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Watch this video to get a glimpse of what we do at SOS! Youtube: We Are Students Oο¬ering Support Instructor Profile – Kyle Bergerson Program: 2nd Year BBA Extracurriculars: Interests: Finance, Law, Gym Instructor Profile – Vivek Bhardwaj Program: 2nd Year CS/BBA (UW/WLU) Extracurriculars: Interests: Mixing music, Swimming, and race cars π Instructor Profile – Arnav Hiremath Program: 2nd Year BBA, Econ Minor Extracurriculars: Interests: F1, drones, mechanical keyboards Instructor Profile – Emily Liu Program: 2nd Year BBA, UX Minor Extracurriculars: Interests: Yoga, kickboxing, bubble tea Instructor Profile – Sia Bhaskar Program: 3rd Year BBA Extracurriculars: Interests: Dance, Reading, Sushi DISCLAIMER We have not seen the midterm! (i.e. we do not know what the questions are) The information presented is based on our experience in the course as students when we took BU111. Agenda 1. 2. 3. 4. 5. 6. 7. 8. Key Success Factors Diamond-E Porter’s Generic Strategies Break (10 mins) External Analysis a. Porter’s Five Forces b. PEST Analytical Thinking / Case Analysis Practice Questions Exam Tips KEY SUCCESS FACTORS Key Success Factors Achieving financial performance Meeting customer needs Building quality products and services Encouraging creativity and innovation The Six Gaining employee commitment Creating a distinctive competitive advantage Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Key Success Factors For the key success factors it is important to ask: 1. Why is each KSF important? i.e. What happens if you don’t achieve them? 2. How are they interconnected? 3. Why must you pursue all of them? Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Key Success Factors For the key success factors it is important to ask: 1. Why is each KSF important? i.e. What happens if you don’t achieve them? 2. How are they interconnected? REMEMBER (in #twitter version ie. Short form): 3. Why must you pursue all of them? • Financial, needs, quality, innovation, employee and competitive advantage Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips KSF Key Success Factors Importance Diamond-E External Analysis KPI Analytical Thinking Exam Tips Key Success Factors It is also important to be able to recognize critical success factors when they come up in examples. 1. Joe’s Java (Meeting Customer Needs, Achieving Financial Performance) 2. High Tech Bar Top You can’t recognize them if you don’t know them so start by being able to list the 6ix factors and understanding their implications and then you’ll be able to recognize them on sight (Innovation & Creativity, Competitive Advantage) Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Key Success Factors Example: Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Achieving Financial Performance Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Building Quality Product/ Service Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Gaining Employee Commitment Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Encouraging Innovation & Creativity Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Meeting Customer Needs Key Success Factors Emily and her ridiculously smart co-tutor Arnav run the BU111 SOS review session. SOS is a charity organization that uses the money from the review sessions to assist in nations around the world. To be an SOS tutor you must have received an 11 or 12 in the course you are tutoring. SOS is a great way to get involved in Laurier and they both can’t wait to apply again. Arnav and Emily are new tutors who brought new slides and examples to the session. Both tutors who are very knowledgeable in BU111 have prepared what is sure to be most exciting session of Fall 2022. Creating a Competitive Advantage How are KSF Related? Quality Products & Services Meeting Customer Needs Achieving Financial Performance Encouraging Innovation and Creativity Gaining Employee Commitment Creating A Distinct Competitive Advantage Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips How are KSF Related? ving Meeting Achie ncial Customer Fina Needs few of the links between the Perfor Quality Products & Services These are just a mance KSF’s for this specific example! I encourage you to try and find some more! It’s important to recognize that these factors work forwards backwards and every way in Encouragin ing A between. g Creat Innovatio and n Creativity Gaining Dist Employee Commitment Compe inct titive ntage Adva Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips How are KSF Related? For Example Achieving Financial Performance Meeting Customer Needs Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips How are CSF Related? For Example Customers were looking for cold caffeinated drink options, that didn’t taste like coffee. So… Meeting Achieving Starbucks expanded its cold drink selection with the CustomerFinancial Refreshers line. (ex. “Pink Drink”) Needs Performance Customers loved the new drinks, and increased the number of trips they made to Starbucks. Cold beverages contributed to 40% of overall revenue growth last quarter! Critical Success How are KSF Related? For Example Encouraging Creativity and Innovation Critical Success Factors Diamond-E Gaining Employee Commitment External Analysis Analytical Thinking Exam Tips How are CSF Related? For Example Every quarter, employees submit ideas for projects they want to work on, not restricted to Shopify’s operations. Encouraging Employees can see each others’ ideas and work in teams to implement Gaining Creativity them. They work solely on those projects during Hack Days, and the best Employee projects are presented at the end. and Innovation Commitment Any ideas that are viable for business can be incorporated into the company’s offering. Employees get bragging rights, and free travel to another office. Critical Success Diamond-E What is the Diamond-E? DIAMOND ENVIRONMENT 1. 2. E Internal Key Success Factors Diamond-E What we want: Consistency Alignment Example: External External Analysis Analytical Thinking Exam Tips The Model Management Preferences Organization Strategy Environment - PEST - Porter’s 5 Resources SWOT: Key Success Factors Strengths, Weaknesses Diamond-E External Analysis Opportunities,Threats Analytical Thinking Exam Tips Environment Management Preferences Organization Strategy Environment - PEST - Porter’s 5 Resources Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Environment Idea: What should we do? What industry do we want to compete in? 1. Porter’s Five Forces 2. PEST Analysis Help to identify opportunities to pursue or threats to defend against. Organizations that fail to do so will not survive. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Management Preferences Management Preferences Organization Strategy Environment - PEST - Porter’s 5 Resources Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Management Preferences Example: Underlying: β β β β Obvious: History Motives Characteristics Biases β β Vision Mission How do managers make decisions? Will they be susceptive to your recommendation? Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Organization Management Preferences Organization Strategy Environment - PEST - Porter’s 5 Resources Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Organization Culture • Flexibility or control • Adaptive or conservative Capabilities • R&D • Technical skills Example: Consider differences between Structure • Geographic • Activities and Characteristics of the organization that enable the firm to carry out its strategy Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Resources Management Preferences Organization Strategy Environment - PEST - Porter’s 5 Resources Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Resources Human Resources: Employees Example: Capital: Buildings, Equipment Fina Financial: Cash, Profit What is the firm’s ‘Tool kit’ that it can use to carry out a strategy Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Strategy Most Important Piece! Management Preferences Strategy Organization Environment - PEST - Porter’s 5 Resources Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Strategy Examples: Lenses What is it Assess: • Plan of action • Trying to create a competitive advantage • Assess current strategy • Generate new one • Evaluate proposed strategies Generate/Evaluate: High Tech Bar Top This piece glues together your internal and external components Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Generic Strategies Competitive Scope Competitive Advantage Broad Target Low Cost Uniqueness Key Success Factors Narrow Target Cost Leadership Cost Focus Differentiation Differentiation Focus Diamond-E External Analysis Analytical Thinking Exam Tips Key Takeaway Want to do Management Preferences Strategy Organization Most successful strategies satisfy all three conditions Environment - PEST - Porter’s 5 Resources Need to do Can do Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Low Cost Uniqueness Competitive Advantage Porter’s Generic Strategies Cost Leadership Differentiation Broad Target Cost Focus Differentiation Focus Narrow Target Competitive Scope Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Break - 10 Minutes External Analysis What is External Analysis? β Process of scanning and evaluating the external environment β Where are the opportunities and threats that exist in the market β Environment can be classified as general (PEST) which effects all businesses or Specific (Porter’s 5) which effects only industry participants This is the E part of the Diamond-E! Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Why is it important? Benefits Challenges • Managers are proactive • Discover information useful for planning • Cope with uncertainty • Highlight gaps in resources • Consistency and performance Key Success Factors Diamond-E 1. Understanding current situation 2. Anticipating future trends 3. Anticipate quick change • Time consuming • Forecasts and analyses imperfect • Rapidly changing environment hard to keep up with External Analysis External analysis is key to aligning business with the external environment. Analytical Thinking Exam Tips External Analysis: -Porter’s Five Forces Porter’s Five Forces Potential Entrants What are the factors that will predict industry profitability? Suppliers Key Success Factors Diamond-E Industry Competitors (Rivalry among existing firms) Buyers Substitutes And how can I proactively manage them? External Analysis Analytical Thinking Exam Tips Porter’s Five Forces Potential Entrants What are the factors that will predict industry profitability? Suppliers Industry Competitors (Rivalry among existing firms) Buyers Substitutes Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Rivalry How it affects industry profitability Rivalry among existing firms Key Success Factors Diamond-E • High rivalry can result in lower volumes, price competition and increased costs • (Arguably) the most powerful of the five forces External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Rivalry What affects rivalry Low Industry Growth Rates • If the industry isn’t growing quickly competitors may try to source their growth from your market • Established CPG’s such as P&G competing in mature categories such as soup, detergent, household cleaning supplies Low Consumer Switching Costs • • If consumers have frictionless switching then you have to be more aware of your rivals as customers will be able to abandon your product for theirs at no extra cost Groceries vs. bank accounts Perishable/Commodity Products • When products are perishable competition intensifies as rivals try to sell their product while it is still good • Groceries vs. Gold High Exit Barriers • Companies that may want to leave the industry but have difficulty doing so or recouping their investment may stay in the industry and continue competing. • Auto manufacturing - Hard to liquidate Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Rivalry Methods to reduce its power A Acquisition Of Competitors Create or Increase Customer Switching Costs Differentiate Products/Services Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Suppliers How it affects industry profitability? • Organizations or people that provide your “Key Inputs” Suppliers Key Success Factors Diamond-E • The higher the force of your suppliers the higher the cost of your inputs and the lower your profitability will be External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Suppliers But what affects the bargaining power of suppliers? Low Number of Suppliers • When you don’t have a lot of choice, your bargaining power goes down • Airlines Few Good Substitute Suppliers/Inputs • If switching to a substitute supplier will reduce your quality this affects your bargaining power • Windows Vs. Linux High Switching Costs • If your suppliers have created a lock-in your threat of switching becomes less credible • Geographic considerations Threat of Forward Integration • If your suppliers pose a credible threat of Forward Integration… that’s not great for you • Small farmers market relying on one large farm for vegetables and fruits • Apple making the M1 chips instead of Intel Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Suppliers Methods to reduce its power Form a Strategic Alliance Internal Supply In the Long Run: redesign your product or needed input Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Buyers How it affects industry profitability? Buyers Key Success Factors Diamond-E • These are the people who actually purchase your product or service • High Buyer force reduces the price you can demand and increases your costs External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Buyers But what affects the bargaining power of buyers? Few/Concentrated Buyers • If you can only sell to a few people you’re going to offer them great prices to actually make the sale→ Selling an really niche action figure Discretionary Purchase • How much do customers need your product or service or is it just “nice to have” → Water vs Diamonds Standardized Products • Price competition is a larger driver in purchasing when products are standard → Commodities Low Switching Costs • Fast Food vs Banking Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Buyers Methods to reduce its power Form Alliances with other sellers Engage in Strong Marketing and Differentiation Create Switching Costs and Lock-In Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces Potential Entrants What are the factors that will predict industry profitability? Suppliers Industry Competitors (Rivalry among existing firms) Buyers Substitutes Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – New Entrants How it affects industry profitability? Potential Entrants • These are people currently outside of the industry looking to get in • Potential entrants have the ability to disrupt an industry and can drive intense competition if the barriers are low to entry Question: How does Apple create high barriers to entry? Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – New Entrants But what affects the threat of potential new entrants? No Regulations or Government Policy • How easy is it to open a new bank? Lack of Capital Intensity or Economies of Scale • Your industry is protected from entrants when there is a significant disadvantage to starting small • Telecom Lack of Specialized Assets/Networks/Knowledge/Tech β If your industry doesn’t have any special “tricks” or anything that would be difficult to learn the door is wide open to new entrants • Wood chair builder Low Switching Costs or Lack of Brand Loyalty & Identity • Wheat vs iPhones Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – New Entrants Methods to reduce its power Grow to Achieve Scale Control Distribution Network Lobby the Government Differentiate and Create Brand Loyalty/Identity Lock Customers in Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Substitutes How it affects industry profitability? Substitutes Key Success Factors Diamond-E • Substitutes aren’t necessarily other members of your specific industry but products and services that provide a subset of the value that you do. • Freshii: consumer looking for healthy and good food. Competitors: Salad Days, Subway. Substitutes: eating food from home, grocery store meals, fast food. • Substitutes create a Price Ceiling External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Substitutes But what affects the threat of substitutes? Lots of Good Quality Substitutes • Having more high quality options for substitutes reinforces the price ceiling you can charge • The Keg vs. Fast Food Low Switching Costs • Fast Food High Buyer Propensity to Substitute • Function of the two above Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Substitutes Methods to reduce its power Strong Marketing & Differentiation Attempt to Lock Customers In Consider Apple, how do they differentiate? How do they lock in customers? Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Questions to Answer From a Porter’s Analysis 1. Is the industry a realistic place for a new venture to enter? If yes, then… 2. Can we do a better job than competition at avoiding or diminishing factors that suppress industry profitability? 3. Is there a unique position we can pursue? 4. Is there a superior business model that competition would find hard to duplicate? Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips When studying Porters… Don’t just understand the factors that affect an industry, understand why. It’s not enough to say “Having a standardized product gives power over your buyers” you should extend your response to show you understand why “because you can’t charge high prices or your customers will switch to your competitors cheaper but identical product.” Don’t just state a solution… state a solution and why it helps you. Don’t stop at “creating a strategic alliance reduces the force of your suppliers” continue on to “because getting them to see you as a partner and not an adversary means they will charge lower prices as your success becomes their success” BECAUSE BECAUSE BECAUSE that word saves lives… and degrees. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Let’s put it all together Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces -WILFS Suppliers: Who are WILFS major suppliers? What gives suppliers more/less power? How much power do WILFS suppliers have? New Entrants? Consider barriers. Food Suppliers No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces -WILFS New Entrants: What affects the threat of potential new entrants? Is there high or low barriers to entry? What is the threat of new entrants? New Entrants? Consider barriers. Food Suppliers No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces -WILFS New Entrants? Consider barriers. Rivals: Who are WILFS Rivals? Food Suppliers No other campus sit downs WLU Students Mozy’s, Freshii, Mels etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces -WILFS Suppliers: Who are WILFS major suppliers? What gives suppliers more/less power? How much power do WILFS suppliers have? 1. 2. 3. New Entrants? Consider barriers. Food Suppliers SYSCO, GFS (food suppliers) Availability of other options for WILFS Low Power Key Success Factors Diamond-E External Analysis No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Analytical Thinking Exam Tips Porter’s Five Forces -WILFS Buyers: Who are WILFS major buyers? What gives buyers more/less power? How much power do WILFS buyers have? New Entrants? Consider barriers. Food Suppliers No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces -WILFS Buyers: Who are WILFS major buyers? What gives buyers more/less power? How much power do WILFS buyers have? 1. 2. 3. New Entrants? Consider barriers. Food Suppliers WLU Students Availability of other options for WLU students Depends: on campus- low power In general- decently high power Key Success Factors Diamond-E External Analysis No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Analytical Thinking Exam Tips Porter’s Five Forces -WILFS New Entrants: What affects the threat of potential new entrants? What mitigates threat of new entrants? Is there high/low barriers to entry? New Entrants? Consider barriers. Food Suppliers 1. Covered previously: (see next slide) No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – New Entrants But what affects the threat of potential new entrants? No Regulations or Government Policy • How easy is it to open a new bank? Lack of Capital Intensity or Economies of Scale • Your industry is protected from entrants when there is a significant disadvantage to starting small • Telecom Lack of Specialized Assets/Networks/Knowledge/Tech • If your industry doesn’t have any special “tricks” or anything that would be difficult to learn the door is wide open to new entrants • Wood chair builder Low Switching Costs or Lack of Brand Loyalty & Identity • Wheat Critical Success Factors Diamond-E External Analysis Entrepreneurship Exam Tips Porter’s Five Forces -WILFS New Entrants: What affects the threat of potential new entrants? What mitigates threat of new entrants? Is there high/low barriers to entry? 1. 2. 3. New Entrants? Consider barriers. Food Suppliers Covered previously: (see last slide) growth, control, differentiate Generally high No other on-campus sit down restaurants WLU Students Mozy’s, Freshii, Mels etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces -WILFS New Entrants? Consider barriers. Substitutes: What affects the threat of substitutes? What mitigates threat of substitutes? Is there high/low customer lock-in? Food Suppliers 1. Covered previously: (see next slide) No other on-campus sit down restaurants WLU Students Freshii, Mels, Meal hall etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Porter’s Five Forces – Substitutes But what affects the threat of substitutes? Lots of Good Quality Substitutes • Having more high quality options for substitutes reinforces the price ceiling you can charge • The Keg vs. Fast Food Low Switching Costs • Fast Food High Buyer Propensity to Substitute • Function of the two above Critical Success Factors Diamond-E External Analysis Entrepreneurship Exam Tips Porter’s Five Forces -WILFS New Entrants? Consider barriers. Substitutes: What affects the threat of substitutes? What mitigates threat of substitutes? Is there high/low customer lock-in? No other Food Suppliers 1. 2. 3. Covered previously: (see last slide) Differentiation, lock-in Generally high on-campus sit down restaurants WLU Students Freshii, Mels, Meal hall etc. Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips External Analysis: PEST PEST – Why does it matter? Framework for analyzing the general environment Identify trends or changes in the environment that will have an effect on our business Helps managers identify opportunity and prepare for threats in the environment Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips PEST – Why does it matter? Political Economic • Laws, regulations • Taxes • Trade agreements • Political system • Political stability • Balance of trade • Exchange rates • Productivity • Inflation (deflation) • Interest rates • Employment rates/measures Key Success Factors Diamond-E Social • Customs • Values • Attitudes • Demographics • Trends External Analysis Technological • Internet and ecommerce • Information technologies • Innovation cycles Analytical Thinking Exam Tips PEST – Why does it matter? • Can create incentives for businesses and provide support when needed P E S T • Affects uncertainty, risk, and constraints/costs faced by a firm • Affects costs, sales & financial uncertainty • Influences customer preferences • Influences corporate social responsibility and worker attitudes • Affects how we live, work, consume and produce • Results in firms needing to constantly scan the environment Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Questions to Answer from PEST 1. Are there any opportunities provided by the government that can help my business? E.g. Grants, subsidies? 2. Do the economic conditions support my business? What current and future economic factors affect my industry and product? E.g. exchange rates in US/Canada, unemployment rates and COVID, etc. 3. What demographic and social trends affect my business? How? 4. What technological forces affect me now and in the future? How do they assist or constrain? Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips PEST Example Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips Analytical Thinking Tackling A Case 3 Whys: β Keep asking why until you identify the underlying issue Issue Trees: β Profitability Framework, etc. Make Tree Diagrams Identify the applicable models β Are they entering a new market? β Porter’s Five Forces β Mentions environmental analysis? β PEST β Strategy does not align with current environment or with internal business? β Diamond-E β Need to analyze feasibility of your strategy β Force Field Analysis Creating a GOOD Solution Good solution must be: β Feasible: Can be realistically executed β Complete: Addresses strategic, tactical, and operational β Effective: Meets the objectives It must also: β Satisfy key success factors of solution β Address constraints or preferences β Support the aspirations or vision or top priority of the organization or decision-maker Three Levels Of Recommendations Strategic 1 Tactical What are the 2-3 main questions we must address to make the strategic recommendation a reality? 2 What is the “big idea” for answering the key question in the case? Operational 3 What do we need to make, buy, borrow, acquire to implement the tactical recommendations? Case Process 1. Identify the immediate issue, underlying issue and big question 2. Identify objectives, aspirations, and decision criteria 3. Apply models and frameworks relevant to the big question 4. Develop and evaluate hypotheses 5. Propose GOOD solution with implementation 6. Identify risks, mitigation and contingency strategies 7. Demonstrate impact Case Process 1. Identify the immediate issue and big question 2. Identify objectives, aspirations, and decision criteria 3. Apply models and frameworks relevant to the big question What’s theand difference objectives 4. Develop evaluatebetween hypotheses and decision criteria? 5. Propose GOOD solution with implementation 6. Identify risks, mitigation and contingency strategies 7. Demonstrate impact Objectives vs. Decision Criteria Objective: β Target that you are trying to achieve Decision Criteria: β Used to evaluate the different options available to us β A good solution will include these criteria β A set of “rules” to follow while crafting your recommendation β Can use these to point to a solution and “yes” it meets the criteria or “no it doesn’t” SAMPLE CASE! KEY SUCCESS SOUVLAKI SAMPLE CASE! Sofy is the owner of the Key Success Souvlaki Restaurant in Uptown Waterloo. Although she’s a busy professor, it’s been her dream to provide university students the nourishment they need to succeed in their exams. Since Sofy is an over-achiever, her business offers in-dining and frozen food. She offers in-house dining options but only has 4 tables that are usually empty, and also offers take-home frozen meals since students value convenience. Sofy knows that if she removes the 4 tables and expands her kitchen, she can increase her capacity to produce take-home options like her famous Porter’s Panini and Tactical Tzatziki by 150%. Her customers are loyal and love her dishes and service. Unfortunately, recently she has faced declining profits and is not sure why. What would you recommend to her? 1. Immediate Issue What is the big question that we are trying to answer? How can Sofy achieve consistent profitability? 2. Objectives, aspirations, decision criteria Objective: achieve profitability Decision Criteria: - Accommodates time constraints (professor schedule) - Meets customer needs - Allows her to continue living her dream 3. Applying the Framework What framework should we use? Profitability 3. Applying the Framework 3. Applying Framework - DIAMOND E ELEMENTS Sofy is the owner of the Key Success Souvlaki Restaurant in Uptown Waterloo. Although she’s a busy professor, it’s been her dream to provide university students the nourishment they need to succeed in their exams. Since Sofy is an over-achiever,her business offers in-dining and frozen food. She offers in-house dining options but only has 4 tables that are usually empty, and also offers take-home frozen meals since students value convenience. Sofy knows that if she removes the 4 tables and expands her kitchen, she can increase her capacity to produce take-home options like her famous Porter’s Panini and Tactical Tzatziki by 150%. Her customers are loyal and love her dishes and service. Unfortunately, recently she has faced declining profits and is not sure why. What would you recommend to her? Organization | Management Preferences | Resources | Strategy | Environment 4. Develop and Evaluate Hypotheses… Alternatives 1. Expand ability to produce home-made frozen meals 2. Focus on providing a premium dine-in experience 3. Sell the business 4. Develop and Evaluate Hypotheses… Alternatives Alternatives Meet customer needs Feasible (time) Live her dream Focus on Take Out 1 Tie? Tie? Focus on in Dining 2 Tie? Tie? Sell the Business 3 1 3 Now that we’ve done our analysis, we need to propose a solution that is COMPLETE, FEASIBLE, and EFFECTIVE. How? Completeness: THREE LEVELS OF RECOMMENDATION Feasibility: FORCE FIELD ANALYSIS! Effectiveness: DEMONSTRATE IMPACT 5. Purpose a GOOD solution and Implementation Implementation (Operational) Short Term (0-3 Months) β Conduct consumer research to determine specific needs β Evaluate kitchen expansion options β Develop new product offerings (different types of frozen pastas) Medium Term (3-6 Months) β Renovate physical location β Train staff on new product offerings and recipes β Develop branding and marketing guidelines Long Term (6-12 Months) β Launch social media campaign to drive awareness β Host special launch for new product offerings β Conduct consumer surveys to assess success of offering 6. Identify risks, mitigation and contingency strategies 7.Demonstrate the Impact Not enough to stop at the recommendation… need to PROVE that it meets the case objectives: β What revenues and costs are affected because of my recommendation? β Which financial indicators are relevant to the objectives? β E.g. market share, profitability, ROI, etc. Case Process RECAP 1. Identify the immediate issue and big question 2. Identify objectives, aspirations, and decision criteria 3. Apply models and frameworks relevant to the big question 4. Develop and evaluate hypotheses 5. Propose GOOD solution with implementation 6. Identify risks, mitigation and contingency strategies 7. Demonstrate impact Practice Questions Practice Question: 1. Bob owns a business selling fried turkeys and he’s excited to hopefully see some increased success around thanksgiving. Being a keen business student, you notice that he has a high employee turnover rate as well as a high customer churn. Define each of these metrics and explain the success factors that you believe might be in trouble given this information. Finally, explain the relationship between high employee turnover and high churn and give Bob a suggestion to amend these problems. (5 marks) How to Approach this Question Practice Question: 2. IA Corp is looking to you for advice to ensure their continued success over time. They have been experiencing healthy profits for the past 5 years since they are operating in the high growth e-commerce space, but they haven’t been experiencing as much success as comparable companies in their industry. Provide the IA Corp team with three factors they should focus on, explain why each factor is important and one metric they should use to measure their progress while improving each factor. Since the IA Corp team is stubborn, include examples from lecture of companies who have experienced success due to focusing on the factors you suggest. How to Approach this Question Practice Question: 3. Grace is looking to strengthen her position in the Waterloo Region dating market and has asked you for advice. Using a framework from BU111, identify and explain two factors that you will need to consider about her when recommending a strategy. (2) Then, using another course framework, identify and describe two external elements she will need to consider that will make her pursuit in this market more challenging, and provide solution for each. You know that cuffing season is around the corner, that she can look into both UW and Laurier since the schools are down the road. Finally, provide an example of one force that will be working in her favour based on the provided information. (5) How To Approach This Answer Part 1: DIAMOND-E - Management Preferences: describe what this means. If you recommend a strategy, you will need to figure out her type, deal breakers and other critical information that will impact your strategy recommendation. - Resources: describe what this means. Your strategy will need to be aligned with the resources she has at her disposal. Does she still live with her parents? Have a car? Does she have the ability to flex some brains? Part 2: PORTERS - Threat of new entrants: low capital requirements (describe). Solution: differentiate. - Substitutes: good substitutes or low switching costs (describe). Solution: create switching costs. - Buyers: does not have few/concentrated ‘buyers’ (describe) as she is down the road from both schools and has access to both UW and Laurier student populations. Exam Tips Tips from your TAs Trust us… we’re paid to know what we’re talking about We are NOT marking for keywords, but you need to be very clear about what you mean. Sometimes what you meant isn’t what comes across from what you wrote→ we aren’t mind readers, we can only reward you for what is on the page Course models are things you should know the exact words for (e.g. the 5 Forces, the 6 KSFs) and using business vocabulary makes your point clearer Do yourselves a favour and try to avoid leaving questions blank as sometimes you are closer to the answer than you think! Make sure you understand how frameworks connect to each other and how the frameworks connect to the other elements within it Doing practice questions are key - if you can apply models to real world situations and issues then you will increase your odds of doing well on the exam Key Success Factors Diamond-E External Analysis Analytical Thinking Exam Tips STAY IN THE LOOP! @lauriersos @lauriersos Thank You! Please ο¬ll out this survey: https://forms.gle/VYTrrrZ6JSyUkqAt8