Strategic Analysis Bpsm
- 1. Chapter 3 Strategic Analysis MANDEEP KAUR HARSHIL SHAH MONISH SHAH 4-1
- 2. Chapter Roadmap Analysing Company’s Resources & Competitive Position Core Competencies & Distinctive Competitiveness Organisational Capability Profile Strategic Advantage Profile 4-2
- 3. Strategic Management Strategic Management is the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve it’s objectives. Elements of Strategic Management: Strategic Analysis Strategic Choice Strategic Implementation Strategic Analysis is the investigation of the objective factors being considered in the process of strategic choice. Strategic Strategic Strategic Analysis Choice Implementation Evaluation Process 4-3
- 4. PYRAMID OF STRATEGY STRATEGY PLANS PROGRAMMES PROJECTS BUDGET Policies, Procedures, Rules, Regulations, etc 4-4
- 5. Approaches to Assess How Well the Present Strategy Is Working Qualitative assessment – Quantitative assessment – What is the strategy? What are the results? Completeness Is company achieving its financial and strategic Internal consistency objectives? Rationale Is company an above- average industry Relevance performer? 4-5
- 6. Key Indicators of How Well the Strategy Is Working Trend in sales and market share Acquiring and/or retaining customers Trend in profit margins Trend in net profits, ROI Overall financial strength and credit ranking Efforts at continuous improvement activities Trend in stock price and stockholder value Image and reputation with customers Leadership role(s) – Technology, quality, e-commerce, innovation, etc. 4-6
- 7. Analysing Company’s Resources & Competitive Position S W O T represents the first letter in S trengths W eaknesses O pportunities T hreats For a company’s strategy to be well-conceived, it must be Matched to its resource strengths and weaknesses Aimed at capturing its best market opportunities and erecting defenses against external threats to its well-being 4-7
- 8. Identifying Resource Strengths and Competitive Capabilities A strength is something a firm does well or an attribute that enhances its competitiveness Valuable competencies or know-how Valuable physical assets Valuable human assets Valuable organizational assets Valuable intangible assets Important competitive capabilities An attribute that places a company in a position of market advantage Alliances or cooperative ventures with partners 4-8
- 9. Identifying Resource Weaknesses and Competitive Deficiencies A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage Resource weaknesses relate to Inferior or unproven skills, expertise, or intellectual capital Lack of important physical, organizational, or intangible assets Missing capabilities in key areas Resource weaknesses and deficiencies are competitive liabilities! 4-9
- 10. Identifying a Company’s Market Opportunities Opportunities most relevant to a company are those offering: Good match with its financial and organizational resource capabilities Best prospects for profitable & long-term growth Potential for competitive advantage 4-10
- 11. Identifying External Threats Emergence of cheaper/better technologies Introduction of better products by rivals Entry of lower-cost foreign competitors Onerous regulations Rise in interest rates Potential of a hostile takeover Unfavorable demographic shifts Adverse shifts in foreign exchange rates Political upheaval in a country 4-11
- 12. Role of SWOT Analysis in Crafting a Better Strategy The most important part of S W O T analysis is not developing the 4 lists of strengths, weaknesses, opportunities, and threats, but rather Using the 4 lists to draw conclusions about a company’s overall situation and Acting on the conclusions to Better match a company’s strategy to its resource strengths and market opportunities, Correct the important weaknesses, and Defend against external threats 4-12
- 13. Competencies vs. Core Competencies vs. Distinctive Competencies A competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity A core competence is a well-performed internal activity central (not peripheral or incidental) to a company’s competitiveness and profitability A distinctive competence is a competitively valuable activity a company performs better than its rivals 4-13
- 14. Core Competencies -- A Valuable Company Resource A competence becomes a core competence when the well-performed activity is central to a company’s competitiveness and profitability Often, a core competence results from collaboration among different parts of a company Typically, core competencies reside in a company’s people, not in assets on a balance sheet A core competence gives a company a potentially valuable competitive capability and represents a definite competitive asset 4-14
- 15. Examples: Core Competencies Know-how in creating operating systems for cost efficient supply chain management Speeding new/next-generation products to market Better after-sale service capability Skills in manufacturing a high quality product System to fill customer orders accurately and swiftly 4-15
- 16. Distinctive Competence -- A Competitively Superior Resource It’s a specific ability possessed by a particular organization exclusively, or in a relatively large measure A distinctive competence is a competitively significant activity that a company performs better than its competitors A distinctive competence Represents a competitively valuable capability rivals do not have Presents attractive potential for being a cornerstone of strategy Can provide a competitive edge in the marketplace — 4-16 because it represents a competitively superior resource
- 17. Examples: Distinctive Competencies Sharp Corporation Expertise in flat-panel display technology Toyota and Honda Low-cost, high-quality manufacturing capability and short design-to-market cycles Intel Abilityto design and manufacture ever more powerful microprocessors for PCs Wal-Mart Low-cost distribution and use of state-of-the-art retail technology 4-17
- 18. Determining the Competitive Value of a Company Resource To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a “resource” must pass 3 tests: 1. Should provide access to potential market…. 2. Should contribute to the customer benefits of the end product…. 3. Should be difficult for the rivals to imitate…. 4-18
- 19. Organisational Capability Profile Organisational capability means the potential of the company to use its strengths & to overcome its weaknesses with a view to avail the opportunities provided & face the threats posed by its external enviornment. Organisational Capability Profile includes 3 factors: 4-19
- 20. General Management Factors It is concerned with the accomplishment of organisational objectives by utilising physical, financial & human resources. A Manager performs 5 basic functions: 4-20
- 21. Planning Suitable Organisati onal structure Optimum Right Levels of People in Control Right Effective Places Planning Effective Effective Methods of Leadership Motivation 4-21
- 22. Organising Means to an end. It is essential to carry out pre-determined course of action Organising includes: Giving a structure to a task Authority – Responsibility Relationship. Co-ordination Control Pressure to complete the desired objectives. Organising is a medium to complete tasks as per priority 4-22
- 23. Directing It involves efforts directed towards achieving organisational goals The basic function of management is: Motivating Commanding Leading Activating It deals with inducing the willingness & cooperation of employees towards attaining the objectives It also enables a sense of coordination of activities 4-23
- 24. Staffing Centered around human resource management. It includes: Job Design & Analysis HR Planning Recruitment & Selection Training & Development Performance Appraisal & Compensation Union Mgmt & Grievance Handling Maintaining records It is one of the most complicated task to handle. 4-24
- 25. Controlling It includes all activities that are undertaken to ensure the actual performance confirm to the planned performance The controlling activities include: Establish performance standards Measure actual performance Compare actual performance to planned standards Take corrective action 4-25
- 26. Functional Management Factors Functional competence refers to the strengths of the organisation in the functional areas of management viz; 4-26
- 27. Marketing Management Customer Analysis Social Responsibili Buying ty Opportunity Selling Analysis Product & Marketing Service Research Planning Price Distribution Planning 4-27
- 28. Contd… Marketing System Audit Marketing Intelligence system Market & Sales Forecast Marketing Cost Marketing Productivity Audit Profitability Cost Reduction Marketing Function Audit Product – line & offerings Distribution Pricing 4-28
- 29. Financial Management Investment Financing Decision Decision Dividend Decision 4-29
- 30. Contd… Financial Checklist Liquidity Activity(Turnover) Profitability Growth 4-30
- 31. Production & Operation Management Managing the resources required to produce the products or render services provided by the organisation. It reflects: Product Design Product Cost Production Efficiencies Production Process Inventory Work Force Product Quality 4-31
- 32. Human Resource Management It is said that, the difference between two organisations in term of competencies is due to the difference in the capabilities of their Human Resources. Human Resource Department HR Human Industrial Employment Compensation Development Relations Relations 4-32
- 33. Research & Development It is concerned with: creationof knowledge; design of goods & services; & the operation of production process Survival & Development 4-33
- 34. Value Chain Analysis It separates the activities of the firm into a sequential chain. Michael Porter’s representation of the value chain distinguishes between: Primary Activities (those involved with the transformation of inputs and interface with the customer) Support Activities (those involved with other activities which support the primary function of the organisation) 4-34
- 35. Support Activities FIRM’S INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROFIT MARGIN PROCUREMENT I L O O L M S N O P U O A E E R B G T G R R K O I A B I E V U S T O S T I N T I U T I C D I O N I N E N D C G C Primary Activities 4-35
- 36. Strategic Advantage Profile Strategic Advantage Organisational Capability Competencies Synergistic Effects Strengths & Weaknesses Organisational Resources + Organisational Behaviour 4-36
- 37. Strategic Advantage It is the outcome of organizational capabilities The rewards are in terms of financial parameters (eg. Profit, shareholder value) or in terms on non-financial parameters (eg. Market share, goodwill) 4-37
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