Approach to Strategy Development
EXTERNAL ANALYSIS
INTERNAL ANALYSIS
• Customer Analysis
• Performance Analysis
• Competitor Analysis
• Determinants of
• Market Analysis
Strategic Options
• Environment Analysis
Opportunities
Threats
Trends
Uncertainties
Strengths
Weaknesses
Problems
Constraints
STRATEGY IDENTIFICATION & SELECTION
Internal Analysis
Financial Performance
• Sales & Market Share
• Profitability
• ROA = profits / assets
• Shareholder Value: ROA > Cost of Capital
Beyond Financials
• Brand Loyalty
– 3 out of 6 purchase occasions
– Causes for High Loyalty / Low Loyalty
– Delight drivers for the loyalists
– Exit interview the disloyal customers
– Monitor size of loyal customers
– Compare it with key competitors
Beyond Financials
• Brand Associations
– What do they think about the brand?
– Perception: Innovative? Expensive?
– Strength of each association
– Understanding through projectives in FGDs
Beyond Financials
• Product Quality / Service Quality
– Customer Expectation
– Competitor Delivery
– Key Performance Indicators
– Perceived Quality (Product / Service)
Beyond Financials
• New Product Activity
– Does R&D deliver on concepts?
– Is the process of innovation well managed?
– Track record of past launches
– Average time-to-market
Beyond Financials
• Employee Capability / Performance
– People with required capability
– Can the human resources deliver on plans?
– Are resources well managed?
– What is their attitude?
Beyond Financials
• Relative Cost
Change Design
Change Process
INFERIOR
De-emphasise
Upgrade
MORE EXPENSIVE
OUR
COMPONENT IS…
Raise Price
Cost Reduction
SUPERIOR
LESS EXPENSIVE
Emphasise
Leave alone
Strength-Weakness Analysis
• Profiling the Company in the areas of
– Marketing
– Finance
– Manufacturing
– R&D
– Human Resources
Ref. Marketing Management by Ramaswamy &
Namakumari, 3rd Edn. (page. 130-131, Chart 10.4)
Example: Bajaj Motorcycles
• Strengths
–
–
–
–
Strong brand presence / growth in sales
Nationwide distribution / service network
Strong financial support of corporate
Strong imagery of Pulsar
• Weaknesses
– Product Mix: Overdependence on Pulsar
– No presence in fuel efficient / cruiser categories
– Weak R&D: Last 4-5 launches a failure
Determinants of Strategic Options
• Past & Current Strategies [YAMAHA]
• Consumer Perception [TATA & INDICA]
• Organisational Capabilities
– Marketing [HUL]
– Finance [RELIANCE]
– Human Resources [GOOGLE]
– R&D [INTEL]
– Manufacturing [TATA]
From Analysis to Strategy
EXTERNAL ANALYSIS
INTERNAL ANALYSIS
• Customer Analysis
• Performance Analysis
• Competitor Analysis
• Determinants of
• Market Analysis
Strategic Options
• Environment Analysis
Opportunities
Threats
Trends
Uncertainties
Strengths
Weaknesses
Problems
Constraints
STRATEGY IDENTIFICATION & SELECTION
MARKET NEEDS /
ATTRACTIVENESS
1. Strategic Investment
COMPETITORS
STRENGTHS /
WEAKNESSES
ORGANISATIONAL
STRENGTHS /
WEAKNESSES
2. Value Proposition
3. Creating the Value
Proposition
4. Communicating the
Value Proposition
Strategic Investment
For Market Attractiveness
•
•
•
•
•
•
•
Size of market
Market rate of growth
Customer Needs / Satisfaction Levels
Competition: Quantity, Position
Profitability
Sensitivity to economic trends
Environmental impact
For Competitive Position
•
•
•
•
•
•
•
•
•
Market share
Management profile
R&D
Quality of products and services
Customer Loyalty
Margins
Distribution
Marketing
Flexibility