance capabilities are equal to or performance capabilities are equal to or greater than those of the competing greater than those of the competing productproduct

Intensity of RivalryIntensity of Rivalry

Are numerous or equally balancedAre numerous or equally balanced Experience slow industry growthExperience slow industry growth Have high fixed costs or high storage Have high fixed costs or high storage

costscosts Lack differentiation or low switching Lack differentiation or low switching

costscosts Experience high strategic stakesExperience high strategic stakes Have high exit barriersHave high exit barriers

Components ofComponents ofInternal AnalysisInternal Analysis

Discovering CoreDiscovering CoreCompetenciesCompetencies

ResourcesResources• TangibleTangible• IntangibleIntangible

CapabilitiesCapabilities

CoreCoreCompetenciesCompetencies

CompetitiveCompetitiveAdvantageAdvantage

StrategicStrategicCompetitivenessCompetitiveness

Four CriteriaFour Criteriaof Sustainableof SustainableAdvantagesAdvantages

• ValuableValuable• RareRare• Costly to ImitateCostly to Imitate• Non-substitutableNon-substitutable

ValueValueChainChain

AnalysisAnalysis

• OutsourceOutsourceCorporate CultureR & DCapital SituationTechnology

Marketing Mix

ServiceService

Marketing & SalesMarketing & Sales

Outbound LogisticsOutbound Logistics

OperationsOperations

Inbound LogisticsInbound LogisticsFirm

Infra

stru

ctur

eFi

rm In

frast

ruct

ure

Hum

an R

esou

rce

Mgm

t.H

uman

Res

ourc

e M

gmt.

Tech

nolo

gica

l Dev

elop

men

tTe

chno

logi

cal D

evel

opm

ent

Pro

cure

men

tP

rocu

rem

ent

Margin Margin

Primary ActivitiesPrimary Activities

Supp

ort A

ctiv

ities

Supp

ort A

ctiv

ities

The BasicThe BasicValue ChainValue Chain

Quiz – Question 1Quiz – Question 11.1. When an organization is evaluating its When an organization is evaluating its

strategic position, which is NOT one of the strategic position, which is NOT one of the strategic questions it should ask itself?strategic questions it should ask itself?A.A. Where is the organization now?Where is the organization now?B.B. How can functional and operational areas be How can functional and operational areas be

improved?improved?C.C. If no changes are made, where will the If no changes are made, where will the

organization be in one year?organization be in one year?D.D. If the evaluation is negative, what specific If the evaluation is negative, what specific

actions should management take?actions should management take?E.E. If no changes were made, where will the If no changes were made, where will the

organization be in 10 years?organization be in 10 years?

Quiz – Question 1Quiz – Question 11.1. When an organization is evaluating its When an organization is evaluating its

strategic position, which is NOT one of the strategic position, which is NOT one of the strategic questions it should ask itself?strategic questions it should ask itself?A.A. Where is the organization now?Where is the organization now?B.B. How can functional and operational areas be How can functional and operational areas be

improved?improved?C.C. If no changes are made, where will the If no changes are made, where will the

organization be in one year?organization be in one year?D.D. If the evaluation is negative, what specific If the evaluation is negative, what specific

actions should management take?actions should management take?E.E. If no changes were made, where will the If no changes were made, where will the

organization be in 10 years?organization be in 10 years?

Quiz – Question 2Quiz – Question 2

2.2. Strategic planning within a small Strategic planning within a small organization organization

A.A. May be informal and irregularMay be informal and irregularB.B. Must be elaborate to allow for future growthMust be elaborate to allow for future growthC.C. Should be formalized and explicitly statedShould be formalized and explicitly statedD.D. Should be done by the President onlyShould be done by the President onlyE.E. Is unnecessary and a waste of timeIs unnecessary and a waste of time

Quiz – Question 2Quiz – Question 2

2.2. Strategic planning within a small Strategic planning within a small organization organization

A.A. May be informal and irregularMay be informal and irregularB.B. Must be elaborate to allow for future growthMust be elaborate to allow for future growthC.C. Should be formalized and explicitly statedShould be formalized and explicitly statedD.D. Should be done by the President onlyShould be done by the President onlyE.E. Is unnecessary and a waste of timeIs unnecessary and a waste of time

Quiz – Question 3Quiz – Question 33.3. Research done by Henry Mintzberg Research done by Henry Mintzberg

suggests that strategy formulationsuggests that strategy formulationA.A. Is irregular and a discontinuous processIs irregular and a discontinuous processB.B. Should be followed unswervingly to ensure Should be followed unswervingly to ensure

success of the plansuccess of the planC.C. Is worthlessIs worthlessD.D. Should be reviewed after a specific interval of Should be reviewed after a specific interval of

time to make sure it is still applicabletime to make sure it is still applicableE.E. Is merely a checklist of actions following a logical Is merely a checklist of actions following a logical

processprocess

Quiz – Question 3Quiz – Question 33.3. Research done by Henry Mintzberg Research done by Henry Mintzberg

suggests that strategy formulationsuggests that strategy formulationA.A. Is irregular and a discontinuous processIs irregular and a discontinuous processB.B. Should be followed unswervingly to ensure Should be followed unswervingly to ensure

success of the plansuccess of the planC.C. Is worthlessIs worthlessD.D. Should be reviewed after a specific interval of Should be reviewed after a specific interval of

time to make sure it is still applicabletime to make sure it is still applicableE.E. Is merely a checklist of actions following a logical Is merely a checklist of actions following a logical

processprocess

Quiz – Question 4Quiz – Question 4

4.4. Which of the following is NOT one of the five Which of the following is NOT one of the five triggering events that are the stimulus for a triggering events that are the stimulus for a strategic change?strategic change?

A.A. Intervention by the organization’s bankIntervention by the organization’s bankB.B. Entrance of a new competitor into the industryEntrance of a new competitor into the industryC.C. Change in ownership of the organizationChange in ownership of the organizationD.D. New CEONew CEOE.E. Decreased profitabilityDecreased profitability

Quiz – Question 4Quiz – Question 4

4.4. Which of the following is NOT one of the five Which of the following is NOT one of the five triggering events that are the stimulus for a triggering events that are the stimulus for a strategic change?strategic change?

A.A. Intervention by the organization’s bankIntervention by the organization’s bankB.B. Entrance of a new competitor into the industryEntrance of a new competitor into the industryC.C. Change in ownership of the organizationChange in ownership of the organizationD.D. New CEONew CEOE.E. Decreased profitabilityDecreased profitability

Quiz – Question 5Quiz – Question 5

5.5. Which of the following is an example of a Which of the following is an example of a strategy?strategy?

A.A. Diversify the product line to appeal to more peopleDiversify the product line to appeal to more peopleB.B. Increase sales by 10% over last yearIncrease sales by 10% over last yearC.C. Pay highest salaries to keep high quality Pay highest salaries to keep high quality

employeesemployeesD.D. Develop and sell quality appliances world-wideDevelop and sell quality appliances world-wideE.E. Divide a sales region into a group of sales districtsDivide a sales region into a group of sales districts

Quiz – Question 5Quiz – Question 5

5.5. Which of the following is an example of a Which of the following is an example of a strategy?strategy?

A.A. Diversify the product line to appeal to more peopleDiversify the product line to appeal to more peopleB.B. Increase sales by 10% over last yearIncrease sales by 10% over last yearC.C. Pay highest salaries to keep high quality Pay highest salaries to keep high quality

employeesemployeesD.D. Develop and sell quality appliances world-wideDevelop and sell quality appliances world-wideE.E. Divide a sales region into a group of sales districtsDivide a sales region into a group of sales districts

Analysis Tools – SWOTAnalysis Tools – SWOTChapter 5Chapter 5

Strengths Strengths

WeaknessesWeaknesses

OpportunitiesOpportunities

ThreatsThreats

Strategy Development - TOWSStrategy Development - TOWS

TOWS Analysis Opportunity Threat

Strength O/S Strategies T/S Strategies

Weakness O/W Strategies T/W Strategies

Identify strategies that focus the organization’s strengths on opportunities

Identify strategies that shore up weaknesses

Identify strategies that shore up weaknesses to allow the pursuit of opportunities

Identify strategies that focus strengths against threats

SWOT Example – Bicycle Co.SWOT Example – Bicycle Co.

Strengths Strengths – InnovationInnovation– QualityQuality– Brand in Brand in

segmentsegment– Flexible Flexible

manufacturingmanufacturing WeaknessesWeaknesses

– CostCost– Financial sizeFinancial size

OpportunityOpportunity– International International

growthgrowth– Dirt bikesDirt bikes

ThreatsThreats– Lower cost, higher Lower cost, higher

quality competitionquality competition– Flattening demandFlattening demand

TOWS Example – Bicycle Co.TOWS Example – Bicycle Co.

TOWS Analysis Opportunity• International• Dirt bikes

Threat•Flat demand•Lower cost, higher quality

Strength• Innovation• Quality• Brand in segment• Flexible manufacturing

O/S Strategies T/S Strategies

Weakness• Cost• Financial size

O/W Strategies T/W Strategies

• Grow international• Develop/enter dirt bikes

• Grow international• Develop/enter dirt bikes

•Grow international to increase economies of scale

•Int’l alliances

• Grow international• Develop/enter dirt bikes