Savi chapter4
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This chapter discusses critical success factors from an industry and organizational perspective. It introduces models for analyzing the industry environment, including stages of industry evolution, to identify industry critical success factors. It also presents the SWOT analysis tool to match industry factors with an organizational profile and determine strategic approaches based on the organization's internal strengths and weaknesses and external opportunities and threats.
Savi chapter4
- 1. CHAPTER 4, CRITICAL SUCCESS FACTORS I used to be indecisive, but now I am not so sure 1
- 2. Figure 4.1, the Planning Model 2
- 3. Defining Critical Success Factors Figure 4.3. Matching the profile to the environment. Matching the Profile to the Environment Examining the Examining the Doing an environment organizational profile independent Determining the level of and honest Determining the level of competence required to operate review of each competence the organization effectively in this environment aspect has as to: as to: Marketing and sales Matching what Marketing and sales Production needs to be done Production Financial Management With what can be Financial Management Research and Development done Research and Development Human Resource In all aspects of Human Resource Management Management the business 3
- 4. Analyzing the Environment, Opportunities and Challenges (threats) The terms defined An opportunity is something that if taken, will result in something positive for the organization. A challenge (threat) is quite different. Out of the environment, something with a negative consequence to your organization is going to happen unless you act in some way. 4
- 5. Remote environment, opportunities and challenges (threats) Figure 4.4. the remote environment for a ski area Remote Environment for a Ski Area Description o/t The amount of disposable income available for Economic recreation, in the hands of customers. T The perception of people regarding health and wellness Social and the use of recreation to achieve those ends. O Government regulations regarding development of park Political land and the environmental impact of the development T of recreation areas. Internet based advertising systems and reservation Technological systems. O 5
- 6. The Industry Environment, Opportunities and Challenges (threats) Figure 4.5, Opportunities And Challenges From The Five Forces Applied To The Recreation Industry (Ski Area) Force Issue o/t Demand is high for the total industry relative to T Substitute supply O products Customers are not product sensitive T Profits are Low O New entrants Large capital investment is required O to the market Demand exceeds supply in the industry for the T product or service 6
- 7. Opportunities And Challenges From The Five Forces Applied To The Recreation Industry (Ski Area) Buying groups are formed T Buyers The buyers are brand sensitive O There are a large number of travel agents O Suppliers There are a small number of suppliers of chair T lifts and equipment Industry profits are low T Rivalries Customer growth rate is high O Among Ski Areas Customers are not brand sensitive T Switching costs are high T 7
- 8. The Local Environment, Opportunities and Challenges (threats) Figure 4.6. Characteristics of the local environment. Analyzing the local Environment Issue Questions and answers o/t Do the features of the product Customers Demographic match the demographic of the O market? Competitive Product Do customers perceive the product Position Quality T as high value for the price paid? Financial Are creditors willing to let the loan Creditors Claims T serve its purpose? 8
- 9. Characteristics of the local environment Can the organization attract and Employees Availability O hold the right people? Are suppliers able to meet your Quantity present and future demand for T Suppliers their products? Does a change in the season or a Ecological Impact change in the weather impact O issues your operations? 9
- 10. The Organizational Profile, Strengths and Weaknesses A strength means you are already equipped to handle the situation and you are using state of the art procedures. A weakness means you don’t have the tools to deal with the issue. Put another way: A strength is something you have that you need, A weakness is something you don’t have that you need. 10
- 11. Step 3, a partially Figure 4.8, complete organizational profile. Major areas Potential issues S/W Explanation Quality of long and We hired a college Strategic short range S graduate to facilitate the planning development of goals. objectives We hold a small market share of a rapidly growing Marketing Market share W market. We are not growing at the same rate. We earn a rate of return Financial and Profitability S that is significantly higher accounting than the industry average 11
- 12. Step 3, a partially complete organizational profile. Our unit production costs Production, Efficiency of are lower than industry operations production S average because we have and technical processes state of the art machinery and equipment. Four of the last five rounds of negotiations were Union/Management Human W resolved after a work relationship stoppage, two strikes and resource management two lockouts. Willingness of Management is willing to Organization hold others responsible management to and W and accountable, but they delegate tasks and are not willing to delegate management authority. authority and control. 12
- 13. Stages of Industry Evolution Figure 4.9 , Industry life cycle Maturity Decline Growth Development Growth Rate Profits 13
- 14. Critical Success Factors at Figure 4.10, Each Stage of Industry Evolution Function Development Growth Maturity Decline Hold existing markets and Establish brand Focus on the promote to new Create wide recognition. Find best channels. Marketing markets. spread effective Replace old & Sales Introduce awareness. marketing products with successor channels. new ones. products to extend maturity. Prune the Finance Reinvest profits product line and Finance initial expansion and and employ cost harvest the Finance R&D losses. net cash controls. resources from outflows. liquidation. 14
- 15. Critical Success Factors at Each Stage of Industry Evolution Re-deploy unused Improve the Limit number of Increase equipment, product and Production designs, use capacity while simplify reduce standards. retaining quality. processes and operating costs. reduce product variants. Focus on quality Improve Ability to make and ability to processes to Commit changes and make product reduce costs resources to R&D take the bugs variants to and introduce new growth out. satisfy successor products. customers. products. Motivated and loyal workforce Reduce Flexibility in Reduce and Human with excellent workforce and staffing and reallocate Resources product increase training. personnel. knowledge and efficiency. selling skills. 15
- 16. Critical Success Factors at Each Stage of Industry Evolution Development Growth Maturity Decline Production Engineering Sales and Finance and Focus efficiency and market investment area and marketing share recovery successors 16
- 17. Defining Organizational Critical Factors Figure 4.11, SWOT diagram Environmental Opportunities Internal Internal Weakness Strength Environmental Threats 17
- 18. Figure 4.12, SWOT Analysis Environmental Opportunities Internal Internal Weakness Strength Environmental threats 18
- 19. the “cells” Figure 4.13, of a SWOT diagram Environmental Opportunities Cell “A” Cell “B” Redesign practices Be aggressive Internal Internal Weakness Strength Cell “C” Cell “D” Be Defensive Use your strengths in new places Environmental threats 19
- 20. Cell “A” Grand Strategy, “Re-design practices” An organization with internal weakness which is facing an industry with numerous opportunities must focus attention on re-designing how business is done so that the opportunities can be effectively captured. 20
- 21. Other Cell “A” Strategies Retrenchment/turn around Joint Venture Strategic Alliance 21
- 22. Cell “B” Grand Strategy, “Be aggressive” An organization with internal strengths which is facing an industry with numerous opportunities expand operations into new markets, invest in growth and reproduce success in other areas. 22
- 23. Other Cell “B” Strategies Product development Market development Vertical Integration 23
- 24. Cell “C” Grand Strategy, “Be Defensive” An organization with internal weakness which is facing an industry with numerous threats needs to revaluate whether or not it is advisable to stay in business. 24
- 25. Other Cell “C” Strategies Divestiture Liquidation 25
- 26. Cell “D” Grand Strategy, “Use your strengths in new places” An organization with internal strengths which is facing an industry with numerous threats evaluate whether or not their expertise could be transferred to a new, less threatening environment. 26
- 27. Other Cell “D” Strategies Horizontal Integration Concentric Diversification 27
- 28. Summary The objective of chapter 4 was to define “Critical Success Factors”. The factors relate to an industry and an organizational perspective. The “Stages of Industry Evolution” was introduced as a tool to pinpoint the critical success factors from an industry point of view. The SWOT diagram was introduced as a tool to match the industry critical success factors with the organizational profile developed in chapter 3. 28