Professional Documents
Culture Documents
Environmental Analysis
SWOT ANALYSIS
Survival growth
Implementation – 7s model
Strategic Analysis
Strategy
Strategic Implementatio
Choice n
The elements unlike in the earlier presentation, are not in a linear for simply because they are
overlapping. Analysis may be done concurrently with choice while choice may also be done together
with implementation. However as implementation takes place, analysis may also take place at the
same time. The earlier presentation only facilities learning but in reliability the Johnson and Scholes
model is far more relevament.
Strategic analysis: concerned with understanding the strategic position of an organization that is
changes taking place in the environment and their likely impact on organisation’s performance. The
aims of strategic analysis is to help form an opinion about the key influences on the present and future
well-being of the organization including opportunities and threats that are yielded by the environment
and it thus includes issues such as:-
1. The environment – current and future
New Entrants
Other stakeholders
government, trade
associations,
Threat of
community
Threat of
Substitutes
Porter’s contribution can thus be summarized by way of priority matrix. The company’s external
strategic factors are those key elements of the eternal trends that are judged to have both a medium to
high probability of occurrence as well as a medium to high probability of impact on the company. The
issues priority matrix can thus be used to help managers decide on eternal elements that should be
merely scanned (low priority) and which should be monitored as strategic factors (high priority). Those
eternal elements/trends that are judged to be strategic factors are the categorized as opportunities and
threats and will from the basis of strategy formulation.
Competitive Analysis
This can be subdivided into 4 basic areas
(i) Industry environmental analysis
(ii) Industry analysis
(iii) Competitive analysis
(iv) Operating environment
Analytical Approach
Based on data rather than opinion. This can be done by consultants or individual with the organization
teams. The following basic concepts should be remembered when carrying out this process.
Resource audit
This involves assessment as already indicated of resources both tangible and intangioble. The
resources to be audited include both current as well as those not currently owned but can be accessed
and key to success in future.
The audit must also identify those resources that are critical to the success to the success of the
organization’s strategies in contrast to those which are necessary but not source of the organisation’s
competitive advantage:
Link to competitive advantage
Competitors’ Better than competitors’
or easy to imitate and difficult to inmate
Competences
Firm Infrastructure
Procurement
margin
Primary Activities
Customer requirements
Product attributes
Service expectations
Price sensitivity
Degree of malching
Communication
The key question in analyzing value addition or effectiveness is, what are the critical key features and
the core competencies, which underpin these features?
Are customer requirements met by product or service features? Is it possible to recover the added costs
of providing unique features through the value which customers place on this feature. How easy is it
for competitors to copy these features?
Do services offered match, customer expectations and do they represent perceived value.
SWOT Analysis
Very useful in summarizing many of the previous analyses and combining them with key issues from
internal analysis. The aim is to identify the extend to which the current strategy of an organization and
its more specific strengths and weaknesses are relevant to and capable of dealing with changes taking
place in the business environment. It can also be used to assess whether they are still opportunities
HAND OUT 3
MISSION/VISION
According to Thompson and Strickland on mission is concerned with the organisation’s current
business whereas a vision is concerned with the future business or well being of the organization.
It is however important to point to the distinction between the two or even there being a distinction
between the two. It is therefore difficult to draw a line of distinction between the two and in a some
cases literature on a mission amounts to literature on a vision of an organization. In this confusion
Thomson and Strickland’s distinction on management always applied. In Zimbabwe some
organizations do not separate between the two reflecting on lack of consensus of opinion by
authorities.
According to Johnson and Scholes, a mission is a general expression of the overriding purpose of the
organization which is in line with the values of expectations of major stakeholders and concerned with
the scope and boundaries of the organization. This definition is in line with the views expressed by
Thomson and Strickland. It answers the question, what business are we in?
Piece and Robinson argue that a mission represents the fundamental, unique purpose that sets a
business apart from other organizations of its type and underfies the scope of its operations, in product
and market. According to Scholes & Johnson for a mission statement to be useful it should address the
following issues”
a) It should be visionary and remain relevant for a longer time to come as it is the backcloth
against which more detailed objectives and strategies can be developed, delivered and changed ever
time.
b) It should describe the organisation’s main activities and the position it wishes to attain within
the industry.
Environmental factors
These include PESTEL factors.
Objectives
They represent desired states or outcomes. They are statements of planning purpose developed within
any kind of business plan. They evolve from tentative and vague ideas to more specific declarations of
purpose, Ansolf sees objectives as “decisions rules which enable management to guide and measure
the firm’s performance towards its purpose, Hussay co-lends that organisation may have different
objectives and he classifies then thus.
The primary or profit objective of the business, set in advance of strategy
The secondary and narrative objectives, again set in advance of strategy.
Goals which are time assigned targets from the strategy
Standards of performance assigned to particular individuals.
Profit or primary objectives
The basic duty of chief executive is to produce a profit for the shareholder. This also assures the
organizations of capacity to renew itself. The means by which these are achieved is the chief
executive’s responsibility subject to whatever constraints that may be placed by the shareholders. The
questions to ask however is whether chief executive can choose between making profit or gaining
turnover growth with little or no profit. The choice is unfortunately not available in the majority of
cases save for situation where the chief executive and shareholder are one and same. The penalty of not
making profit is elimination or dissolution through bankrupting. The only difference in such
circumstances is depends on the patience of creditors, the size of its liquid resources, and the demands
of its shareholders. To this end, one can c-..that a company that fails to make adequate profit will
eventually fail of dissatisfaction of shareholders or cause company can not generate funds for growth
and corporate renewal on which the future of every company depends. A feeling for managers in an
organizations if it is to be successful. A company whose management is not keen on profit is on sick
company profit is a philosophy not only of shorter but of longer growth allowing for renewal. Focus on
short term profit sacrifices profit and survival in the longer term management must therefore create and
balance between the need for current profit and need for company to progress in the future. General
statements of profit such as profit maximization are however a acceptable. This because if the
difference in interpretation. The difference between company that practice effective strategic
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33
management and those been on traditional approach to management is that strategic companies are not
satisfied with words alone. A much more meaningful statement should be a specific quantitative
statement of what profit is required which is also specific in terms of time. Profit should have a
quantity and efficiency focus. Efficiency target looks at such factors relating to utilization of resources
and quantity such returns e.g. return on capital employed. A no of factors should be taken into
consideration when coming up with profit targets.
i. Trends over previous years.
ii. Progress by other company in a similar size or industry
iii. Performance of leading company on the stock exchange
iv. Opportunities for more profitable investments elsewhere.
The vision of the CEO and intensive to give shareholders more than they have had in the past.
The strategic need for growth to reach a size, which enables the company to at least maintain its
position of influence in its trade.
Future rates of inflation
Acceptable levels of risk
Once profit objectives have been set for the total company, similar objective should also be set for
divisions and subsidiaries. Such are however set by head office in consultation with the subsiding and
also after paying due co-ordination of the factors alluded to above.
Secondary objectives
Profit is an important objective but not the only objective of an organization. The term secondary is
used here to describe the next group of objectives. These are subsidiary objectives are descriptive and
attempt to set out the key elements of the business of the future, while corporate appraisal is concerned
with current identity, secondary objectives give an organization its future identity. They define what
the company is determined to be in the future. They do not end with what business the company is in
now, but rather what business the company be in future. This type of objective (mission) should
examine the scope of the business, the geographical sphere of operation and some of the key factors
about the company, which the CEO feeds are important. Other authorities feel that these are not
objectives at all but statements of strategy that broadly define the ….by which profit objective will be
attained. They are important in as far as they claimed creative thought to a desired end is thus justified
on the basis of expediency. Every CEO holds a mental vision of what the company can become,
regardless of the strategy chosen to reach it. A company operating in one sector may have initially a
vision for that sector done, but as they grow and become more experienced, that vision may shift. As
3. Competitive position – This looks at the relative position of an organization in the market place.
Organization can establish objectives either to maintain or increase their standing. This standing can be
measure in terms of sales (units) or revenues or market share.
4. Employee Development – This is often done as a way of increasing commitment mainly because it
opens up promotional opportunities as well as earnings. It is also an assurance that organization will be
bale to obtain requisite skills in future in order to implement new strategies.
5. Employee Relations – This helps to create an harmonious environment in which the firm can pursue
its objectives without having to fire fight. Strategists feel that productivity improvements is a result of
employee loyalty as well as appreciation of managers interests in employee welfare. Objectives are
thus put in place in order to ensure good relations.
6. Technological leadership – Decisions must be made on whether the organization will be a leader or
follower – Trust bank, whichever objective is selected, the organization must be able to formulate
HAND OUT 5
Strategy evaluation and selection
This involves an analysis of flaws and merits of each alternative strategies so that choice will represent
the best of the alternatives. Some criterion has thus to be set in order to guide action decision on which
option to follow. Each of the following criteria can thus be used in trying to arrive at a decision on
which of the alternative strategies is to be followed.
1. Suitability
2. Validity
3. Consistency
4. Feasibility
5. Vulnerability
6. Potential rewards
c. Anticipate the likely competitive responses to each strategic option. The business must therefore put
in place measures on how it will deal with such response.
d. This deals with whether the strategy meets with the suitability test or not. Where it does not, it
should either be modified or dropped.
2. Validity Assumptions faulty or
This involves assessment of the assumptions on which the strategy is build. The problem here is that of
distinguishing faulty assumptions from those that are second. Manager must however guard against
conventional wisdom in this respect. All assumptions must be examined thoroughly for soundness
reflecting on the past as well as probable trends. Past behaviour in costs, revenues as well as demand
under similar conditions can be examined. Trends that are likely given the expected environmental
condition should also receive a closer investigation. In doing this, the first step involves the isolation of
the assumptions about the reason for the forecasts changes, share increases alluded to above may be
inrealistic given the inflationary environments where price are reviewed upwards frequently and also
the emergence of cheaper products from China. The next step is to examine the evidence used to
Potential rewards
This represents the ultimate test for alternative evaluation. Three classes of measures can be used for
this purpose.
i. Economic value generation
ii. sales growth and profitability
iii. Relative competitive position
Sales growth and profitability measures
These include not earnings, R01 and cash flow. They are used to evaluate strategic options its terms of
their performance. They are seldom- inadequate for teaching meaningful signals to corporate or
business level decision markets. Arguments presented are that techniques used should assess economic
value of the business or to improve competitive position.