Diamond E Model - Seen as a roadmap for strategic analysis - SWOT (Strengths and Weaknesses on the left, Opportunity and Threats on the left) - Shows the strengths and weaknesses that come from within the organization, as well as what you should do in response to the environment - The Principle Logic of Diamond E is that the left side of the model(ie. Preferences, Strategy, Organization, Resources) have to be consistent with the right side of the model(the environment). - If the left side is not consistent with the right, we will not be able to execute the strategy as expected - If the strategy does not aligned with the environment, there will be threats and obstacles - When both sides are consistent with each other, it leads to coherent performance within the company - In order for an idea to work, the internal organization has to be aligned with the external environment. The company has to want to pursue the idea, and the idea has to fit with what the company sees within the environment at the time Key Success Factors - How are each factor affected by other factors(ie. How does employee commitment affect customer satisfaction, how is customer satisfaction connected to distinct competitive advantage) - Questions like what does it mean to gain employee commitment, What is it like to be innovative and creative are important to study - Motivation includes commission, recognition, promotion, etc - To satisfy a customer, you need to understand what a customer really wants - Consistency is very important in quality of product, for example, if you go to a McDonald’s and order a big mac, you assume that the big mac taste the same as any other McDonalds - If your product is inconsistent, the customer may refrain from buying that product in the first place - Processes ensure consistency and reliability, and it may also affect value - The culture is related to the internal company Key Performance Indicators - If you have high turnover and high applications, it means you hire the wrong people, high turnover and low applications, it means you are the problem - Productivity(the bigger the better) - Market share(ie. If the market is 10 billion, and you have one billion of your share, then you are 10%) - Churn is the amount of customers that leave you for other competitors - High Churn and high market share, it means people buy your product but won’t come back a second time Churn is the customer satisfaction Net Promoter Score is the advocates Innovation is about valuable change, driven by new ideas Idea generation is a good indicator about your culture(if a lot of ideas is generated, that people people are not afraid to voice their opinions) The longer the cycle time takes, the worst Learn to link all of the concepts together Why Key Success Factors - Guide strategic and daily actions - Ensures holistic thinking(if one area is weak, then others will fail) - Ensures success over time External Analysis ● Present(Understand) - Current Situations ● Trends(Watch) - Evolutionary Changes - Anticipate ● Quick Change(Anticipate) - Predictable or surprising - Anticipate and plan(contingency strategies PEST Overview ● PEST model helps gauge external factors that may affect a company’s profitability ● Political - Laws, Regulations, trade agreements - Expansion, barriers, competition ● Economic - Cost, demand, funding, competitive pricing - Based on money(GDP, inflation, employment, exchange, interest) ● Social - Value/attitudes, customs, habits, demographics - Customers, employees, CSR ● Technology - Information technology, internet, materials & equipment - Barriers, innovation, strategy, R&D Applying Generic Strategies ● Broad Target & Low Cost - Cost and leadership - Companys such as Walmart, Target - Do I have enough resources that allow me to produce more cheaply than others? - Does the market value the lower priced offering? ● Narrow Target & Low Cost - Cost focused - Companies such as Freedom mobile - Is the market big enough to be profitable? - Does a cheaper and lower performance product appeal to consumers in the market? ● Broad Target & Uniqueness - Differentiation for a wide audience - Companies such as Apple - Do I have capabilities or resources that allow me to provide unique feature that consumers value? - Are these unique features broadly appealing? ● Narrow Target & Uniqueness - DIfferentiation for a narrow audience - Companies such as Ferrari, Lamborghini - Are customers willing to pay more for the uniqueness? Porter’s Five Forces Porter’s Five Forces: Competitors ● Rivalry among existing firms - Who sells something similar to you? ● Effects: Price competition, lower volume, increased costs ● Easier to win over new customers rather than winning over customers from other competitors ● Have to fight other competitors to win over new customers and keep existing customers Substitutes ● Products that do a similar job ● Effects: Creates price ceiling; increases marketing cost
