Strategic Analysis Flashcards
What are internal and external analysis tools?
External:
-Use PESTEL for country aka MACRO/ General environment
-Use Porter’s 5 forces for industry environment aka micro/ market place/ competitive environment
-Use Porter’s diamond (for national competitive advantage)
Internal:
-SWOT
-Porter’s value chain
-Strategic capability
What is the PESTEL model?
The PESTEL model helps us assess the macro environment:
1) Political: includes tax policy, government stability and foreign trade regulations.
2) Economic: includes interest rates, exchange rates, recession, inflation, unemployment, disposable income and energy availability and cost.
3) Social: values, attitudes towards work and leisure, lifestyle, income distribution, education, consumerism, changes in lifestyles, values, patterns of work and leisure.
4) Technological. The technological environment is influenced by government spending on research, new discoveries and development, government and industry focus of technological effort, speed of technological transfer and rates of obsolescence.
5) Ecological/environmental. The ecological environment, sometimes just referred to as ‘the environment’, considers ways in which the organisation can produce its goods or services with the minimum environmental damage.
6) Legal. The legal environment covers influences such as taxation, employment law, monopoly legislation and environmental protection laws.
This model allows you to assess the growth prospects for the industry in which you operates.
It’s ok if points overlap. When assessing, Mention if the factors are favourable or unfavourable. And explain their impact
What is the porter’s 5 forces model?
According to porter, 5 forces affect the attractiveness of entering an industry: (mention high or low, and tell impact.)
1- Customer power:
impact: Powerful customers can demand discounts, low prices, and extra services .
2-Supplier power: Powerful suppliers can demand higher prices for their product
3- Competitive rivalry- High levels of competition can lead to price wars and high expenditure on marketing and innovation
4-Threat of New entrants: can impact competitive environment, other forces will also be affected.
barriers to entry: patent, approval, license, capital, franchise
5-Substitutes: If an organisation has a lot of substitutes it will have to keep its prices low to deter customers from moving to these substitutes
The more powerful these forces become, the less attractive the industry becomes. And margins are likely to decline.
What affects bargaining power of buyer?
Powerful customers can force price cuts and/or quality improvements.
Such factors could include where:
buyer purchases high % of your total sales
buyer makes a low profit
buyer doesn’t care about quality or delivery time
substitutes available
What affects bargaining power of suppliers
- no substitutes
- the presence of one or two dominant suppliers controlling prices
- uniqueness
What factors affect competition?
Intensity of existing competition will depend on the following factors:
Number of competitors.
Rate of growth.
Where high fixed costs are involved companies will cut prices to marginal cost levels to protect volume, and drive weaker competitors out of the market.
exit barrier (i.e. the cost incurred in leaving the market) is high, companies will hang on until forced out, thereby increasing competition and depressing profit.
What are the different barriers of entry in an industry?
Economies of scale
Product differentiation- brand name and customer loyalty
Capital requirements
Switching costs, i.e. one-off costs in moving from one supplier to another (e.g. a garage chain switching car dealership).
Access to distribution channels may be restricted (e.g. for some major toiletry brands in the UK 90% of sales go through 12 buying points, i.e. chemist multiples and major retailers). It is therefore difficult for a new toiletry product or manufacturer to gain shelf space.
Know-how.
regulation, more supervision
What is the porter diamond?
Porter discovered that some countries have a national competitive advantage that makes their companies more successful.
Factors which contribute to national advantage:
1) Favourable factor conditions: land,weather, minerals, capital, infrastructure, skilled labour, motivation, knowledge that can be used effectively
2) demand conditions: there must be a strong home market demand for the product or service.
3) related and supporting industry: the success of an industry can be due to its suppliers and related industries. Eg, good hotels, airlines, tour operators in greece all contribute to the tourism industry
4) Firm strategy, structure and rivalry:
Firm strategy: open minded, innovative, RnD
Structure: good culture and leaders
Rivalry: competition to help them excel
when a question asks you to do a strategic position analysis
include 3 things in answer:
-macro/ country environment
-micro/ industry environment
-internal factors (human resource, financial resource/ brand)
SWOT MODEL
Strength-
Weakness-
Opportunity
Threat
What factors to look at when comparing potential SUBS with one another
- Industry status (growth, maturity, decline)
- Market share % (increasing, maintained, decline)
- Profit margin % (increasing, maintained, decline)
- BCG assessment (Star, Cash Cow, Dog, Question Mark)
- Strength / weakness / primary reason for acquisition
what is the BCG assessment
there are four quadrants in the BCG Matrix:
-Question marks: Products with high market growth but a low market share.(Harvest)
-Stars: Products with high market growth and a high market share. Strategy: build
-Dogs: Products with low market growth and a low market share. (Divest, get rid of it
-Cash cows: Products with low market growth but a high market share.strategy: hold
20% and above is high market share otherwise low
what is ansof’s growth matrix?
EXISTING PRODUCT, EXISTING MARKET:
Market penetration strategy
EXISTING PRODUCT, NEW MARKET:
MARKET DEVELOPMENT strategy
NEW PRODUCT NEW MARKET: DIVERSIFICATION strategy
NEW PRODUCT EXISTING MARKET: PRODUCT DEVELOPMENT strategy
WHAT IS HARMON’S PROCESS MATRIX
IF THE PROCESS IS COMPLEX BUT NOT IMPORTANT: OUTSOURCE TO SPECIALIST
IF THE PROCESS IS COMPLEX AND IMPORTANT: AUTOMATE USING CUSTOM SOFTWARE+ HIRE TOP RESOURCES (research and development)
NOT COMPLEX BUT IMPORTANT: GET CUSTOM SOFTWARE eg. Customer’s orders
IF NOT IMPORTANT NOR COMPLEX: OUTSOURCE OR AUTOMATE USING OFF THE SHELF SOFTWARE (eg. Lift operator, cleaner, payroll)
Strategic importance: revenue market share growth, comp edge, customers
