3. Chapter [3]
Strategic Analysis

4. Strategic Analysis
The analysis of company’s external environment and internal situation is called Strategic Analysis.
Issues to be considered in SA –
Time Period
Strategy evolves over a period of time.
Balance
(S-O, W-T) or (S-T, W-O)
Risk
Competition, Liberalization, Globalization, Boom, Recessions all pose risk of varying degree.

5. Risk Classification Error in interpreting the environment change
Short term
Long term
Time
Error in interpreting the environment change
Environment lead to obsolescence of strategy
Organizational capacity is unable to cope up with demand
Inconsistency with strategy begins to develop
External
Sources
Internal

6. Analysis
Strategic
Situational
analysis
Industrial
SWOT
TOWS
Portfolio

7. Situational Analysis
Study of current external situation of the company.
Situational
analysis
Product
Competitors
Market
Distribution
Opportunity
Threat

8. Industry & Competitive analysis
Dominant economic feature of the industry
Nature and Strength of Competition
Triggers of Changes
Strategic group mapping
Identify key success factors
Strategic moves of rivals
Analysis of industry attractiveness

9. [1] Dominant eco. features of the industry
a) Market size b) Scope of competition
c) Market growth d) Life cycle position of org.
e) no. of competitors f) No. of buyers
g) Type of distribution channel
h) Pace of technological changes
i) Clusterization of key industry participants
[2] Nature & Strength of competition
a) Type of competition
b) How strong is the competitive force

10. [3] Trigger of changes
The trends and new developments produces changes which requires strategic response from the organization.
Life cycle position and new technology are the two major sources of trigger of changes or Deriving forces.
Examples ~
Internet opportunity & threat
Globalization
Change in industry growth rate
Product innovation
Diffusion of technical know-how across more companies
Changes in cost and efficiency

11. [4] Strategic group mapping
Identifying the companies that are in strong/weak position. H
Quality L H
Price
Distribution channel
Product line

12. [5] Key Success Factor
The strength to prosper in the market is called KSF. For e.g. – Particular strategy, product attribute, resource ownership etc.
All firms in the industry must pay close attention to them because being distinctively better than rivals on one or more KSF gives competitive advantages.
KSF vary from industry to industry and firm to firm.
Only rarely does an industry have more then 3 or 4 KSFs at any particular time.

13. [6] Strategic moves of rivals -
Competitive intelligence about the rival’s strategy, their latest moves, their strength and weakness is essential to decide company’s own best strategic move.
[7] Analysis of industrial attractiveness
Industry’s growth potential
Adequate Profitability
Firm’s competitive position
Ability to capitalize vulnerabilities of weak rivals
Degree of risk and uncertainty
Ability to defend against the factors that makes industry unattractive

14. SWOT analysis S - Strength
Inherent capability to gain competitive advantages
W - Weakness
Inherent inability that creates competitive disadvantages
O - Opportunities
Favorable condition in the environment
T - Threat
Unfavorable condition in the environment

15. Significance of SWOT analysis
Logical framework
Formal SWOT analysis is better then managerial perception about company’s S, W, O, T.
Comparative account
Compare external opportunities and threats with internal strength and weakness.
Strategy identification
Guides strategists to identify a set of strategy to choose from.

16. Strength factors Powerful strategy supported by needed skills.
Strong brand name, image and goodwill.
Strong financial position.
Market leadership with large customer base.
Proprietary technology and patents.
Superior intellectual skills.
Product innovation skills
User of e-com technology
Superior supply-chain management.
Better product quality.
Wide geographical coverage.

17. Weakness factors No clear strategic mission. Obsolete facilities.
Lack of key skills.
No cost controlling measures.
Too narrow product line.
Weak brand image.
Weaker dealer network.
Poor financial health.
Under utilized plant capacity.
Behind on product quality, R&D etc.

18. Opportunity factors Additional customer group.
Expansion to new geographic market.
Expanding product line to meet customer demand.
Additional technological capacity.
Using internet to pursue new sales growth.
Falling trade barriers.
Rapid growth in market demand.
Acquisition of rival firm.
Opening to new technology.
Liquidation of rival firm.

19. Threat factors Entry of new competitor.
Loss of sale to substitute product.
Competition with e-com companies.
Increasing intensity of competition.
Technological changes.
Slow market growth rate.
Adverse shift in trade barriers.
Costly new regulatory requirement.
Growing bargaining power of customers.

20. TOWS Matrix SO WO ST WT Heinz Welhrich
Organizational
Strength
Weakness SO
Strategy that uses strength to capitalize new and emerging opportunities WO
Strategy to overcome weakness to exploit opportunities ST
Strategy that uses strength to minimize threat WT
Strategy to overcome weakness to cope with threat
Opportunity
Environmental
Threat
Heinz Welhrich

21. Portfolio analysis
Portfolio is the collection of business or products that makes up the company.
PA is a technique to analyse company portfolio so that resources can be chanalized to potential products.
PA is used in multi-product and multi-business organization.
Depending upon the result of the analysis strategy can be selected.

22. Pre-requisites of Portfolio analysis –
Knowledge of SBU
Knowledge of Experience curve
Knowledge of Product life cycle
analysis
Portfolio
Growth-share
Matrix
BCG
Product-market
matrix
Ansoff’s
ADL
General
Electric
Model

23. Boston Consulting Group Growth-Share matrix
High
STAR
Question mark
Cash Cow
Dog
Market growth
Low
High
Low
Market share

24. Question Marks ~ STAR ~ Cash Cows ~ Dogs ~
High-growth low-share business, requires heavy investment even with less cash generation.
STAR ~
High share-high growth business, requires heavy investment to maintain the position.
Cash Cows ~
High share, low-growth business, requires less investment.
Dogs ~
Low-share, low-growth business, requires divestment or liquidation.

25. BUILD strategy ~ HOLD strategy ~ HARVEST strategy ~ DIVEST strategy ~
High-growth Low-share business, requires heavy investment even with less cash generation.
HOLD strategy ~
High-share High-growth business, requires heavy investment to maintain the position.
HARVEST strategy ~
High share, Low-growth business, requires less investment.
DIVEST strategy ~
Low-share, Low-growth business, requires divestment or liquidation.

26. STARS n
CASH COWS n
DOGS n
QUESTION MARKS n
n BUILD
n HARVEST
n HOLD
n DIVEST

27. Ansoff’S Product – Market matrix
It is portfolio planning tool that suggest 4 alternative growth strategies.
Existing Product
New Product
Market
Penetration
Product
Development
Diversification
Existing
Market
New
Market

28. ADL Matrix
Developed by Arther D. Little it is 2D matrix drawn between Industry maturity and Competitive position.
Industry maturity has 4 stages –
Embryonic Growth
Mature Ageing
Organization have 5 competitive positions–
Dominant Strong
Favorable Tenable
Weak

29. Growth Mature Aging Dominant Strong Tenable Weak Embryonic Favorable
Build barriers,
Act offensively
Invest, cost leadership, defend position
Invest, cost leadership, Defend position
Renew focus, Defend position, Withdraw
Strong
Differentiate, Fast grow
Differentiate, Low cost, Acquisition
Low cost, focus, Differentiate
Find Niche,
Hold niche, Harvest
Favorable
Differentiate, Focus
Focus, Differentiate, Defend
Find niche Hold niche, Harvest,
Harvest, Turn around
Tenable
Grow with industry, Focus
Find niche
Turn around, Retrench
Divest, Retrench
Weak
Find niche, Hold niche, fast grow
Divest, Withdraw
Withdraw

30. General Electric Model
Business Position
High
Medium
Low
Invest
Protect
Harvest
Divest
High
Market Attractiveness
Medium
Low

31. Business Position
Size
Customer Loyalty
Distribution
Technology skills
Patents
Marketing
Flexibility
Management
Market Attractiveness
Size
Customer satisfaction
Competition
Growth rate
Price level
Profitability
Govt. regulations
Economic trends

32. Strategic group
A group of those rival firms which are similar in one of the following ways –
Comparable product line.
Same price/quality range.
Focusing on the same distribution channel.
Similar product attributes.
Selling to similar type of customers.
Depend on same technology.
An industry may contain one or more strategic groups.