Presentation on theme: "Company Situation Analysis"— Presentation transcript:
1 Company Situation Analysis Matching the company’s strategy to external market circumstances and to internal resources and competitive capabilities.1. How well is the present strategy working?2. What are the company’s resource strengths /weaknesses and external opportunities and threats?3. Are the company’s costs and prices competitive?4. How strong is the company relative to rivals?5. What strategic issues does the company face?
2 1. How well is the current strategy working? What is the current strategy?Is it achieving financial/strategic objectives?Is market share increasing/decreasing?Trends in profit margin, net profit, ROI, stock price, sales?
3 2. SWOT Analysis Identifying: Company STRENGTHS & competitive capabilities; Company WEAKNESSES & resource deficiencies; Company market OPPORTUNITIES; THREATS to a company’s future profitability…..
5 Core & Distinctive Competencies Core competence is something a company does well relative to other internal activities.Distinctive competence is something a company does well relative to competitors.Whether a core competence represents a distinctive competence depends on how good the competence is relative to what competitors are capable of.
6 SWOT Analysis - Opportunities/Threats Not every industry opportunity/threat is a company opportunity/threat - need to analyse and compare:Impact on growth & profit potentialImpact on existing / potential sources of competitive advantageMatch with company resource capabilities
7 Drawing Conclusions from SWOT Analysis How best to deploy resources in view of the company’s internal/external situationDoes the resource base need to be adjusted to respond to emerging issues?Are there resource gaps that need to be filled?In what ways does the company need to strengthen its (future) resource base?
8 3. Are company prices/costs competitive? Cost disparities can stem from:Difference in raw materials pricesDifference in technology usedDifference in age of plant/equipmentDifference in production costsDifference in marketing, sales, promotion &advertising costsDifference in exposure to inflation/taxes etc.
9 Strategic Cost Analysis - Benchmarking Benchmark the costs of key activities to understand the best practices involved in performing an activity and to see if costs are in line with other companies.Use info. from published reports, trade groups, industry analysts, customers, suppliers....Used to identify areas of cost advantage/disadvantage.
10 Strategic Cost Analysis Business as a collection of activities with costs= cost structureCompare a company’s costs activity by activity against those of rivals.Learn which internal activities are a source of cost advantage or disadvantage.
11 Cost Analysis - Company Value Chain Primary analytical tool of strategic cost analysisIdentifies the separate activities, functions and processes used in designing, producing, marketing, delivering and supporting a product or service.Identifies the primary activities that create value for customers and the related support activities.
12 Cost Analysis - Company Value Chain PrimaryActivities& CostsSales &MarketingPurchasingOperationsDistributionServiceProfitSupportActivities& CostsR & D; Technology; HRM; Administration
13 Cost Analysis - Company Value Chain Value chains of rival companies differ.Company value chain is embedded in larger Value Chain System - part of and affected by value chains of upstream suppliers and downstream customers.
14 Value Chain Composition Differs by Industry & by SOFT DRINKSProcessing ingredientsSyrup manufactureBottling/Can FillingWholesale distributionRetailingSOFTWAREProgrammingDisk LoadingMarketingDistributionACCOUNTANCYHuman ResourceManagementCustomer ServiceValue Chain CompositionDiffers by Industry & byCompany
15 Upstream Company Downstream Value Chains Value Chain Value Chains THE VALUE CHAIN SYSTEMUpstream Company DownstreamValue Chains Value Chain Value ChainsActivities,Costs, andMargins ofSuppliersInternallyPerformedActivities, Costsand MarginsActivities,Costs, Marginsof ForwardChannelsENDUSERAdapted from Michael Porter, Competitive Advantage, 1985.
16 Strategic Options for Achieving Cost Competitiveness Options to combat upstream disadvantage:Negotiate more favourable prices with suppliersWork with suppliers to help reduce costsIntegrate backwardsSource cheaper substitutesManage linkage between supplier & co. Eg JIT
17 Strategic Options for Achieving Cost Competitiveness Options to combat downstream disadvantage:Push distributors/forward channels to markupsLook for win-win opportunities to costsChange to more economical distribution strategyForward integrate
18 Strategic Options for Achieving Cost Competitiveness Options to combat internal disadvantage:Streamline high cost activitiesReengineer business processes / work practicesRe-vamp value chain to eliminate some activitiesOutsource activities if more economicalInvest in cost-saving technologySimplify product design
19 4. How strong is the company’s competitive position? Whether mkt position will improve/deteriorate if present strategy continued?How the firm ranks relative to key rivals on each industry success factor and each relevant measure of competitive strengthWhether the firm has a competitive advantage / disadvantage v.a.v rivalsFirm’s ability to defend mkt position in light of industry driving forces
20 Competitive Strength Assessment Identify industry’s KSFs/determinants of competitive advantage/disadvantage (usually measures)Rate firm and key rivals on each indicator (scale 1-10)Sum individual ratings = competitive strengthNote which companies are strongest and areas of relative strength & weakness
23 Strategic Group Mapping Identify characteristics that differentiate firms in the industryIdentify and group firms with similar competitive approachesPlot firms on a two variable map using pairs of these differentiating characteristicsDraw circles around each group proportionate to size of groups’ respective share of total industry sales revenue
24 Strategic Group Mapping Distinguishing characteristics: price/quality range; geog scope; vertical integration; pdt line breadth; distribution channels; service; pdt attributes; technologyNumber of groups - spread of groupsA number of maps can be usefulWhether some groups affected more by certain ind. forcesMovement between groups
25 Strategic Mapping - Jewellery Industry HighPRICEQUALITYIMAGEMedLowSpecialty Full line craftDiamonds/ jewellersWatches etcLtd categorymerchandiseretailersBroadcategoryretailersPRODUCT LINE BREADTH
26 5. What strategic issues does the company face? Does the company have a competitive advantage?Does it capitalise on resource strengths?Which opportunities should be prioritised?What corrective measures need to be taken?How does the cost position compare to that of rivals?Does the present strategy defend against the 5 forces?Is it closely matched to the industry’s KSFs?Should it be adjusted to better respond to driving forces?