1. Business Analysis by Binam Ghimire

2. Learning Objectives Internal and External Analysis;
PESTLE Analysis - an examination of the Legal, Economic, Political, Environmental; Social; Technological; Ethical factors and Competition.
SWOT Analysis - identifying and analysing Strengths, Weaknesses, Opportunities and Threats;
Porter's 5 Forces - Rivalry amongst Existing Competitors, New Entrants, Substitutes, Bargaining Powers of Buyers and Suppliers.

3. Business & Financial Analysis
Introduction
As the course title suggests this course will examine:
Business Analysis and
Financial Analysis
What do they involve ?

4. Business Analysis Business Analysis involves:
Internal Analysis – value chain, audit
External Analysis – SWOT, PESTLE & Porter’s 5 Forces Model
Competitive Advantage – Generic Strategies and SPACE Model, Stakeholder Analysis and Choices
This session will focus on External Analysis (Internal Analysis: Self study)
SWOT
PESTLE
Porter’s 5 Forces Model

5. External Analysis SWOT PESTLE Porter’s 5 Forces Model
Spend a moment outlining what you know of each model
OK, let’s see if we agree…

6. SWOT Analysis SWOT Strengths Weaknesses Opportunities Threats
Internal Factors
Weaknesses
Opportunities
External Factors (PESTLE Analysis)
Threats

7. SWOT Analysis

8. Opportunities & Threats
PESTLE Analysis is a useful tool to help identify Opportunities & Threats facing your organisation or sector
Let us examine PESTLE Analysis…

9. PESTLE Analysis PESTEL analysis is:
an evaluation of broad societal trends that affect many industries.
It is intended to identify:
both current and, especially, future developments that will shape the micro-environments of each industry sector
What current and future developments will have an impact on a particular sector ?
Hint: The first one is P – Political. The second is E…

10. PESTLE Factors POLITICAL ISSUES/TRENDS ECONOMIC ISSUES/TRENDS
SOCIAL ISSUES/TRENDS
TECHNOLOGICAL ISSUES/TRENDS
ENVIRONMENTAL ISSUES/TRENDS
LEGAL ISSUES/TRENDS

11. PESTLE & The Oil Sector
Spend a moment listing events under each heading with reference to the Oil Sector, for example:
P – Political
Tension in the Middle East may impact on supply and hence price
Tension between neighbouring countries may affect supply, e.g. Russia and Ukraine
Tax will affect price

12. What did you come up with ?
E Economic
Volatility in the price of oil
Exchange rate risk (oil is priced in $)
Cost of petrol and its impact on demand
Social
The rise of the car from luxury to necessity
Move to green and/or alternative fuel
Technology
Development of alternative energy due to….?
Environmental
BP Oil Spill
Legal
Fines etc, consider the cost of the recent BP oil spill

13. A good PESTLE analysis should be….
Focused on society wide trends which looks at the impact on industry and organisation.
Based on sound research of actual (not hypothetical) issues.
Supported by evidence from the research to validate points made.
Future oriented rather than merely describing the present, i.e. it is about emerging trends that will shape the industries future.
Interpretive in nature not descriptive, i.e. don’t just state what is, but say why/how it is significant for the future of the industry and firm context.

14. Porter’s 5 Forces Model Industry Sector Analysis
The industry analysis can be done using Porter’s 5 Forces Model.
This has two main aims:
To understand the drivers of competitive behaviour in the sector;
To evaluate the long-run profit potential of the sector;
What factors do you think drive Competitive Behaviour ?

15. Porter’s 5 Forces Model Again, consider the Oil Sector Threat of
new entrants
Bargaining
power of
suppliers
Rivalry among
Existing firms
Bargaining
Power of
consumers
Again, consider the Oil Sector
Threat from
Substitutes

16. Bargaining power of Suppliers
Capital requirements
Product differentiation
Switching costs
Access to distribution channels
Access to raw materials
Intellectual property
Competitive response
Government regulation
Economies of scale
Threat from
new entrants
Size of purchases
Differentiation in product
Few substitutes
A few big suppliers
Threat of backward integration
Intensity of Rivalry
Growth rate of market
Relative size of rivals
Capacity increases in large
increments
Exit barriers are high
Switching costs
Profitability
Bargaining power of Suppliers
Bargaining
power of Customers
Size of purchases
Undifferentiated product
Per cent of cost
Low margins (buyer)
Threat of forward integration
Impact on quality
Price performance is high
Threat of
Substitute
products
Degree of differentiation
Technological innovation
Price performance relationships
Financial & Strategic Planning 5

17. Evaluation of the Five Force Model
ADVANTAGES
DISADVANTAGES
Identifies drivers of competitive behaviour.
Indicates trends in profitability.
Highlights strategies to alter industry structure.
Can be used to compare attractiveness of different sectors.
Assumes all business relationships are competitive.
Industry convergence makes defining sectors difficult.
Five forces may not capture the whole picture of what drives an industry.

18. Market analysis for strategy
Market analysis for strategy purposes is not simply about customer segments, their needs and numbers as in marketing.
Strategists are concerned with broader criteria relating to*:
Market attractiveness
Is entry into the market compatible with our strategic objectives?
Competitive advantage
What relative (better) or absolute (unique) advantages do we bring to the market that satisfy customer needs better than competitors?
The GEC Matrix examines these issues
* These two issues overlap, i.e. the better able you are to compete, the more attractive the market

19. Information sources
Obviously, the available sources are many and varied but key ones include:
Basic market data
Mintel
Keynote
Datamonitor/Marketline
Census data
Basic competitor information
Hoovers online
Fame
Corporate web sites

20. Can you remember what PESTLE stands for and what the 5 Forces are ?
Summary
SWOT
Strengths, Weaknesses – Internal Factors
Opportunities & Threats – External Factors (PESTLE Analysis)
Porter’s 5 Forces Model
– Competitive Behaviour/ Industry Sector Analysis
Can you remember what PESTLE stands for and what the 5 Forces are ?

21. PESTLE Factors POLITICAL ISSUES/TRENDS ECONOMIC ISSUES/TRENDS
SOCIAL ISSUES/TRENDS
TECHNOLOGICAL ISSUES/TRENDS
ENVIRONMENTAL ISSUES/TRENDS
LEGAL ISSUES/TRENDS

22. Porter’s 5 Forces Model Threat of new entrants Bargaining Bargaining
power of
suppliers
Rivalry among
Existing firms
Bargaining
Power of
consumers
Threat from
Substitutes

23. Summary
SWOT
PESTLE
PORTER’S FIVE FORCES