Business Policies and
Strategies
Environmental and Internal
Scanning
Sun Tzu Chinese General
?, Know the enemy and know yourself; in a
hundred battles you will never be in peril,
When you are ignorant of the enemy but
know yourself,your chances of winning or
losing are equal,If ignorant of both your
enemy and yourself,you are certain in
every battle to be in peril.”
PESTEL Analysis
? Political – legal
? Economic
? Socio-cultural
? Technological
? Environmental
? Legal
TOWS Analysis
? Threats – unfavorable conditions
? Opportunities – favorable conditions
? Weaknesses – limitations or deficiencies
relative to the competition or the
environment
? Strengths – resources,skills or
advantages relative to the competition or
the environment
Threats
? New market entrants
? Increased competition
? Increased power from buyers and
suppliers
? Substitutes
? Economic cycle downturns
? Demographic changes
Opportunities
? New markets and segments
? New products
? Diversification opportunities
? Market growth
? Competitor weakness
? Demographic and social change
? Change in environment
Weaknesses
? Few core strengths
? Low market share
? Old plant or technology
? Weak finances and/or poor cash flow
? Lacking management skills
? Poor record on innovation
? Low quality and/or reputation
? Non-differentiated products
Strengths
? Market dominance
? Core strengths
? Economies of scale
? Low cost position
? Leadership and management skills
? Financial and cash reserves
? Manufacturing ability
? Reputation
? Differentiated products
Analysis of Financials
? Liquidity ratios – ability to meet short term
obligations
? Leverage ratios – extent of debt financing
? Activity ratios – effective use of resources
? Profitability ratios – effectiveness of the firm
? Growth rates – ability to maintain economic
position
Industry Analysis
Typical Uses of Industry
Analysis
? Understand current profitability levels
? Identify forces that must be countered in
order to achieve superior profitability
? Test decision to enter an industry
? Test decision to exit an industry
? Assess effect of a major change
? Identify ways to alter industry structure
Key Success Factors
? Those variables that can significantly
affect the overall competitive positions of
all companies within a particular industry.
– Vary from industry to industry
– Crucial for success
– Deal with an entire industry
Analysis of Customers
? Segmentation
– Largest
– Most profitable
– Potential
– Geographical location
– Strategic importance
– Ability to backward integrate
Analysis of Markets
? Actual and potential market size
? Market growth
? Market share
? Market profitability
? Cost structure
? Distribution systems
? Key success factors
Analysis of Products
? Product innovation
? Product differentiation
? Quality
? Delivery time
? Volumes and trends
? Contribution to profit
? Amount of capacity required
Analysis of Prices
? Company internal factors
– Costs and profitability
? Market factors
– Competition
? Environmental factors
– Inflation
– Regulations
? Managerial issues
– Market by market pricing
– Uniform pricing
Analysis of Suppliers
? Reliability and service
? Quality
? Research and development
? Capacity
? Financial condition
? Labor relations
? Managerial ability
? Warranties
? Prices
Competitive Intelligence
? Formal program of gathering information on a
company’s competitors
? Sources
– Suppliers
– Customers
– Employees
– Industry publications and conferences
– Industry experts
– Internet
Resources
? Assets,competencies,processes,skills or
knowledge controlled by an organization
? VRIO framework
– Value – competitive advantage
– Rareness
– Imitability – easy to copy
– Organization to exploit
Analysis of Resources
? Tangible resources
– Plant and equipment
– Financial
? Intangible resources
– Brand names and reputation
– Service levels
– Technological
? Organizational capability
– Management and leadership
– Expertise of employees
Analysis of Core Competencies
? Core competencies are the collective
learning in the organization,especially
how to co-ordinate diverse production
skills and integrate multiple streams of
technology.
? Things a company can do exceedingly
well.
Corporate Value Chain
Organizational Alignment,Fit”
? Strategy
? Structure – tasks,specialization,authority
? Systems – processes and procedures
? Staffing – people and competencies
? Skills – distinctive competencies
? Style – leadership and operating
? Shared Values – guiding principles
Types of Organizational Designs
? Simple
? Functional
? Divisional
– Geography
– Product
– Customer or market segment
? Matrix
? Network
Analysis of Organization Culture
? Set of beliefs,values and learned ways of
doing things
? Derives from the past,the present,its
current people,technology,and physical
resources
? Influences every aspect of the
organization and impacts the performance
of the firm
Organizational Culture Model
Organizational
Culture
Aroused
Motivation
Improved
Performance
External Environment
Strategy
Leadership
Practices
History
Structures
Standards
Responsibility
Recognition
Support
Commitment
Achievement
Affiliation
Power
Organizational
Arrangements
Strategic Functional Issues
? Marketing – position,segmentation,mix,
PLC
? Financial – leverage,capital budgeting
? Research and Development – intensity,
competence,mix
? Operations - processes
? Human Resources – teams,unions,
temporary workers
? Information Systems