Business Analysis (BA)

Chapter 1:
The Nature of Strategic Business Analysis
The Strategic Planning Process
Levels of Strategic Planning
Johnson, Scholes and Whittington
Johnson and Scholes Lenses
Business Analysis
 Chapter 2:
The Environment and Competitive Forces
 PESTEL Analysis
This model examines the growth prospects for the industry
as a whole. This is achieved by examining 6 factors that
are outside the control of the companies in the industry:

• Political factors
• Economic factors
• Social factors
• Technological factors
• Environmental factors
• Legal factors
Porter’s Diamond
Convergence in Industries
Porter’s 5 Forces Model
 The Product Life Cycle

Sales
The four stages of a products life
£

Time

Introduction Growth Maturity Decline

 Strategic Groups

These are organisations with:

• same industry
• similar strategic characteristics
• following similar strategies/ competing
on a similar basis
• can have similar assets and skills
Strategic Group Positioning
 Chapter 3:
Marketing and the value of goods and services
 Customers and Markets

•There are 3 strategic questions that are

used to analyse customers:

– segmentation

– motivation

– unmet needs
Market Segmentation
 Marketing styles

There are three ways to market a product

in order to account for the fact that
different segments have different needs:

• undifferentiated marketing

• differentiated marketing

• niche/target marketing
Marketing Mix Strategies
 Critical Success Factors

“performance requirements that are

fundamental to an organisation's success. In
this context CSFs should thus be viewed as
those product features that are particularly
valued by customers. This is where the
organisation must outperform competition.”
Value Chain Analysis
 Benchmarking

“to provide a target for action in order to

improve competitive position.”

They can take many forms:

• strategic
• historical
• industry
• best-in-class
• international
 Chapter 4:
Internal resources and competencies
 Capabilities
Same as Competitor Different and
Easy to Copy Difficult to Copy

Resources Basic Unique

Competencies Threshold Core

 Resource Audit (M’s model)

An organisations resources can be

organised into the following categories:

• Men
• Money
• Markets
• Materials
• Management
• Make-up
• Manufacturing/Machinery
 Sustaining Competitive
Advantage
The capabilities needed to sustain
competitive advantage are:

• Value of strategic capabilities

• Rarity of strategic capabilities

• Robustness of strategic capabilities

 Other ways to gain
competitive advantage
• innovation
– by the time the competition catch up, the innovator
has built up brand loyalty and a defendable position

• knowledge management
– this encourages innovation and sharing, and it
reduces complexity. It also ensures continuity as
staff turnover
SWOT Analysis
 Chapter 5:
Stakeholders, ethics and culture
 The need for corporate
governance
• The gap between ultimate beneficiaries and
those making day-today decisions can be large
and agents might not know what the
beneficiaries want.

• Self-interest can cause agents to work for

their own benefit at the expense of their
principals (remuneration packages, share
options, budget padding, short-termism to make
current results look good at the expense of
long-term performance).
 Typical features

• boards should have non-executive directors – to advise

and warn the executive directors. Executive and non-
executive directors (NEDs) should be in balance so that
neither group dominates

• there should be a separation of the roles of chairman and

chief executive

• executive remuneration should be decided by a

remuneration committee, consisting of non-executive
directors

• an audit committee, comprising non-executive directors

should look after the appointment of supervision of auditors.
 Impact of Corporate Governance

• Greater shareholder power

• Greater pressure

• Greater scrutiny

• Greater need for risk assessments

 Stakeholder Mapping

Low

Minimal Keep
Effort (A) Informed (B)
Power

Keep Key
Satisfied (C) Players (D)
High
Low Level of Interest High
 Ethics

Ethical issues arise at three levels:

• Macro level

• Corporate level

• Individual level
 Ethical Stances

„The extent to which an organisation will

exceed its minimum obligations to
stakeholders.‟
 Corporate Social Responsibility
The following are common areas where
businesses get involved in CSR issues:

• work creation and training programmes

• sponsorship of the arts and sport
• employee welfare programmes
• community welfare programmes
• support for educational institutions and links with
business
• contributions to overseas aid
• environmental programmes.
 Organisational culture

The concept of the cultural web is a useful device for mapping

out change but its real worth is in the fact that we can identify
which elements of culture need to change.
 Mission Statements
A mission statement should contain the following:

• purpose
• strategy
• policies and Standards of Behaviour
• values.

Also:
• mission statements should be short – typically half a page
• note that mission statements can have a valuable role in
setting ethical standards and organisational culture.
 Chapter 6:

Strategic Choice I
 Corporate Parenting

The issue for corporate parents whether

they:

• add value to the organisation and give

business units advantages that they
would not otherwise have

• add cost and so destroy the value that

the business units have created.
 Rationales for adding value

A well-managed corporate parent should be able

to add value. Johnson, Scholes and Whittington
identify three corporate rationales or roles adopted
by parents in order to do this:

• portfolio managers

• synergy managers

• parental developers.
 Boston Consulting Group Matrix
>10%
% rate market growth

<10%

+1 Relative Market Share -1

 Chapter 7:
Strategic Choice II
 TOWS Analysis
Internal Factors
Strengths (S) Weaknesses (W)

Opportunities Examine strategies Examine strategies

(O) that use strengths that take advantage
to make use of of opportunities by
External opportunities (SO). overcoming or
Factors avoiding
weaknesses (WO).
Threats (T) Examine strategies Examine strategies
that use strengths that minimise the
to overcome or effect of
avoid threats (ST). weaknesses and
avoid or overcome
threats (WT).
 Directions for Growth - Ansoff
Products
Existing New

Existing Market Product

Markets

penetration development

New Market Diversification

development
 Diversification
FORWARD VERTICAL INTEGRATION

HORIZONTAL
CORE ACTIVITY DIVERSIFICATION

UNRELATED
DIVERSIFICATION

BACKWARD VERTICAL INTEGRATION

 Implementing growth
Organic Growth

• Internal development
• Easier to control?
• Can be risky if not enough skills or
experience
 Implementing growth

Mergers & Acquisitions

Assess by synergy

Transfer of Skills Sharing activities

 Implementing growth
Strategic
Joint Venture Alliance

Joint Development

Licence Agency
Franchise
 Strategies for Competitive
Advantage
There are three generic strategies through which an
organisation could achieve competitive advantage:

• Cost leadership, where there is great emphasis on

keeping costs down. This opens up the profit margin by
lowering costs, ideally more than any competitor can.

• Differentiation, where a better product or service is

sold. This opens up the profit margin by raising selling
prices.

• Additionally an organisation can choose a focus strategy,

where the organisation concentrated on a small segment
of the market. Within the focus strategy, the organisation
must choose whether or not to become a cost leader or a
differentiator.
The Strategy Clock
 Strategies for hyper-competition

• Reposition on the strategic clock

• Competing successfully

• Fight and overcome competitors‟

strategies

• Overcome previous barriers to entry

 Strategy Evaluation

Key words

Suitability Feasibility

Acceptability
 Chapter 8:
Organisational Structure
 Organisational structure

Entrepreneurial structure

The boss

Everyone else
 Organisational structure

Functional Structure

Board

Production Sales R&D Finance HR

 Organisational structure

Divisional Structure

Board
Central functions
eg finance, HR

Division 1 Division 2 Division 3

Production Sales R&D

 Organisational structure

Matrix Structure

Production Purchasing
Manager Manager

Manager
Customer A

Manager
Customer B
 Virtual Organisations

An example:
 Chapter 9:
Business Process Change
 Business Processes

• Every business has unique characteristics embedded in

its core processes that help it achieve its goals and create
competitive advantage.

• Strategic business processes, such as new product

design or high sensitivity customer care, provide unique
and durable business advantages to organisations.

• Looking at the business in terms of activities and

processes opens up scope for challenging the ways
in which things are done, and coming up with
improvements, or sometimes more radical changes.
 Harmon’s process-strategy
matrix

According to Harmon, BPR should be

focused on those activities which are:

– of high strategic importance

– likely to be complex and dynamic

These are normally the processes that

provide competitive advantage and overall
company success.
Business Process Redesign
 Software Solutions

BPR will often mean there is a need for new

software in order for the change to work
effectively and efficiently.

The key decision here is whether to buy in a

“ready made”/generic software package or
to pay for a bespoke system
 Chapter 10:
Information Technology
 Strategic Context
IT can form an important part in the entire strategic
planning process. For example
• it can help provide new technological developments
which open up growth opportunities
• It can help a business cope with it‟s competitive
environment and market position
• Strategic choice can be made easier through the use of
IT
• IT can help in strategy implementation
• IT can help review performance and monitor controls
McFarlan’s Grid
 E-business

The stages of e-business:

1. Web presence
2. E-commerce
3. Integrated e-commerce
4. E-business
 Supply Chain Management

The transformation of product from node to

node includes activities such as:

• production planning
• purchasing
• materials management
• distribution
• customer service
• forecasting
 Push vs Pull SCM

• Push = supplier-led.

• Pull = customer/ market led. Consumers

have a direct voice in the functioning of the
supply chain. This is what e-commerce
facilitates and this was very rare prior to
the development of e-commerce. Many
businesses have developed this further
into upstream SCM
 Impact of successful
downstream SCM

• Customers become more reluctant to

switch
• Disintermediation
• Continual updates
• Cheaper communication
• Consumer/ user groups
• Better information on consumers
• Customers can start to customise products
E-marketing
 E-marketing: the 7Ps

E-marketing involves extending the original 4Ps of

marketing (product, price, promotion and place) to
incorporate the following:

– people/participants
– processes
– physical evidence
6Is: Benefits over Traditional
Marketing Methods
 Customer Relationship Management
(CRM)

There are 4 stages in the customer life cycle:

• Selection
• Acquisition
• Retention
• Extension

IT can play a pivotal role in improving all aspects of

CRM
Chapter 11:
Quality
 Benefits of Improving Quality

• It is a differentiator
• Reduced internal failure costs
• Reduced external failure costs
• Potentially requires less capital investment

However there may be an increase in:

• Prevention costs
• Appraisal costs
 Quality Control vs Quality
Management

• Quality control = reactive (old way to do

things)

• Quality management = proactive (the

modern way to improve quality)
 Total Quality Management

• Everyone‟s involved
• Customer focused
• Internal and external buyer/supplier
relationships established
• Try to get it right first time
• Use a “kaizen” system
The ‘V-model’
Capability Maturity Model
Integration (CMMI)
 The Six Sigma Approach

• This is an extension of the TQM approach.

• It is a data-driven approach – it uses a wide

range of statistical calculations and techniques to
examine and analyse quality problems

• It aims to reduce the variation in process output

so that there are no more than 3.4 defects per
million opportunities
 DMAIC

• Define
• Measure
• Analyse
• Improve
• Control
 Chapter 12:
Project Management

Project
Management

Project Managing and

Project Risk Project
features and Leading
Management Planning
constraints Projects

Project The Project Project

Initiation Plan Completion
 Project Constraints

• Cost

• Time

• Scope
 Project Risk Management

Risk management comprises:

• risk assessment (identifying and

analysing risk) – assessing the loss
probability and magnitude for each item

• risk control (taking steps to reduce

risk, provide contingency and monitor
improvements).
 How to manage risk

• Ignore it

• Insure against it

• Transfer it

• Mitigate it
Contents of a project plan
 Assessing Project Quality

• Define
• Measure
• Analyse
• Design
• Verify
 Chapter 13:
Finance & Strategy
 Different Organisational Types

• Listed Companies

• Non-listed businesses

• Not for Profit organisations

Funding Sources
 What to consider

• Cost
• Gearing
• Control
• Security
• Cash flow
• Availability
• Exit routes
 Funding of NFPs

• Strategic funding
• Self-generated income
• Developmental funding
• Cost minimisation
• Project returns
Working Capital Management
Investment Appraisal Ratios
 Chapter 14:
Strategy and People
 Objectives of HRM

• Identifying the kinds of talent needed

• Recruiting an adequate supply
• Developing people‟s potential by training,
development and education.
• Retaining as high a proportion as possible
• Motivating the talented personnel
• Improving the performance and productivity
of the most talented.
• Creating an organisational culture in which
talent is nurtured and can flourish
 Leadership

An effective leader will need

• Vision
• Communication
• Passion and motivation
• Flexibility
 Appraisal Systems

A good appraisal system should have:

• Relevance
• Fairness
• Serious intent
• Cooperation
• Efficiency
 Facilitating change

Project and strategic change need staff

support. In order for these changes to be
effective they may need:

• new output measures

• new skills and competences required
• changes to roles and job descriptions
• changes to responsibilities
 Reward Systems

When designing a reward system we

should consider:

• Organisational objectives
• CSFs and KPIs
• Desired behaviour
• Competitor systems
• Legislation
• Constraints
 Human Resources and Strategy
HRM is becoming increasingly important to businesses:

• people are seen as a major source of competitive advantage,

• training and development is seen as an investment, not a cost
• learning is seen as essential
• employees expect to learn and change and retrain as necessary
as strategy demands
• Staff development is seen as a key management role
• changes outside the organisation are reflected in changes to
training and development needs
• human resource implications are considered as part of strategic
planning.
 Chapter 15:
Managing Change
 Reasons for Strategic Change
There are many ways in which a business‟
strategy might change. But these fall into two
general categories:

• planned/intended strategic changes

• emergent strategic changes

In either case, the change process will have to

be managed and led well by senior
management.
 Types of Strategic Change
Extent of Change
Transformation Realignment
Incr.
Speed of Change

Evolution Adaptation

Revolution Reconstruction

Big Bang
Barriers to Change
 The Change Process

Lewin suggested that successful change is

achieved in three stages:

– Unfreezing existing behaviour

– Making the change
– Refreezing the new behaviour
Contextual Features
Leadership Styles