3
STRATEGIC ANALYSIS
WORKBOOK
Materials Prepared by:
Dr. Chris Peterson
Agricultural Economics
Michigan State University
1
STRATEGIC ANALYSIS WORKBOOK
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CONTENTS
Page
Performance Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Internal Analysis
Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Strengths Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Weaknesses Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
External Analysis
Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Opportunities Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Threats Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Strategic Issues Synthesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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GOAL OF SWOT ANALYSIS
SWOT = Strengths, Weaknesses, Opportunities, and Threats
To challenge your assumptions and beliefs about the world inside and outside
your firm in order to:
1.
select reality-based desired accomplishments (vision, mission, and
objectives),
2.
better develop or alter your business strategies,
3.
set priorities for operational change,
4.
improve your performance.
2
PERFORMANCE ASSESSMENT
The strategic analysis process begins with assessing your level of performance in each of the
following areas. Performance can be low or high based on the current situation, comparison to
goals, trends for the future, or your firm’s level of satisfaction.
Customer SatisfactionBability to attract and maintain customers.
Low Performance
1-----2-----3-----4-----5
High Performance
Evidence:
CompetitivenessBability to do better than your competition.
Low Performance
1-----2-----3-----4-----5
High Performance
Evidence:
ProductivityBability to provide products/services efficiently and effectively based on internal
management processes.
Low Performance
1-----2-----3-----4-----5
High Performance
Evidence:
ProfitabilityBability to attract resources based on level of return to key stakeholders.
Low Performance
1-----2-----3-----4-----5
High Performance
Evidence:
Which performance concerns (if any) warrant strategic analysis and planning?
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3
INTERNAL ANALYSIS CHECKLIST
GOAL:
TO DETERMINE A FIRM'S INTERNAL STRENGTHS AND WEAKNESSES
DIRECTIONS:
For each item below, circle the number on the scale that best corresponds to your honest
assessment of your firm's strength or weakness in the indicated area.
GREAT
WEAKNESS
I.
MARKETING RESOURCES
1.
Customer satisfaction with products/services
2.
Ability to gain customers versus the competition
3.
Knowledge of the market
4.
Product/service line breadth and depth
5.
Product/service quality in terms of function,
image, place, time, possession, ease of use
6.
Advertizing and promotion activities
7.
Product/service pricing
8.
Facilities and methods used to sell to customers
9.
Market share
GREAT
STRENGTH
1-------2-------3-------4-------5
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II.
FINANCIAL RESOURCES
1.
Strong and recurring operating profits (PM*)
1-------2-------3-------4-------5
2.
Efficient asset management (TAT*)
1-------2-------3-------4-------5
3.
Strong and recurring return on investment (ROI*)
1-------2-------3-------4-------5
4.
Proper balance of debt and equity (EM*)
1-------2-------3-------4-------5
5.
Strong and recurring return on equity (ROE*)
1-------2-------3-------4-------5
6.
Strong and recurring cash flow
1-------2-------3-------4-------5
7.
Ready access to outside/new funds
1-------2-------3-------4-------5
8.
Well managed customer credit
1-------2-------3-------4-------5
9.
Well managed supplier credit
1-------2-------3-------4-------5
*Key financial ratios used to assess these areas.
III.
HUMAN RESOURCES
1.
Adequate number of people to do the work
2.
Adequate quality of people to do the work
3.
Personnel plans
4.
Job design and descriptions
5.
Performance standards and evaluation procedures
6.
Training programs
7.
Good morale as evidenced by absenteeism,
turnover, tardiness, complaints, bickering,
employee growth and development
8.
Compensation system that promotes performance
and satisfaction
9.
Equitable and competitive pay
10.
Equitable and competitive fringes
11.
Appropriate use of teams
12.
Work ethic of individuals and teams
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GREAT
WEAKNESS
IV.
V.
VI.
VII.
OPERATIONS/PRODUCTION RESOURCES
1.
Quality of needed facilities to serve customers
2.
Capacity of needed facilities to serve customers
3.
Up-to-date and appropriate technology
(buildings, machinery, etc.)
4.
Effective and efficient physical layout
5.
Effective and efficient work flow
6.
Effective and efficient inventory control
7.
Effective and efficient purchasing practices
8.
Effective and efficient production practices
MANAGEMENT/LEADERSHIP RESOURCES
1.
Effective management style
2.
Timely decision making
3.
Effective delegation
4.
Effective participation
5.
Effective risk taking
6.
Effective leadership
ORGANIZATIONAL RESOURCES
1.
Appropriate mix of resources (people, money,
equipment) available
2.
Resources properly placed to do the job
3.
Effective interdepartmental communications
4.
Effective reporting relationships
5.
Firm's public image
6.
Strong organizational culture (productivity,
honesty, dispute handling, tolerance of change)
INFORMATION RESOURCES
1.
Appropriate financial and cost accounting systems
2.
Planning system appropriate for internal analysis
(assessing strengths and weaknesses)
3.
Planning system appropriate for external analysis
(assessing opportunities and threats)
4.
Control system that highlights problems and
generates corrective action
5.
Information systems that use the best technology
available
6.
Effective information for strategic decision making
7.
Effective information for operational decision
making
8.
Ability to utilize internet and e-commerce
GREAT
STRENGTH
1-------2-------3-------4-------5
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5
STRENGTHS ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT STRENGTHS* USING THE QUESTIONS FROM
ABOVE AND YOUR OWN BELIEFS ABOUT YOUR FIRM. In the column marked CA put a check beside
those strengths that are COMPETITIVE ADVANTAGES.** In the final column, cite specific evidence that
supports your believe that the item is a strength or competitive advantage.
STRENGTHS
CA?
EVIDENCE
* STRENGTH: Something a company does well or a characteristic that gives it an important
capability.
**COMPETITIVE ADVANTAGE: A strength that clearly places a firm ahead of its competition.
6
WEAKNESSES ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT WEAKNESSES* USING THE QUESTIONS FROM
ABOVE OR YOUR OWN BELIEFS ABOUT YOUR FIRM. In the column marked CD put a check beside
those weaknesses that are COMPETITIVE DISADVANTAGES.** In the final column, cite specific evidence
that supports your belief that the item is a weakness or competitive disadvantage.
WEAKNESSES
CD?
EVIDENCE
* WEAKNESS: Something a company does poorly or a characteristic that puts it at a disadvantage.
**COMPETITIVE DISADVANTAGE: A weakness that clearly places a firm behind its
competition.
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EXTERNAL ANALYSIS CHECKLIST
GOAL:
TO DETERMINE A FIRM'S EXTERNAL OPPORTUNITIES AND THREATS
PORTER'S FIVE COMPETITIVE FORCES
DIRECTIONS:
1.
2.
3.
4.
5.
For each item below, circle the number on the scale that best corresponds to your honest
assessment of the external situation faced by your firm. Numbers to the left on the scales
correspond to situations with greater threats while numbers to the right correspond to
situations with greater opportunities.
POTENTIAL ENTRY:
How difficult is it for new firms to enter your
market?
How many options exist for discouraging new
firms from entering your market?
SUPPLIER POWER:
How much bargaining power do your suppliers
have?
How many options exit for lessening supplier
power?
BUYER POWER:
How much bargaining power do your buyers
have?
How many options exist for lessening buyer
power?
POTENTIAL SUBSTITUTES:
How many alternatives do buyers have for
getting the benefits of your products or services
in some other way?
How many options exist for improving your
price-performance tradeoff?
How many options exist for finding less
substitute-sensitive customers?
RIVALRY:
What level of intensity exists in the rivalry
between you and your direct competitors?
How strong are these direct competitors?
How many options exist for taking on these
competitors head to head?
How many options exist for picking areas of the
market that are not so competitive?
Easy 1---2---3---4---5 Difficult
Few 1---2---3---4---5 Many
Much 1---2---3---4---5 Little
Few 1---2---3---4---5 Many
Much 1---2---3---4---5 Little
Few 1---2---3---4---5 Many
Many 1---2---3---4---5 Few
Few 1---2---3---4---5 Many
Few 1---2---3---4---5 Many
High 1---2---3---4---5 Low
Strong 1---2---3---4---5 Weak
Few 1---2---3---4---5 Many
Few 1---2---3---4---5 Many
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THE CHANGE FORCES
DIRECTIONS:
1.
2.
3.
4.
5.
6.
7.
8.
For each item below, circle the number on the scale that best corresponds to your honest
assessment of the external situation faced by your firm. Then, in the space provided, list
specific key changes influencing your firm. Less change corresponds to less threatening,
but probably fewer opportunities. Greater change corresponds to more threatening, but
probably more opportunities.
Changes in buyer demand, i.e., what buyers
want and need. Consider changes in tastes,
lifestyles, customer income, preferences for
unique products/services, etc.
Changes in long-term market growth rate.
Consider changes in industry growth, population
growth, product/service attractiveness to
customers, market saturation, etc.
Product and marketing innovation. Consider
innovations in product/service features, quality,
packaging, promotion, advertising, distribution,
etc.
Technological change and the speed with
which it spreads. Consider changes in
equipment, production methods, biotechnology,
computers, information systems, and the speed
with which industry competitors or customers
adopt these changes.
Regulatory influences and government policy
changes. Consider changes in environmental,
business, and land-use laws and regulation.
Little Change 1---2---3---4---5 Much Change
LIST KEY CHANGES:
Little Change 1---2---3---4---5 Much Change
LIST KEY CHANGES:
Little Change 1---2---3---4---5 Much Change
LIST KEY CHANGES:
Little Change 1---2---3---4---5 Much Change
LIST KEY CHANGES:
Little Change 1---2---3---4---5 Much Change
LIST KEY CHANGES:
Little Change 1---2---3---4---5 Much Change
Changes in uncertainty and business risk.
Consider changes in business liability, volatility
of markets, ability to forecast effectively, etc.
LIST KEY CHANGES:
Major changes in the economy. Consider
changes in the levels of employment, investment,
interest rates, etc.
LIST KEY CHANGES:
Increasing globalization of the industry.
Consider changes in imports, exports, global
competition, etc.
LIST KEY CHANGES:
Little Change 1---2---3---4---5 Much Change
Little Change 1---2---3---4---5 Much Change
9
OPPORTUNITIES ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT OPPORTUNITIES* USING THE COMPETITIVE
AND CHANGE FORCES FROM ABOVE AND YOUR OWN BELIEFS ABOUT YOUR FIRM'S
EXTERNAL SITUATION. In the column marked evidence, site the primary reason(s) why you believe this is an
opportunity.
OPPORTUNITIES
EVIDENCE
*OPPORTUNITY: Any external factor or situation that offers promise or potential for moving closer
more quickly toward the firm's goals.
or
10
THREATS ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT THREATS* USING THE COMPETITIVE AND
CHANGE FORCES FROM ABOVE AND YOUR OWN BELIEFS ABOUT YOUR FIRM'S EXTERNAL
SITUATION. In the column marked evidence, site the primary reason(s) why you believe this is a threat.
THREATS
EVIDENCE
*THREAT: Any external factor or situation that may limit, restrict, or impede the business in the
pursuit of its goals.
11
STRATEGIC ISSUES SYNTHESIS
"The final analytical task is to home in on the strategic issues management needs to address in forming an effective
strategic action plan. Here, managers need to draw upon all the prior analysis, put the company's overall situation into
perspective, and get a lock on exactly where they need to focus their strategic attention." (Thompson and Strickland)
What are the firm’s core competencies? Key competitive advantages?
Where do the company's strengths and opportunities reinforce each other? Where do the company's
weaknesses and threats reinforce each other? To answer these interrelated questions, construct at least three
scenarios or stories about the company’s future. For each scenario, focus on the key uncertainties about
strengths, weaknesses, opportunities and threats.
1.
DECLINE. What combination of external threats, unrealized opportunities, internal weaknesses, and
decreasing strengths could result in a substantial decline in performance?
2.
SAME BUT BETTER. What combination of external opportunities and threats and internal strengths
and weaknesses could result in a gradual extension and enhancement of past performance?
3.
FUNDAMENTAL CHANGE. What combination of realized opportunities, avoided threats, dramatic
enhancement of strengths, and correction of weaknesses could result in significant, discontinuous
improvement in performance?
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How much change is needed? In balance, should the firm be on offense
or defense? (Locate the company’s relative position on the change grid to
the left.)
O
Turnaround
Offense
W
S
Defense
Diversification
T
What are the critical strategic issues that must be addressed to assure a successful future? The critical
issues can be thought of as a series of "how will we. . . ?" questions that must be answered by the strategic
planning process. The strategic issue questions should be tailored to the company and not stated generically.
Try to keep to under 5 in order to assure focus on the truly critical issues.
1.
2.
3.
4.
5.