MODULE 3

Introduction SITUATION ANALYSIS

• Before developing a marketing strategy, it is important to conduct a
situation analysis to determine the health of your business.
• This analysis serves as a useful tool for determining your business's
strengths and weaknesses, and any opportunities and threats (SWOT)
that can affect its health.
• The results can be eye-opening to what’s really going on within your
business and help determine your business's strategy within the
marketplace.
• Decision-making in any area of your business should be done after a
situation analysis. It should be the first step in project planning or in
setting up of any new initiative.
Situation Analysis
• A situation analysis is a detailed examination of a company’s market
presence based on internal and external factors.
• It examines a business’s current and potential customers and how they
respond to the company’s products and services.
• A situation analysis also explores a firm’s capabilities and how the
current business climate impacts the company.
• It provides the knowledge to identify the current opportunities and
challenges to your organization, service or product.
• This in turn helps with devising a strategy to move forward from your
current situation to your desired situation.
 Situation Analysis Contd.

• An analysis can forecast what results a company can expect—based on

the decisions made—so it can adjust its strategies to meet its goals. A
situational analysis can reveal many important details about a business
such as:
The opinions and experiences of customers and stakeholders
A business’s strength and weakness(es)
How a company is capitalizing on market trends
How it measures up to competitors
What’s holding a business back from its desired goal(s)
The current strategies in place to overcome the weakness(es)
 Situation Analysis Contd.

• The analysis can provide an appreciation of the risks and benefits to the
project and the organisations involved from the way in which the
communication process is implemented.
• It takes a snapshot view of an organisation or situation and where things
stand at a certain point in time.
• It is sometimes accomplished by means of a SWOT analysis (Strengths,
Weaknesses, Opportunities and Threats), which examines all aspects in
relation to the success or results of the project in question.
 Components of a situation analysis
• The company
• An analysis of a company’s vision, strategy, and goals—and if it’s meeting
them—is a good start.
• Examining how the company is performing by reviewing sales, market
share, and customer retention provides a useful snapshot that reveals if
the business is fulfilling its goals.
• It will also help you evaluate competitors and market share.
 SA contd.

• Product and services

• Analysing current products or services, as well as future product
launches, is a vital component of a situation analysis
• A market analysis conducted with potential customers who offer
feedback or opinions about the product, service, or pricing can shed light
on who the target market is and how to improve a company’s offerings.
• Examine products and services separately to identify which products best
meet your clients' needs and which ones need adjusting.
 SA Contd.

• Distribution
• The distribution portion of a situation analysis reviews how you get your
products to market and compares it to your competitors’ to determine
the best distribution channels for your business.
• Opportunities
• Unmet or underserved needs represent market opportunities. Knowing
how to capture that market share is essential to a company’s success
(SWOT Analysis).
 SA Contd.

• Environmental factors
• Determine the external and internal environmental factors, which can
include economic or sociological factors that impact your business's
performance

• Competitors
• An analysis of your main competitors will help you determine how your
business measures up.
• Identifying and comparing the competitive advantages of one company
to another can help your business adapt to compete more effectively.
Situation Analysis Tools
• SWOT Analysis
• PESTLE Analysis (Done)
• STEEPLE Analysis (*a variant of PESTLE)
• Porter’s Five Forces (Done)
• 5 C Analysis
 SWOT Analysis

• SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and

so a SWOT Analysis is a technique for assessing these four aspects of
your business.
• It helps you to build on what you do well, to address what you're lacking,
to minimize risks, and to take the greatest possible advantage of chances
for success.
• A SWOT analysis organizes your top strengths, weaknesses,
opportunities, and threats into an organized list and is usually presented
in a simple two-by-two grid.
 SWOT Contd.

• Strengths and weaknesses are internal to your company—things that you

have some control over and can change.
• Examples include who is on your team, your patents and intellectual
property, and your location.
• Opportunities and threats are external—things that are going on outside
your company, in the larger market.
• You can take advantage of opportunities and protect against threats, but
you can’t change them. Examples include competitors, prices of raw
materials, and customer shopping trends.
 5 C Analysis

• 5C Analysis is a technique used to conduct situation analysis.

• A situation analysis involves examining the external environmental factors and
internal organizational capabilities that impact how a company operates.
• 5C Analysis is one of the most popular and useful frameworks in understanding
internal and external environments.
• It is an extension of the 3C Analysis that originally included Company, Customers, and
Competitors.
• Collaborators and Climate were later added to the analysis to make it
comprehensive.
• This integrated analysis covers the most important areas of marketing/strategy, and
the insights generated can help identify the key problems and challenges facing the
organization.
•
•
 5 C contd.

• Company—The company analysis studies an organization’s vision,

strategies, capabilities, product line, technology, culture, and
objectives. It is useful in understanding the existing and potential
problems with the company’s business.
• Customers—Understanding customers is a key part of situation
analysis. It involves knowing the target audience, their behaviour,
market size, market growth, buying patterns, average purchase size,
frequency of purchase, and preferred retail channels.
• Competitors—Competitor analysis is critical in understanding the
external environment in which the firm operates. This analysis
involves knowing the competitors’ strengths, weaknesses,
positioning, market share, and upcoming initiatives.
•
 5 C contd.

• Collaborators—Collaborators are the external stakeholders who team up

with the organization in a mutually beneficial partnership. Agencies,
suppliers, distributors, and business partners are typical collaborators. It
is important to understand their capabilities, performances, and issues to
better identify business problems.
• Climate—Climate analysis is the evaluation of the macro-environmental
factors affecting the business. PESTEL analysis can be used to analyse
climate—political, economic, social/cultural, technological,
environmental, and legal scenarios are included in PESTE
•
 Balanced Scorecard

• The balanced scorecard is a management system aimed at translating an

organization's strategic goals into a set of organizational performance objectives that,
in turn, are measured, monitored and changed if necessary to ensure that
an organization's strategic goals are met.
• A key premise of the balanced scorecard approach is that the financial accounting
metrics companies traditionally follow to monitor their strategic goals are insufficient
to keep companies on track because Financial results shed light on what has
happened in the past, not on where the business is or should be headed.
• The balanced scorecard system aims to provide a more comprehensive view to
stakeholders by complementing financial measures with additional metrics that gauge
performance in areas such as customer satisfaction and product innovation.
•
 Balanced Score Card

• A balanced scorecard is a performance metric used to identify, improve, and control a

business's various functions and resulting outcomes.
• The concept of BSCs was first introduced in 1992 by David Norton and Robert Kaplan,
who took previous metric performance measures and adapted them to include
nonfinancial information.
• BSCs were originally developed for for-profit companies but were later adapted for
use by non-profits and government agencies.
• The balanced scorecard involves measuring four main aspects of a business: Learning
and growth, business processes, customers, and finance.
• BSCs allow companies to pool information in a single report, to provide information
into service and quality in addition to financial performance, and to help improve
efficiencies.
•
 BSC Contd.

• Information is collected and analysed from four aspects of a business:

• Learning and growth are analysed through the investigation of training and knowledge
resources. This first leg handles how well information is captured and how effectively
employees use that information to convert it to a competitive advantage within the industry.
• Business processes are evaluated by investigating how well products are manufactured.
Operational management is analysed to track any gaps, delays, bottlenecks, shortages, or
waste.
• Customer perspectives are collected to gauge customer satisfaction with the quality, price,
and availability of products or services. Customers provide feedback about their satisfaction
with current products.
• Financial data, such as sales, expenditures, and income are used to understand financial
performance. These financial metrics may include dollar amounts, financial ratios, budget
variances, or income targets.
•
 BSC Contd.

• The four legs encompass the vision and strategy of an organization and require
active management to analyze the data collected.
• The balanced scorecard analyzes is often referred to as a management tool rather
than a measurement tool because of its application by a company's key personnel.

• Kaplan and Norton cited two main advantages to the four-pronged balanced
scorecard approach.
• First, the scorecard brings together disparate elements of a company's
competitive agenda in a single report.
• Second, by having all important operational metrics together, managers are
forced to consider whether one improvement has been achieved at the expense
of another.
 Corporate Strategy

Corporate strategy definition

Corporate strategy is a unique plan or framework that is long-term in nature,

designed with an objective to gain a competitive advantage over other market
participants while delivering both on customer/client and stakeholder promises (i.e.
shareholder value).
Another, much simpler corporate strategy meaning is to see it as a set of decisions
where a company would place its bets for the future. Given that every organization
has a limited amount of resources, it needs to decide how it will prioritize the use of
these resources.
 CS

• Corporate Strategy takes a portfolio approach to strategic decision

making by looking across all the firm’s businesses to determine how to
create the most value.
• In order to develop a corporate strategy, firms must look at how the
various business they own fit together, how they impact each other, and
how the parent company is structured, in order to optimize human
capital, processes, and governance.
• Corporate Strategy builds on top of business strategy, which is concerned
with the strategic decision making for an individual business.
 CS

• A diversified company has two levels of strategy: business unit (or

competitive) strategy and corporate (or companywide) strategy.
• Competitive strategy concerns how to create competitive advantage in
each of the businesses in which a company competes.
• Corporate strategy concerns two different questions: what businesses the
corporation should be in and how the corporate office should manage
the array of business units.
 GENERIC STRATEGIES – THE CONTRIBUTION OF PORTER

• The study of business strategy was strongly influenced by Michael Porter,

Harvard Professor, and author.
• In 1985, he wrote the seminal text, Competitive Advantage: Creating and
Sustaining Superior Performance, concerning business strategy. In his
text, he proposed 3 categories of generic strategies for approaching a
product market. Per Porter, any one of these strategies is capable of
producing a competitive advantage for a business in a given market.
• It is important to note that, every strategy is not possible for a single firm.
However, if the firm is capable and executes a strategy sufficiently, then it
can achieve a competitive advantage in the market.
 Generic Strategies

Generic strategies are the three basic strategies of cost leadership, differentiation and focus
(sometimes called niche) open to any business.

Porter’s contribution was based on earlier work in industrial economics, exploring how firms
compete.

Porter made the bold claim that there were only three fundamental strategies that any business
could undertake – that is why he called them generic.

During the 1980s, they were regarded as being at the forefront of strategic thinking. Arguably, they
still have a contribution to make in the new century in the development of strategic options.
 GS contd.

• Porter argued that there were three basic, i.e., generic, strategies open to
any business:
• 1. cost leadership
• 2. differentiation
• 3. focus
• According to the theory, every business needs to choose one of these in
order to compete in the marketplace and gain sustainable competitive
advantage.
• Each of these three strategic options represents an area that every
business and many not-for-profit organisations can usefully explore.
 Overall-Cost Leadership

• The low-cost leader in an industry has built and maintains plant, equipment,
labour costs and working practices that deliver the lowest costs in that
industry.
• The essential point is that the firm with the lowest costs has a clear and
possibly sustainable competitive advantage.
• However, in order to cut costs, a low-cost producer must find and exploit all the
sources of cost advantage.
• Low-cost producers typically sell a standard, or no-frills, product and place
considerable strategic emphasis on reaping scale or absolute cost advantages
from all sources.
• In practice, low- cost leaders achieve their position by shaving costs off every
element of the value chain – the strategy comes from attention to detail.
Overall-Cost Leadership

• Overall Cost leadership requires a tight set of interrelated tactics that

include:
Aggressive construction of efficient-scale facilities.
Vigorous pursuit of cost reduction from experience.
Tight cost and overhead control.
Cost minimization in all activities in the firm’s value chain, such as R&D,
service, sales force and advertising.
Overall Cost Leadership
• Potential Pitfalls
 To much focus on one or a few value-chain activities.
 All rivals share a common input or raw material.
 The strategy is imitated too easily.
 A lack of parity on differentiation.
Differentiation

• Differentiation occurs when the products of an organisation meet the

needs of some customers in the marketplace better than others.
• When the organisation is able to differentiate its products, it is able to
charge a price that is higher than the average price in the marketplace.
• A generic strategy based on creating something that is perceived
industrywide as unique and valued by customers.
• Examples: Prestige or brand image (BMW, ROLEX); Innovation (Apple) etc.
• Potential pitfalls
• Uniqueness that is not valued.
• Too much differentiation.
• To high a price premium.
• Differentiation that is easily imitated.
 Focus

• Sometimes, according to Porter, neither a low-cost leadership strategy

nor a differentiation strategy is possible for an organisation across the
broad range of the market.
• For example, the costs of achieving low-cost leadership may require
substantial funds which are not available.
• Equally, the costs of differentiation, while serving the mass market of
customers, may be too high: if the differentiation involves quality, it may
not be credible to offer high-quality and cheap products under the same
brand name, so a new brand name has to be developed and supported.
For these and related reasons, it may be better to adopt a focus strategy.
 Focus contd.

• A focus strategy occurs when the organisation focuses on a specific niche

in the marketplace and develops its competitive advantage by offering
products especially developed for that niche.
• Hence the focused strategy selects a segment or group of segments in
the industry and tailors its strategy to serve them to the exclusion of
others.
• By optimising its strategy for the targets, the focuser seeks to achieve a
competitive advantage in its target segments, albeit it does not possess a
competitive advantage overall.
• Ex- Rolls Royce
 Blue and Red Ocean
• Red oceans are all the industries in existence today – the known
market space, where industry boundaries are defined and companies
try to outperform their rivals to grab a greater share of the existing
market. Cutthroat competition turns the ocean bloody red. Hence, the
term ‘red’ oceans.
• Blue oceans denote all the industries not in existence today – the
unknown market space, unexplored and untainted by competition.
Like the ‘blue’ ocean, it is vast, deep and powerful –in terms of
opportunity and profitable growth.
 Blue Ocean
• WHAT IS BLUE OCEAN STRATEGY?
• Blue ocean strategy is the simultaneous pursuit of differentiation and low cost
to open up a new market space and create new demand. It is about creating
and capturing uncontested market space, thereby making the competition
irrelevant. It is based on the view that market boundaries and industry
structure are not a given and can be reconstructed by the actions and beliefs of
industry players.
• Blue Ocean Strategy is referred to a market for a product where there is no
competition or very less competition.
• This strategy revolves around searching for a business in which very few firms
operate and where there is no pricing pressure.
• Blue Ocean Strategy can be applied across sectors or businesses. It is not
limited to just one business.
 Blue Ocean contd.
• In today's environment most firms operate under intense competition
and try to do everything to gain market share.
• When the product comes under pricing pressure there is always a
possibility that a firm’s operations could well come under threat.
• This situation usually comes when the business is operating in a
saturated market, also known as 'Red Ocean'.
• W. Chan Kim & Renée Mauborgne coined the terms red and blue
oceans to denote the market universe.
Functional Level Strategy
• Functional Level Strategy can be defined as the day to day strategy which is
formulated to assist in the execution of corporate and business level strategies.
These strategies are framed as per the guidelines given by the top level
management.
• Functional Level Strategy is concerned with operational level decision making,
called tactical decisions, for various functional areas such as production,
marketing, research and development, finance, personnel and so forth.
• As these decisions are taken within the framework of business strategy, strategists
provide proper direction and suggestions to the functional level managers relating
to the plans and policies to be opted by the business, for successful
implementation
•
 Definition of Functional Strategy
• A functional strategy is the short-term game plan for a key functional area
within a company’.
• It is the approach a functional area takes to achieve corporate and business
unit objectives and strategies by maximizing resource productivity.
• It deals with a relatively restricted plan that provides the objectives for a
specific function, for the allocation of resources among different operations
within that functional area and for facilitating coordination between them
for an optimal contribution to the achievement of the business and
corporate-level objectives.
•
Role of Functional Strategy
• It assists in the overall business strategy, by providing information
concerning the management of business activities.
• It explains the way in which functional managers should work, so as to
achieve better results.
• Functional Strategy states what is to be done, how is to be done and
when is to be done are the functional level, which ultimately acts as a
guide to the functional staff.
• And to do so, strategies are to be divided into achievable plans and
policies which work in tandem with each other. Hence, the functional
managers can implement the strategy.
 Multi Business Strategy
• What is meant by multi business strategy?
• A multi-business organization is a combination of two or more corporations
engaged in entirely different businesses that fall under one corporate group,
usually involving a parent company and many subsidiaries.

The Portfolio Approach:The portfolio approach is a historical starting point for

strategic analysis and choice in multi-business firms.
• Boston Consulting Group (BCG) pioneered an approach called portfolio techniques
that attempted to help managers.
• “balance” the flow of cash resources among their various businesses while
identifying their basic strategic purpose within the overall portfolio.
•