Strategic Analysis

Chapter
3
Strategic Analysis
MANDEEP KAUR
HARSHIL SHAH
MONISH SHAH
4-1
Chapter Roadmap
Analysing Companys Resources &
Competitive Position
Core Competencies & Distinctive
Competitiveness
Organisational Capability Profile
Strategic Advantage Profile
4-2
Strategic Management
Strategic Management is the art and science of formulating,
implementing and evaluating cross-functional decisions that enable

an organization to achieve its 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
Analysis
Strategic
Choice
Evaluation Process
4-3
Strategic
Implementation
PYRAMID OF STRATEGY
STRATEGY
PLANS
PROGRAMMES
PROJECTS
BUDGET
Policies, Procedures, Rules, Regulations, etc
4-4
Approaches to Assess How Well

the Present Strategy Is Working
Qualitative assessment
What is the strategy?
4-5
Completeness
Internal consistency
Rationale
Relevance
Quantitative assessment
What are the results?
Is company achieving its

financial and strategic
objectives?
Is company an aboveaverage industry

performer?
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
Analysing Companys Resources &

Competitive Position
S W O T represents the first letter in
S trengths
W eaknesses
O pportunities
T hreats
For a companys strategy to be well-conceived, it must be

Matched
Aimed
to its resource strengths and weaknesses
at capturing its best market opportunities and

erecting defenses against external threats to its well-being
4-7
Identifying Resource Strengths

and Competitive Capabilities
A strength is something a firm does well or an attribute that
enhances its competitiveness
4-8
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
Identifying Resource
Weaknesses
andis something
Competitive
A weakness
a firm lacks,Deficiencies
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
Identifying a Companys
Market Opportunities
Opportunities most relevant to a company are those
offering:
4-10
Good match with its financial and organizational resource

capabilities
Best prospects for profitable & long-term growth
Potential for competitive

advantage
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
Role of
Crafting
SWOT Analysis in
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 companys overall situation and
Acting
on the conclusions to
Better match a companys strategy to its
resource strengths and market opportunities,

Correct the important weaknesses, and
Defend against external threats
4-12
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 companys competitiveness and profitability
A distinctive competence is a competitively valuable
activity a company performs better than its rivals

4-13
Core Competencies -- A
Valuable Company Resource
A competence becomes a core competence when the
well-performed activity is central to a companys

competitiveness and profitability
Often, a core competence results from collaboration
among different parts of a company

Typically, core competencies reside in a companys
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
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
Distinctive Competence -- A
Competitively Superior Resource
Its 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
4-16
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 because it

represents a competitively superior resource strength
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
Ability
to 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
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:
4-18
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.
Organisational Capability
Profile
4-19
General Management
Factors
4-20
Planning
4-21
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
Directing
It
involves efforts directed towards

organisational goals
The basic function of management is:
achieving
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
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
Controlling
It includes all activities that are undertaken to ensure the
actual performance confirm to the planned performance

The controlling activities include:
4-25
Functional Management
Factors
4-26
Marketing Management
4-27
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
Financial Management
4-29
Contd
Financial Checklist
Liquidity
Activity(Turnover)
Profitability
Growth
4-30
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
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.
4-32
Research & Development

It is concerned with:
creation
of knowledge;
design of goods & services; &
the operation of production process
Survival & Development
4-33
Value Chain Analysis

It separates the activities of the firm into a sequential
chain.
Michael Porters 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
Support Activities
FIRMS INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
PROCUREMENT
Primary Activities
4-35
PROFIT MARGIN
TECHNOLOGY DEVELOPMENT
Strategic Advantage Profile
4-36
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
4-38

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Chapter

implementing and evaluating cross-functional decisions that enable

Approaches to Assess How Well

What is the strategy?

What are the results?

Is company achieving its

Is company an aboveaverage industry

Key Indicators of How Well

Analysing Companys Resources &

For a companys strategy to be well-conceived, it must be

to its resource strengths and weaknesses

at capturing its best market opportunities and

Identifying Resource Strengths

enhances its competitiveness

Valuable competencies or know-how

Resource weaknesses relate to

Inferior or unproven skills, expertise, or intellectual

Lack of important physical, organizational, or intangible

Missing capabilities in key areas

Resource weaknesses and deficiencies

Good match with its financial and organizational resource

Best prospects for profitable & long-term growth

Potential for competitive

Identifying External Threats

The most important part of S W O T analysis is not

developing the 4 lists of strengths, weaknesses,

the 4 lists to draw conclusions

Better match a companys strategy to its

resource strengths and market opportunities,

Competencies vs. Core Competencies

and experience and represents real proficiency in

A distinctive competence is a competitively valuable

activity a company performs better than its rivals

well-performed activity is central to a companys

among different parts of a company

people, not in assets on a balance sheet

valuable competitive capability and represents a definite

Examples: Core Competencies

efficient supply chain management

exclusively, or in a relatively large measure

activity that a company performs better than its competitors

Represents a competitively valuable capability rivals do not

Presents attractive potential for being a cornerstone of strategy

Can provide a competitive edge in the marketplace because it

in flat-panel display technology

Toyota and Honda

high-quality manufacturing capability and short

to design and manufacture ever more powerful

distribution and use of state-of-the-art retail

Determining the Competitive

sustainable competitive advantage, a resource must

Should provide access to potential market.

Should contribute to the customer benefits of the end

Should be difficult for the rivals to imitate.

involves efforts directed towards

It deals with inducing the willingness & cooperation of

employees towards attaining the objectives

Design & Analysis