Holistic Analysis Flashcards
why is holistic analysis needed?
it solves the question of how to do things.
define the term holistic analysis
= a comprehensive strategic analysis of a company and its environment
= an input for strategy formulation
what are the three ways of conducting a holistic analysis?
SWOT
portfolio
value chain analysis
define the term SWOT analysis
analysis of a companies S, W, O and T from the aspect of their present and future impact on company performance
where is SWOT analysis applicable?
to all types of companies and their subunits (and also to other teams that are not firms)
which part of the swot analysis is internal and on what does it focus?
the SW, it focuses only on the present
which part of the swot analysis is the external and on what does it focus?
the OT, it focuses the present and future
what are the two approaches to the SWOT analysis?
- unstructured (for smaller companies, uses only one table)
- structured (for larger companies, uses many SWOT analyses for different predefined substructures (!= departments)(e.g., performance, financial, product, personnel, organisational etc.) - after that, an overall evaluation is done and presented in a user-friendly way
what is the most important rule of a SWOT matrix?
never to write activities into the matrix, only facts
what is a performance analysis?
it is the first step in the structured approach to SWOT analysis.
- defining ratios of different components (e.g. sales, profit, labour productivity ratio)
- analysis of why the performance is what it is = Du Pont System (= dissecting a component to see what it consists of and what we need to check when it starts decreasing)
state 4 advantages of the SWOT analysis
- applicable to all types of companies / teams
- easy to use
- use of external data to supplement management judgement
- facilitates communication within the company (when conducting the specific SWOT analyses)
state 1 disadvantage of the SWOT analysis and a way to reduce that
it is usually based on subjective assessment.
-> using objective indicators, gaining multiple opinions and using the average
define the term portfolio analysis.
= analysis of (im)balance of company’s strategic business units from the perspective of their present position and future market attractiveness
to what is the portfolio anaylsis applicable?
only to diversified companies (= that have several businesses or broad groups of products)
define the term strategic business unit
= relatively independent organisational unit with its own management, competitors and at least some business fuctions
–> defined by its organisation
define the term strategic business area
= relatively independent group of products with its own purchasing, R&D, prouction, and sales characterisitcs
–> defined by its content (of product/service)
define the term experience curve and why is it important for the portfolio analysis
= cumulative experience gained leads to cost decreases
benefits from the experience curve can be competitive advantages for the firm (lower costs of production -> lower price)
state five kinds of portfolio matrixes
- BCG matrix
- GE matrix
- Shell’s DPM matrix
- Hofer’s matrix
- international matrix
define the x axis of BCG matrix (name and calculation)
+ explain 5 characteristics
relative market share RMS = MS our / MS bc = TR our / TR bc
- internal, present dimension
- no units
- middle point of the axis is 1
- logarithmic scale = ratios to each side of the middle are equal
- SBUs and SBAs are not necessarily overlapping (if they are not, there is just a bit more work regarding data collection)
what is the most important step before making the BCG matrix?
choosing the Biggest Competitor for each business in the company separately!
state the y axis of BCG matrix and explain 4 characteristics
business growth rate
- in %
- future and external dimension
- middle point = average growth rate of the whole economy
(depends on your market scope - EU / world) - linear scale = differences to each side of the middle are equal
what is the plus of doing the BCG matrix with market shares rather than total revenues?
the matrix then also tells you what your b.c.’s market share is and also what kind of structure there is on the market (all other competitors have smaller parts than you and b.c.) - it can give you a better idea of what kind of strategy is needed
how is the market share (of our company or the b.c.) calculated?
MS = TR of the company / TR of the industry
describe the BCG matrix.
on top left, there are stars (investment opportunities).
top right, question marks (selective investment, there might still be market potential with these, but currently they don’t hold a big market share)
bottom left, cash cows (used for milking money)
bottom right, dogs (divestment. not a big market share and not expected to grow)
strategic business units (SBUs) are represented by circles. their size shows the relative size of the industry (in comparison to our other SBUs), while the shadowed area represents the relative size of our SBU (in proportion with other SBUs in the industry)
what is the problem of question marks and dogs?
they can’t support their own investments, since they don’t have enough cash flow. hence the cash usually flows from cash cows to question marks and partly to stars, but mostly not to dogs, since they are not expected to grow at all.
what is the best position for a company with multiple businesses (in terms of BCG matrix)?
to have their businesses balanced. if they were only to have cash cows, they would not exist anymore in a few years, because the market growth rate is slow with those. (same goes for others)
define the GE matrix
compares competive position (x) and industry attractiveness (y)
emphasis on potential profitability
describe the GE matrix (how it looks)
both axes are linear and normalised (0 is in the middle)
https://s3.us-west-2.amazonaws.com/secure.notion-static.com/88b825c9-366c-4444-a41e-1dcfaaf222f6/Untitled.png?X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIAT73L2G45O3KS52Y5%2F20211029%2Fus-west-2%2Fs3%2Faws4_request&X-Amz-Date=20211029T151823Z&X-Amz-Expires=86400&X-Amz-Signature=f4859789274fe17cd42f95e317b8f105bd71d171a114bdcd2249ba3a037592e3&X-Amz-SignedHeaders=host&response-content-disposition=filename%20%3D%22Untitled.png%22
state 4 advantages of the portfolio analysis
- each SBU is evaluated individually
- raises issue of cash flow availability
- externally-oriented data to supplement management judgement
- facilitates communication within the company
state 4 disadvantages of the portfolio analysis
- applicable only to diversified companies
- difficult to define groups of products/services
- standard strategies (cash cows, dogs, etc.) can miss opportunities
- illusion of scientific rigor (logarithmic scales and such), while it is still highly subjective (bc of point 3.)
what is an alternative to portfolio analysis? define the term
value chain analysis = analysis of a company’s activities from the aspect of their value creation
to what is VCA applicable?
to all types of companies and their units
what is the purpose of VCA?
- to list all S, W of company’s value chain
2. list all O, T depending on value chains of suppliers, distributors, and buyers
state the basic value chain (Porter’s)
support: - company infrastructure (general mng, accounting, legal, PR ...) - HR mng - tech dev - procurement primary: - inbound logistics - operations - outbound logistics - marketing and sales - service
what are the 4 advantages to the VCA?
- better understanding of company logistics
- better understanding of company’s cost and positioning
- use of externally-oriented data
- facilitates communication
what are the 2 disadvantages of the VCA?
- difficult to define specific activities
2. companies usually do not collect the necessary data
