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© Colin Boyd 2002Strategic Analysis SWOT analysis Industry, Economic and Technical O pportunities and T hreats Company S trengths and W eaknesses
© Colin Boyd 2002Strategic Analysis SWOT analysis for Wendy’s Strengths and weaknesses are specific to Wendy’s – they are internal characteristics Inside Wendy’s Outside Wendy’s = the external environment
© Colin Boyd 2002Strategic Analysis SWOT analysis for Wendy’s Opportunities and threats apply to all the members of the industry that Wendy’s is in – they are external characteristics Outside Wendy’s = the external environment, which is the same for all members of the fast food industry
© Colin Boyd 2002Strategic Analysis The PEST model of the external environment PEST = the Political, Economic, Social and Technological environments that interact with business.
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Political, Economic and Social Dimension International and National Economic Policies Traditional Government Regulation Government Restrictions Recent Political and Social Developments Consumer Pressure Economic Developments Population Change Wealth Changes Leisure Trends
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities For each item on the checklist; for this industry (as defined by horizontal integration for the specific firm we are examining); what are the threats and opportunities facing all the members of this industry, both now and in the foreseeable future? Environmental Opportunities and Threats must be the same for all members of any one industry
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Political, Economic and Social Dimension International and National Economic Policies Traditional Government Regulation taxation regional incentives trade agreements safety – employee, customer, bicycle helmets hygiene competition -- de-regulation Government Restrictions trade with Iraq, Cuba advertising and display of tobacco products coping with new medical technologies
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Political, Economic and Social Dimension Recent Political and Social Developments Consumer Pressure Quebec separatism the “Green” movement skateboarders and snowboarders acceptability of cosmetic surgery telemarketing conduct negative option pricing of cable TV acceptability of tobacco use and advertising
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Political, Economic and Social Dimension Economic Developments Population Change the “boom and bust” economic cycle counter-cyclical businesses seasonality other economic cycles drivers of demand – direct or derived? large aboriginal youth population Sask. population will be skewed baby boomers = 1 million extra Canadians “a python swallowing a pig”
© Colin Boyd 2002Strategic Analysis The Thunder of the Baby Boomers 0 10 20 30 40 50 60 70 80 daiper cleaning baby food school building rock’n roll the pill universities office building rings homes fitness health foods travel golf walking bird watching retirement property nursing homes funeral parlours A baby boomer born in 1955 is now aged 56 school buses …like a python swallowing a pig, the bulge moves ever onwards… Compared to what a normal population profile would be like, Canada has 1 million extra people in the baby boomer age range
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Political, Economic and Social Dimension Wealth Changes Leisure Trends huge changes in disposable income holidays, gadgets, car ownership many more people own houses = improvements the stinking rich – 4 Season’s Hotels more time off work, less home work = leisure time hedonist pursuits – skiing, windsurfing, travel exotic foods, cooking home cocoon – alarms, home theatre, take-out food
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Market Factors Product Life Cycle Market Demand Market Requirements Consumer Preferences Pricing Structure Distribution Requirements New Products New Competitors
© Colin Boyd 2002Strategic Analysis INTRODUCTION ACCELERATING GROWTH CONSTANT GROWTH DECLINING GROWTH DECLINE MATURITY SALES VOLUME TIME The Product Life Cycle
© Colin Boyd 2002Strategic Analysis
© Colin Boyd 2002Strategic Analysis Porter's Generic Strategies Niche Positioning Product Differentiation Cost Leadership it is probably easier to establish a niche position when the market is growing when the pie is growing, no one is fighting too hard for market share, and hence differentiation is possible in the growth stages of the life cycle = MARKETING SKILLS A mature market means a fight for market share via price competition, which in turns puts all the attention on product costs = MANUFACTURING SKILLS
© Colin Boyd 2002Strategic Analysis Market Demand Environmental Threats and Opportunities Market Factors Consumer Preferences Market Requirements consumable goods – how many per person per year? durable goods – how long do they last? derived demand – 1 auto = 5 tires utility products – coloured nails? Westjet need for a broad range of products draft beer trends – dark tasty ale v light lager organic foods
© Colin Boyd 2002Strategic Analysis Pricing Structure Environmental Threats and Opportunities Market Factors Distribution Requirements air fares – return versus single rebate coupons preserving the retail price structure grey market goods growth in 2 income families less time to shop = catalogues + internet, not retail IKEA = KD (KnockDown) furniture
© Colin Boyd 2002Strategic Analysis New Products Environmental Threats and Opportunities Market Factors New Competitors lonely hearts via digital phones computers v VCRs floppy discs v compact discs v mini-discs Fujifilm and Kodak versus digital photos Canon and Kodak into photocopiers Sony Store and Sony Entertainment
© Colin Boyd 2002Strategic Analysis Environmental Threats and Opportunities Product and Technology Dimension Raw Materials Pricing of Raw Materials New Ingredients or Raw Materials Cost and Experience Curves Process Innovation Technological Breakthrough
© Colin Boyd 2002Strategic Analysis Raw Materials Environmental Threats and Opportunities Pricing of Raw Materials general availability – new diamond sources geographical scarcity cost/unit vol. dictates the location of manufacturing? vulnerability to price increases? e.g. OPEC oil prices Hedging strategies – Westjet v Air Canada Product and Technology Dimension New Ingredients or Raw Materials plastic kayaks Substitute away from vulnerable raw materials
© Colin Boyd 2002Strategic Analysis The Experience Curve 10 1 2 34 56 Cost per Unit made Total Accumulated Production Slope of.2 to.3, meaning a 20% to 30% reduction in unit manufacturing costs for each doubling of production Kingston 4GB DataTraveler Pocket USB Drive $12.99
© Colin Boyd 2002Strategic Analysis Process Innovation Environmental Threats and Opportunities Technological Breakthrough multi-screen cinemas on a single-screen footprint computers replacing secretaries in Commerce home wine-making Apple Computer and Apple Corp. - no music use insulin from GM bacteria instead of from pigs laser eye surgery digital photography and digital music Product and Technology Dimension
© Colin Boyd 2002Strategic Analysis 1 STABILITY 2 and 3RETRENCHMENT 4 and 5GROWTH 6 COMBINATION CENTRAL STRATEGIC ALTERNATIVES 1Stay as you are 2Continue in current business, but in a more efficient and streamlined way 3Get out of all or part of current business by selling, merging or liquidating 4Expand current business 5Expand primarily in businesses other than main current business = DIVERSIFICATION 6Choose alternatives 2 or 3, and 4 or 5.
© Colin Boyd 2002Strategic Analysis Decision Making at the Strategic Level …involves questions such as…. Are we in the right kind of business? Should we stay the same, or change in some way? Should we become smaller, or bigger? On which dimension(s) should we change… ….geographical scope? ….breadth of products offered? ….extent of vertical integration? ….specialization versus diversification?
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