Strategic Analysis
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 don’t like the answer to #2
Decision Making Process
P. 12-13
Evaluate
Current
Performance
Examine &
Evaluate the
Current:
- Mission
- Objectives
- Strategies
- Policies
Interview
Strategic
Managers:
- BOD
- Top Mgmt
Decision Making Process
Scan
External
Environment
- Societal
- Tasks
Select
Strategic
Factors
- Opportunities
- Threats
Scan
Internal
Environment
- Structure
- Culture
- Resources
Select
Strategic
Factors
- Strengths
- Weaknesses
Analyze
Strategic
Factors
(SWOT)
in light of
Current
Situation
Decision Making Process
Review and
Revise as
Necessary:
- Mission
- Objectives
Generate &
Evaluate
Strategic
Alternatives
Select &
Recommend
Best
Alternatives
Decision Making Process
Implement
Strategies:
- Programs
- Budgets
- Procedures
Evaluate
And
Control
Go
Back To
Step 1
Evaluate
Current
Performance
Decision Making Process
Customers
Revenue
Admin
HR
MIS
P&L
Bal Sheet
S&UF
Operations
Sales
Marketing
External Environment
Environment
Socio-cultural
Industry
Environment
Threat of new entrants
Power of suppliers
Power of buyers
Product substitutes
Intensity of rivalry
Competitor
Environment
Technological
General
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
Industry Environment
Five Forces of
Competition
Bargaining Power of
Buyers
Threat of New Entrants
Barriers to Entry
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Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of scale
Government policy
Expected retaliation
Bargaining Power of Suppliers


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

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
Bargaining Power of Buyers
(Customers)




They purchase a large portion of an industry’s total
output
Sales of the product being purchased account for a
significant portion of the seller’s annual revenues
They could easily switch to another product
The industry’s products are undifferentiated or
standardized, and buyers pose a credible threat if
they were to integrate backward into the seller’s
industry
Threat of Substitute Products

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Customers face few switching costs
Substitute product’s price is lower
Substitute product’s quality and performance
capabilities are equal to or greater than those of
the competing product
Intensity of Rivalry
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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
Components of
Internal Analysis
Core
Competencies
Discovering Core
Competencies
Strategic
Competitiveness
Competitive
Advantage
Marketing Mix
Capabilities
Four Criteria
of Sustainable
Advantages
Resources
• Tangible
• Intangible
Corporate Culture
R&D
Capital Situation
Technology
•
•
•
•
Valuable
Rare
Costly to Imitate
Non-substitutable
Value
Chain
Analysis
• Outsource
Service
Marketing & Sales
Procurement
Technological Development
Human Resource Mgmt.
Firm Infrastructure
Support Activities
The Basic
Value Chain
Outbound Logistics
Operations
Inbound Logistics
Primary Activities
Quiz – Question 1
1.
When an organization is evaluating its strategic
position, which is NOT one of the strategic
questions it should ask itself?
A.
B.
C.
D.
E.
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?
Quiz – Question 1
1.
When an organization is evaluating its strategic
position, which is NOT one of the strategic
questions it should ask itself?
A.
B.
C.
D.
E.
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?
Quiz – Question 2
2.
Strategic planning within a small organization
A.
B.
C.
D.
E.
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
Quiz – Question 2
2.
Strategic planning within a small organization
A.
B.
C.
D.
E.
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
Quiz – Question 3
3.
Research done by Henry Mintzberg suggests that
strategy formulation
A.
B.
C.
D.
E.
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
Quiz – Question 3
3.
Research done by Henry Mintzberg suggests that
strategy formulation
A.
B.
C.
D.
E.
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
Quiz – Question 4
4.
Which of the following is NOT one of the five
triggering events that are the stimulus for a
strategic change?
A.
B.
C.
D.
E.
Intervention by the organization’s bank
Entrance of a new competitor into the industry
Change in ownership of the organization
New CEO
Decreased profitability
Quiz – Question 4
4.
Which of the following is NOT one of the five
triggering events that are the stimulus for a
strategic change?
A.
B.
C.
D.
E.
Intervention by the organization’s bank
Entrance of a new competitor into the industry
Change in ownership of the organization
New CEO
Decreased profitability
Quiz – Question 5
5.
Which of the following is an example of a strategy?
A.
B.
C.
D.
E.
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
Quiz – Question 5
5.
Which of the following is an example of a strategy?
A.
B.
C.
D.
E.
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
Analysis Tools – SWOT
Chapter 5

Strengths

Opportunities

Weaknesses

Threats
Strategy Development - TOWS
TOWS Analysis
Opportunity
Threat
Strength
O/S Strategies
T/S Strategies
Identify strategies that
focus the organization’s
strengths on
opportunities
Weakness
O/W Strategies
Identify strategies that
shore up weaknesses to
allow the pursuit of
opportunities
Identify strategies
that focus strengths
against threats
T/W Strategies
Identify strategies that
shore up weaknesses
SWOT Example – Bicycle Co.
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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
TOWS Example – Bicycle Co.
TOWS Analysis
Strength
•
•
•
•
Innovation
Quality
Brand in segment
Flexible manufacturing
Opportunity
Threat
• International
• Dirt bikes
• Flat demand
• Lower cost, higher quality
O/S Strategies
T/S Strategies
• Grow international
• Develop/enter dirt bikes
Weakness
O/W Strategies
• Cost
• Financial size
• Grow international to
increase economies of
scale
• Int’l alliances
• Grow international
• Develop/enter dirt bikes
T/W Strategies
• Grow international
• Develop/enter dirt bikes