Strategic Analysis

Strategic analysis is about looking at what is happening outside your organization now and in the future. Strategic analysis will lead to clearer more relevant goals, better quality decisions, and a more secure future as you are better prepared for what will happen. Otherwise known as external environmental analysis it is a key step in strategic planning. It is the link between getting your overall direction right and making the right decisions. You will make better decisions if you understand the influences from the outside world to which you might have to respond in the future. Country To ensure that your business is aligned positively with the powerful forces of change that are affecting our working environment, the country in which the business is operating has to be evaluated from multiple perspectives. By taking advantage of change inevitably happening around your business, you are much more likely to be successful than if your activities oppose it. PEST(LE) PESTLE analysis is a useful tool for understanding the big picture of the environment, in which you are operating, and the opportunities and threats that lie within it. By understanding the environment in which you operate (external to your company), you can take advantage of the opportunities and minimize the threats. The PESTLE analysis is a useful tool for understanding risks associated with market growth or decline, and as such the position, potential and direction for a business or organization, by dividing the general environment into the following categories: Political relates to the pressures and opportunities brought by changes of the government and public attitudes toward the industry, changes in political institutions and the direction of political processes, legal issues, and the overall regulatory climate. Economic refers to a society's economic structures and such variables as the stock exchange, interest and inflation rates, the nation's economic policies and performance, exchange rates, etc. These variables impact differently on different industries. Social refers to cultural attitudes, ethical beliefs, shared values, level of differentiation in lifestyle, demographics, education levels, etc. Observing social factors helps organizations maintain their reputation among stakeholders. Technological refers to changes in technology that can alter the firm's competitive position. Industries merge; new strategic groups emerge; currents products improve and the cost of production drops by process innovation. Managerial innovation is part of the technology scan.

Legal refers to what is happening with changes to legislation. This may impact employment, access to materials, quotas, resources, imports/ exports, taxation etc. Environmental refers to what is happening with respect to ecological and environmental aspects. Many of these factors will be economic or social in nature.

Political Factors

Environmental Factors

Economic Factors

Your Business
Legal Factors Social Factors

Technological Factors

The different aspects include:

Industry An industry's profit potential is largely determined by the intensity of competitive forces within the industry. A good understanding of the industry's competitive forces and their underlying causes is a

crucial component of strategy formulation, which is the building of defenses against the competitive forces, or finding a viable position in an industry where the forces are weaker. Porter's 5 Forces Porter s 5 forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive 5 forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An unattractive industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching pure competition . Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit.

Bargaining Power of Buyers

Threat of New Entrants

Bargaining Power of Suppliers

Threat of Substitutes
Rivalry among Competitors

The 5 Forces are affected by the following: 1. Threat of New Entrants  Barriers to Entry o o o o o o Economies of Scale Product Differentiation Switching Costs Capital Requirement Access to Distribution Channels Government Policy

2. Rivalry among Competition  Intense Rivalry related to o Number of Competitors  Monopoly  Monopolistic Competition  Fragmented Market o o o o o Rate of Industry Growth Characteristics of Product/ Service Amount of Fixed Costs Capacity High Exit Barriers

3. Threat of Substitute   Availability of Substitutes Switching Costs

4. Bargaining Power of Buyers  Buyers Power o o o o o o Buyer buys large portion of seller s product Buyer can integrate backward Undifferentiated product Availability of sellers Switching costs Buyer orientation  Price vs. quality oriented 5. Bargaining Power of Suppliers  Number of Suppliers and Buyers

Characteristics of Supplier s Product o Unique or commodity

    Company

Switching Costs Availability of Substitute Supplier forward integration Amount purchased from supplier

A comprehensive analysis about the company would typically start with the company's history, include its organizational set-up and description of its businesses, and then move on to discuss its key business strategies. Further, the analysis should highlight the key financial parameters of the company with focus on ratio analysis, stock performance, market indicators and earnings estimates. The Value Chain is the collection of processes and activities conducted by a business to design, produce, market, deliver, and support its products/ services. The chain follows the production sequence; Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service. The four areas that affect the whole firm are also considered; Infrastructure, Human Resources, Technology, and Procurement.

Strategic Evaluation and Direction SWOT

SWOT analysis is a tool for auditing an organization and its environment. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) and threats (T). The SWOT analysis provides information that is helpful in matching the firm s resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.

Strategic Direction After mapping the company s strengths, weaknesses, opportunities, and threats, it is easier for the managers to make an informative decision on the Strategic Direction of the company. The options are generally described as: Flaunt, Fix, Fight, or Flee. The decision is based on which pair of relations are the strongest. The final stage of the SWOT Analysis is to match it against the benefits sought by your market. Threats Opportunities Fight Flaunt Strengths Flee Fix Weaknesses

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Marketing Analysis

Marketing Analysis provides methodologies for categorizing customers and focusing on those who make the largest contributions to your bottom line; and how to analyze your CRM and Marketing campaigns. The analysis also focuses on your products, prioritizing them for concentrating your efforts, investments, and promotions on the profitable ones. PLC

The condition in which a product is sold (advertising, saturation) changes over time and must be managed as it moves through its succession of stages. Product life cycle management (or PLCM) is the succession of strategies used by business management as a product goes through its life cycle. A new product progresses through a sequence of stages from introduction, to growth, maturity, and decline. This sequence is known as the Product Life Cycle (PLC) and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. Plotting each of the company s products on its right location on the PLC helps managers make informative and strategic decisions related to their products.

Perceptual Maps Perceptual mapping is a graphics technique used by marketers that attempts to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition. Perceptual maps can have any number of dimensions but the most common is two dimensions. Any more is a challenge to draw and confusing to interpret. The axes names are flexible, yet the most commonly used are price versus quality. Displaying consumers perceptions of related products is only half the story. Many perceptual maps also display consumers ideal points. These points reflect ideal combinations of the two dimensions as seen by a consumer.

BCG Matrix BCG matrix is often used to prioritize which products within company product mix get more funding and attention. It is based on classification of products into four categories based on combinations of market growth and market share relative to the largest competitor. Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The matrix thus maps the company products positions within these two important determinants of profitability.