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Class 8&9 - Business Strategy Analysis
Class 8&9 - Business Strategy Analysis
Class 8&9 - Business Strategy Analysis
Introduction
BAs have responsibility for the following areas:
identifying the tactical options that will address a given situation and will
support the delivery of the business strategy;
defining the tactics that will enable the organization to achieve its
strategy;
supporting the implementation and operation of those tactics;
redefining the tactics after implementation to take account of business
changes and to ensure continuing alignment with business objectives.
Strategy Analysis
the process of conducting research on the business
environment within which an organization operates and on the
organization itself, in order to formulate strategy.
BNET Business Dictionary
a theoretically informed understanding of the environment in
which an organization is operating, together with an
understanding of the organization's interaction with its
environment in order to improve organizational efficiency and
effectiveness by increasing the organization's capacity to deploy
and redeploy its resources intelligently.
PEST analysis
There are several similar approaches used to investigate the
global business environment within which an organization
operates.
The most commonly used
environment analysis are:
approaches
to
external
technological,
PEST analysis
It can be used for evaluating market growth or decline, and as such the position,
potential and direction for a business.
Economic factors. These affect the cost of capital and purchasing power of an
organization. Economic factors include economic growth, interest rates, inflation and
currency exchange rates.
Social factors. These impact on the consumers need and the potential market size for
an organization's goods and services. Social factors include population growth, age
demographics and attitudes towards health.
Technological factors. These influence barriers to entry, make or buy decisions and
investment in innovation, such as automation, investment incentives and the rate of
technological change.
This theory is based on the concept that there are five forces which determine the
competitive intensity and attractiveness of a market.
Porters five forces helps to identify where power lies in a business situation.
Strategic analysts often use Porters five forces to understand whether new
products or services are potentially profitable.
1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is
driven by:
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MOST Analysis
MOST analysis is used to analyze what an organization has set out
to achieve (the mission and objectives) and how it aims to achieve
this (the strategy and tactics).
A MOST provides a statement of intent for the organization, and is
usually created following some strategic analysis activity.
It is also used during the strategic analysis, since it can demonstrate
strength within the organization or expose inherent weaknesses.
MOST stands for:
Mission: the rationale and direction for the organization.
Tactics: the detailed, short-term plans and actions that will deliver
the strategy.
Dr. C. Lakshmi Devasena, IBS Hyderabad Strategy Analysis
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When examining the MOST for an organization, the technique is used to identify strengths and
weaknesses.
If the answer to any of these question is no, then there is a potential for weakness in the
organization.
If the answer to any of these questions is yes, there are potential strengths in the organization.
For example, the clear definition and planning as encapsulated in the MOST can help motivate
the staff to work towards an agreed set of objectives.
MOST analysis can be a tricky technique to use when assessing internal capability.
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technology,
reputation and culture;
human resources skills, knowledge,
communication and motivation.
The Resource Audit is used to analyze key
areas of internal capability in order to
identify the resources that will enable
business change and those that will
undermine or prevent such efforts.
It is also used to examine internal resources
at many different levels, ranging from an
entire organization to a localized team .
Figure beside shows the areas analyzed as
part of the Resource Audit.
Dr. C. Lakshmi Devasena, IBS Hyderabad Strategy Analysis
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Boston Box
The Boston Box is to aid portfolio management. The box is a 2 x 2 matrix with four quadrants.
The axes represent low to high market growth and low to high market share.
Star: These are high-growth business units or products with a high percentage of market
share. Over time the market growth will slow down for these products, and, if they maintain
their relative market share, they will become cash cows.
Cash cow: These are low-growth business units or products that have a relatively high
market share. These are mature, successful products that can be sustained without large
investment. They generate the income required to develop the new or problematic products
that will become stars in the portfolio.
Wild cat or problem child: These are businesses or products with low market share, but
operating in high-growth markets. They have potential but may require substantial
investment in order to develop their market share, typically at the expense of more powerful
competitors. Management has to decide which problem children to invest in, and which
ones to allow to fail.
Dog: These are the business units or products that have low relative share and are in
unattractive, low-growth markets. Dogs may generate enough cash to break even, but they do
not have good prospects for growth, and so are rarely, if ever, worth investing in.
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Ansoffs matrix.
Dr. C. Lakshmi Devasena, IBS Hyderabad Strategy Analysis
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SWOT analysis
A SWOT analysis is a simple but widely used tool that helps in
understanding the strengths, weaknesses, opportunities and threats
involved in a project or business activity.
It starts by defining the objective of the project or business activity
and identifies the internal and external factors that are important to
achieving that objective.
Strengths and weaknesses are usually internal to the organization,
while opportunities and threats are usually external.
SWOT analysis is used to consolidate the results from the external
and internal business environment analysis.
Variant: TOWS Analysis (threats, opportunities, weaknesses and
strengths).
Dr. C. Lakshmi Devasena, IBS Hyderabad Strategy Analysis
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SWOT Analysis
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SWOT analysis
Strengths - the internal positive capabilities of the organization,
for example financial resources, motivated staff or good market
reputation;
Weaknesses - the internal negative aspects of the organization
that will diminish the chances of success, for example out-of-date
equipment and systems, unskilled staff or poor management
information;
Opportunities - the external factors that present opportunities for
success, for example social changes that increase demand for the
organization's services, or the development of technology to
provide new service delivery channels;
Threats - the external factors that have the potential to harm the
organization, for example a technological development that could
enable new competitors to enter the market, or economic
difficulties leading to a reduction in market demand.
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Strategy: the defined strategy for the organization. This is likely to have been
developed following a SWOT analysis , and may be based upon Porters
generic strategies of market development or product development.
Structure: the internal structures that define the lines of communication and
control within the organization. Examples include centralized or decentralized
control, and hierarchical or matrix management structures.
The 7-S model elements are sometimes categorized as hard and soft.
The hard areas are those that are more tangible and may be defined
specifically; the soft areas are less tangible and are more difficult to define
precisely.
The hard group consists of strategy, structure and systems; the soft areas
are shared values, style, staff and skills. Although the hard areas are more
concrete, the soft ones are of equal importance.
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Critical success factors (CSFs) and key performance indicators (KPIs) are used to determine
measures of organizational performance.
CSFs are identified first, since they are the areas of performance that the organization
considers vital to its success.
They are typically broad-brush statements such as customer service or low costs.
Two types of CSF should be considered:
Industry-wide CSFs the areas of effective performance that are necessary for any
organization operating within a particular business domain or market sector. For example, all
airlines have safety of operations as a CSF no airline that disregards safety is likely to
operate for very long.
These CSFs do not differentiate between organizations, but they allow them to continue
operating.
Organization-specific CSFs the areas of performance that enable an organization to
outperform its competition. These are the areas that it focuses upon as key differentiators.
KPIs are related to the CSFs, and define the specific areas to be monitored in order to
determine whether the required level of performance has been achieved.
If an organization has defined excellent customer service as a CSF, the KPIs could include the
volume of complaints received over a defined time period, and the percentage of customers
rating the organization very good or excellent in a customer perception survey.
Since KPIs are related to CSFs, they need to be defined for both the industry-wide and the
organization-specific areas.
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Organizations' often have their own variants of the Balanced Business Scorecard (BBS),
reflecting aspects of the organization that are particularly important and that need to
be monitored. An example is the area of risk: a financial services provider might be
particularly keen to monitor this aspect of its business.
The BBS identifies four aspects of performance that should be considered:
Financial: This aspect considers the financial performance of the organization, looking
for example at the profit generated by sales, the returns generated by the assets invested
in the organization, and its liquidity.
Customer: Looking at the organization from the customer perspective shows how
customers view it. For example, the level of customer satisfaction and the reputation the
organization has in the marketplace are considered.
Internal business process: This perspective shows the internal processes and procedures
that are used to operate the organization. For example, are the processes focused on
reducing costs, to the detriment of customer service? Is the technology used well to
support the organization in delivering its products and services?
Learning and growth (also known as innovation): The learning perspective is concerned
with the future development of the organization. Examples of performance areas are
the development of new products and services, the level of creative activity in the
organization, and the extent to which this is encouraged.
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