Strategic Analysis

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Strategic Analysis
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Strategic Analysis

• Answer Three Questions
• Where is the organization now?
• Where will the organization be in a few years
  if no changes are made
• What specific actions should management take if
  they dont like the answer to 2

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Decision Making ProcessP. 12-13
Evaluate Current Performance
Examine Evaluate the Current - Mission -
Objectives - Strategies - Policies
Interview Strategic Managers - BOD - Top
Mgmt
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Decision Making Process
Scan External Environment - Societal - Tasks
Select Strategic Factors - Opportunities -
Threats
Analyze Strategic Factors (SWOT) in light
of Current Situation
Scan Internal Environment - Structure -
Culture - Resources

• Select
• Strategic
• Factors
• - Strengths
• Weaknesses

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Decision Making Process
Generate Evaluate Strategic Alternatives
Review and Revise as Necessary - Mission -
Objectives
Select Recommend Best Alternatives
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Decision Making Process
Evaluate Current Performance
Implement Strategies - Programs - Budgets -
Procedures
Evaluate And Control
Go Back To Step 1
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Decision Making Process
Customers
Revenue
Admin
P L Bal Sheet S U F
Sales Marketing
HR MIS
Operations
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External Environment
Environment
Industry Environment Threat of new entrants Power
of suppliers Power of buyers Product
substitutes Intensity of rivalry
General
General
Competitor Environment
Environment
Environment
General
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External Environment
A continuous process which includes

• Scanning Identifying early signals of
  environmental changes and trends
• Monitoring Detecting meaning through ongoing
  observations of environmental changes and trends
• Forecasting Developing projections of
  anticipated outcomes based on monitored changes
  and trends
• Assessing Determining the timing and importance
  of environmental changes and trends for firms
  strategies and their management

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Industry Environment
Five Forces of Competition
Rivalry Among Competing Firms
Threat of New Entrants
Bargaining Power of Suppliers
Threat of Substitute Products
Bargaining Power of Buyers
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Threat of New EntrantsBarriers to Entry

• Economies of scale
• Product differentiation
• Capital requirements
• Switching costs
• Access to distribution channels
• Cost disadvantages independent of scale
• Government policy
• Expected retaliation

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Bargaining Power of Suppliers

• Dominated by a few large companies
• Satisfactory substitute products are not
  available
• Industry firms are not a significant customer for
  the supplier group
• Suppliers goods are critical to buyers
  marketplace success
• Effectiveness of suppliers products has created
  high switching costs
• Suppliers are a credible threat to integrate
  forward into the buyers industry

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Bargaining Power of Buyers (Customers)

• They purchase a large portion of an industrys
  total output
• Sales of the product being purchased account for
  a significant portion of the sellers annual
  revenues
• They could easily switch to another product
• The industrys products are undifferentiated or
  standardized, and buyers pose a credible threat
  if they were to integrate backward into the
  sellers industry

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Threat of Substitute Products

• Customers face few switching costs
• Substitute products price is lower
• Substitute products quality and performance
  capabilities are equal to or greater than those
  of the competing product

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Intensity of Rivalry

• Are numerous or equally balanced
• Experience slow industry growth
• Have high fixed costs or high storage costs
• Lack differentiation or low switching costs
• Experience high strategic stakes
• Have high exit barriers

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Components ofInternal Analysis
Marketing Mix
Corporate Culture R D Capital
Situation Technology
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The Basic Value Chain
Margin
Margin
Service
Marketing Sales
Technological Development
Human Resource Mgmt.
Outbound Logistics
Support Activities
Firm Infrastructure
Procurement
Operations
Inbound Logistics
Primary Activities
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Quiz Question 1

• When an organization is evaluating its strategic
  position, which is NOT one of the strategic
  questions it should ask itself?
• Where is the organization now?
• How can functional and operational areas be
  improved?
• If no changes are made, where will the
  organization be in one year?
• If the evaluation is negative, what specific
  actions should management take?
• If no changes were made, where will the
  organization be in 10 years?

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Quiz Question 1

• When an organization is evaluating its strategic
  position, which is NOT one of the strategic
  questions it should ask itself?
• Where is the organization now?
• How can functional and operational areas be
  improved?
• If no changes are made, where will the
  organization be in one year?
• If the evaluation is negative, what specific
  actions should management take?
• If no changes were made, where will the
  organization be in 10 years?

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Quiz Question 2

• Strategic planning within a small organization
• May be informal and irregular
• Must be elaborate to allow for future growth
• Should be formalized and explicitly stated
• Should be done by the President only
• Is unnecessary and a waste of time

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Quiz Question 2

• Strategic planning within a small organization
• May be informal and irregular
• Must be elaborate to allow for future growth
• Should be formalized and explicitly stated
• Should be done by the President only
• Is unnecessary and a waste of time

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Quiz Question 3

• Research done by Henry Mintzberg suggests that
  strategy formulation
• Is irregular and a discontinuous process
• Should be followed unswervingly to ensure success
  of the plan
• Is worthless
• Should be reviewed after a specific interval of
  time to make sure it is still applicable
• Is merely a checklist of actions following a
  logical process

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Quiz Question 3

• Research done by Henry Mintzberg suggests that
  strategy formulation
• Is irregular and a discontinuous process
• Should be followed unswervingly to ensure success
  of the plan
• Is worthless
• Should be reviewed after a specific interval of
  time to make sure it is still applicable
• Is merely a checklist of actions following a
  logical process

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Quiz Question 4

• Which of the following is NOT one of the five
  triggering events that are the stimulus for a
  strategic change?
• Intervention by the organizations bank
• Entrance of a new competitor into the industry
• Change in ownership of the organization
• New CEO
• Decreased profitability

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Quiz Question 4

• Which of the following is NOT one of the five
  triggering events that are the stimulus for a
  strategic change?
• Intervention by the organizations bank
• Entrance of a new competitor into the industry
• Change in ownership of the organization
• New CEO
• Decreased profitability

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Quiz Question 5

• Which of the following is an example of a
  strategy?
• Diversify the product line to appeal to more
  people
• Increase sales by 10 over last year
• Pay highest salaries to keep high quality
  employees
• Develop and sell quality appliances world-wide
• Divide a sales region into a group of sales
  districts

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Quiz Question 5

• Which of the following is an example of a
  strategy?
• Diversify the product line to appeal to more
  people
• Increase sales by 10 over last year
• Pay highest salaries to keep high quality
  employees
• Develop and sell quality appliances world-wide
• Divide a sales region into a group of sales
  districts

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Analysis Tools SWOTChapter 5

• Strengths
• Weaknesses

• Opportunities
• Threats

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Strategy Development - TOWS
TOWS Analysis
Opportunity
Threat
Strength
O/S Strategies
T/S Strategies
Identify strategies that focus the organizations
strengths on opportunities
Identify strategies that focus strengths against
threats
Weakness
O/W Strategies
T/W Strategies
Identify strategies that shore up weaknesses to
allow the pursuit of opportunities
Identify strategies that shore up weaknesses
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SWOT Example Bicycle Co.

• Strengths
• Innovation
• Quality
• Brand in segment
• Flexible manufacturing
• Weaknesses
• Cost
• Financial size

• Opportunity
• International growth
• Dirt bikes
• Threats
• Lower cost, higher quality competition
• Flattening demand

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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

• Grow international
• Develop/enter dirt bikes

• Grow international
• Develop/enter dirt bikes

• Weakness
• Cost
• Financial size

O/W Strategies
T/W Strategies

• Grow international to increase economies of scale
• Intl alliances

• Grow international
• Develop/enter dirt bikes