Business Start and Market Analysis Flashcards
Strategic Planning
Sequence of procedures for deterring an entities long-term goals and objectives
Steps in Strategic Planning
Establish mission, values, and goals; Mission statement - expression of purpose and range of entity activities
Values - underlying beliefs that govern the operations of an entity and conduct of its relationship
Goals - general purposes toward which entity endevours are directed
Assess environment - Analyze macro,industry, strengths and weaknesses…
(Macro environment) A variation of the PEST analysis provides a framework for this environmental analysis
( Industry analysis) The five forces framework (developed by Michael Porter) for determining the nature, operating attractiveness and likely long-run profitability of a competitive industry may be used for this analysis
(Internal strengths/weaknesses of entity) - SWOT analysis
Establish objectives -
Formulate strategies - Michael Porter - 3 GENERIC STRATEGIES; cost leadership, differentiation, and focus
Implement strategies
Evaluating and controlling strategic activities (feedback loop)
Macro-Environmental Analysis
PEST Analysis - Political, Economic, Social, and Technological
Political - Nature of political environment
Economic - Economic growth rate and demographic, inflation/deflation, interest
Social - Culture, values, and demographics
Technological - Nature and level of technology
Industry definition
Group of entities that produce goods or services which are close substitutes and which compete for same customers
5 Forces Analysis
Identifies factors that determine operating attractiveness and likely long-run profitability of an industry
1) Threat of entry into market by new competition
2) Threat of substitute goods or services
3) Bargaining power of buyers (customers) of good or service
4) Bargaining power of suppliers of the inputs used in the industry
5) Intensity of rivalry
Entity/Environment Relationship
Assessment of relationship between external and firm’s internal environment
SWOT analysis can be used
Internal -
Strength, resources and capabilities that provide relative competitive advantage in market
Weaknesses, shortcomings that place entity at competitive disadvantage
External -
Opportunities, chances to benefit from new or unmet demand
Threats, chances of adverse consequences of external factors.
SWOT MATRIX STRATEGY - Strengths and opportunities - Utilize strengths to take advantage of opportunities in market
Weaknesses and opportunities - Pursue opportunities to overcome weaknesses
Strengths and threats - Utilize strengths to reduce susceptibility to external threats
Weaknesses and threats - pursue ways to prevent the entity’s weaknesses from being overcome by external threats
Generic Strategies
PEST and SWOT provide framework for formulation strategy
Basic Strategy - Leverage strengths to achieve objectives and goals
Specific Strategy - Unique to each entity and situation
3 GENERIC STRATEGIES -
Cost - Become low-cost provider in an industry
- Seek to minimize costs
- Invest in production and distribution
- High expertise in manufacturing and distribution
- Pursuing vertical integration
Differentiation - Develop product or service that offer quality or uniqueness; value added will permit a premium price that covers extra cost
- Highly skilled and creative development personnel
- Strong and dedicated marketing and sales personnel
- Innovation, quality, and service
Focus - Either cost leadership or differentiation within a narrow segment; “niche” subgroup
- Outstanding market research and understanding of target group
- Ability to tailor strengths in product or service development to target group
- High degree of customer satisfaction and loyalty
RBM - Alternative Resources-Based Model
Assesses resource and capabilities of an entity; bases strategy on collection of resources and capabilities
Strategic Planning Process Caveats
Forms of analysis do not provide a comprehensive method for strategy formulation
Actual strategy formulated would consider the particular characteristics of operating environment and entity; would address operating level issues (financing, organization, etc)
