ENCG - Casablanca

Strategic Management
Theme 2

Strategic Assessment : Basic Concepts and Tools

to perform External and Internal Assessment

S8/2020

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 Theme 2 Overview and Objectives
• Understanding the Basic and Fundamental Concepts of
Strategic Diagnosis ;
• Understanding how to perform External and Internal
Assessment;
• Understand the standard approach for conducting strategic
diagnosis Project;
• Perfoming strategic diagnosis tools;
– PESTEL model.
– Industry Competitiveness Analysis – Competitive Profile Matrix
(CPM);
– EFE(External Factor Evaluation) Matrix/ IFE (Internal Factor
Evaluation) Matric
– SWOT & TOWS Analysis;
– BCG Matrix (Portfolio Analysis) : Level1, Level 2 & Level 3;
– Value Chain Analysis (CVA);
• Trend Monitoring (Indicators Analysis).
• The impact of Big Data and Machine Learning.
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 Strategic Diagnosis/Assessment ?

- Understand the strategic impact of the external

environment, the strategic capacity of the Resources
(resources, skills, finance, Information, etc…) and the
expectations and influences of stakeholders.
- Environment: opportunities and threats
- Resources, skills: strengths and weaknesses
- Stakeholder expectations: corporate governance,
cultural, ethical influences

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 Part I:
External Assessment

Determining Industry Attractiveness and

Identifying Strategic Opportunities

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The scope of External
Environment

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 External Assessment
• Level 1: External Environment

• Level 2: Market Strctures

• Level 3: Industry Life Cycle

• Level 4: Competition Structure

• Level 5: Analyzing EFE Matrix

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PESTEL ANALYSIS
PESTEL Analysis
General Questions

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 PESTEL ANALYSIS

• Used mainly in the case of an international

development orientation (New implementation in a
Country # Zone # Region # Market),
• Existence of up-to-date country, region and market
ratings (Moody's, IMF, Coface, etc ...),

• Assessing the notion of RISK(Political, Economic,

Social, etc ...).
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PESTEL ANALYSIS: Risk Profile
Following up PESTEL Analysis

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PESTEL ANALYSIS : Risk Profile
Level 1: Country RISK ASSESSMENT

COFACE RISK ASSESSMENT

www.coface.com

Level 2: Sector RISK ASSESSMENT

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 Level 1: Country Risk Assessment www.coface.com
A1: Very Low – A2: Low – A3:Quite Acceptable-A4: Acceptable-B:Significant-C:High-D:VeryHigh–E:Exterme

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Level 2: Sector Risk Assessment www.coface.com

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 The Scope of Industry/Market
Structures
Competition Oligopoly Duopoly Monopoly

Concentration

Entry and Exit

Barriers
Industry / Market Structure
Product
Differentiation
Relevant Criteria

Information

Strategy Effect

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 The Scope of Industry/Market
Structures
Competition Oligopoly Duopoly Monopoly

Concentration Many firms A few firms Two firms One firm

Entry and Exit No/Low barriers Significant barriers High barriers

Barriers

Product Homogeneous
Differentiation Potential for product differentiation
Product

Perfect Imperfect availability of information

Information
Information flow High level of information Asymmetry

Strategy Effect Very High Very Low

lobbying Effect Very Low Very High

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 The Traditional Model of
Industry/Market Life Cycle
Standard Curve Analysis

Fermentation Shakeout Maturity Decline

volume
Sales

Time
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The Industry/Market Life Cycle
as an S curve

Maturity
Sales volume

Discontinuity
Takeoff

Cannibalization
Zone
Ferment

Time
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The Industry/Market Life Cycle
as an S curve

Maturity
Sales volume

Discontinuity
Takeoff

Cannibalization
Zone
Ferment

Time
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 Analysis of sector's competition and identification
of competitive factors
Porter’s model (5+1)
• This model makes it possible to structure the intellectual
approach of analysis of the competitive environment of a
market, a company or a product and to deduce from it the
factors of competitiveness;

• The environment is broken down according to five axes of

analysis (+ )A regulatory authority: Competitors, New
Entrants, Suppliers, Substitutes and Customers;

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 Porter’s Model Architecture
The Structural Determinants of Competition How is the extent
Intensity of
Regulation ?
SUPPLIER POWER
• Supplier concentration
• Relative bargaining
power

THREAT OF ENTRY INDUSTRY RIVALRY SUBSTITUTE

•Capital requirements •Concentration COMPETITION
•Economies of scale •Diversity of
•Absolute cost advantage competitors • Buyers’ propensity
to substitute
•Product differentiation •Product differentiation
• Relative prices &
•Access to distribution •Excess capacity &
channels exit barriers performance of
substitutes
•Legal/ regulatory barriers •Cost conditions
•Retaliation

BUYER POWER
• Buyers’ price sensitivity
• Relative bargaining
power
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Porter ANALYSIS – Competing
Profile

Car Manufacturing in Germany: Industry Competitiveness Profile, 2018

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 EFE (External Factor Evaluation) Matrix ?

External Factors = Opportunities + Threats

External Factor Evaluation (EFE) matrix method

is a strategic-management tool often used for the assessment of
current strategy efficience and efficacy.

« The EFE matrix is a good tool to visualize

and prioritize the opportunities and
threats that a business is facing »

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 the Creation of EFE matrix?

1. List of factors (E): list of external factors.

Divide factors into two groups: opportunities
and threats.
2. Assign weights: Assign a weight to
each factor. The value of each weight should
be between 0 and 1 (or alternatively between
10 and 100 if you use the 10 to 100 scale).
Zero means the factor is not important. One or
hundred means that the factor is the most
influential and critical one.

The total value of all weights together should be

equal to 1 or 100.

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 the creation of EFE matrix?

3. Rate factors: Assign a rating to each factor.

Rating should be between 1 and 4. Rating indicates
how effective the firm’s current strategies respond to the
factor. 1 = the response is poor. 2 = the response is
below average. 3 = above average. 4 = superior.
Weights are industry-specific. Ratings are company-
specific.
4. Multiply weights by ratings: Multiply each factor
weight with its rating. This will calculate the weighted
score for each factor.
5. Total all weighted scores: Add all weighted
scores for each factor. This will calculate the total
weighted score for the company.

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 EFE Score Analysis

- Organization response is
outstanding to threats
- Firms strategy effectively
taking advantage of existing
opportunities and minimizing
the effects of external threats

1 ≤ EFE Total weighted Score ≤ 4

-Firm’s strategies not capitalizing

on opportunities or avoiding threats

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 EFE in pratice
American Airlines operates domestic and
international flights on four continents, from
its many hubs in Dallas-Fort Worth, Los
Angeles, New York / JFK, Miami and
Chicago O'Hare. In 2016, it is the 3rd
largest airline in the world

• Regarding the structures of the Airlines

markets (WorlWide) and also the nature of
the competition (Qatarairways, canadian
airlines, etc….)
• 2018, AA would like to assess the
effectiveness of it’s own strategy.

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 EFE Matrix
American Airlines, 2018

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 Specific to
EFE Matrix American Airlines
(Performed by Top
American Airlines, 2018 management)

Opportunities and
Threats
are the same
for all competitors

Specific to
The Industry
(Performed by Airlines
Industry Expert)

The analytical ability to seize opportunities and

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 EFE Matrix
American Airlines, 2018

What are the results to consider

after performing EFE matrix?

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 EFE Matrix
Example (American airlines, 2018)
It will be necessary to level
the capacity of AA to
take advantage of the
opportunities.

Action plan for

leveling -
improvement
process

It will be necessary to
level the capacity of the
AA to protect
itself from the impact of
the threats.

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 Sources of External Information
- Published & Unpublished sources
- Customer survey-Market research-
Speeches at meetings- TV programs-
Interviews.
- Journals-Government documents- books-
newspaper.
- Internet.
- Networking
- Business Intelligence documents
- ………
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 Part I

Key Learning Concepts.

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 Part II
Internal Assessment
RESOURCES,
CAPABILITIES, SKILLS AND
CORE COMPETENCES

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The Internal Assessment: Basic
Concepts
• Scope of Internal Assessment;
• Resources, Capabilities and Core
Competencies;
• Auditing and Evaluating Functions;
• Discussing key interrelationships among the
functional areas of business;
• Discussing the tools for performing Internal
Analysis.

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 Resources ?

-Resources are Assets employed in the activities

and processes of the organization.

-They can be tangible or intangible

-They can be obtained externally or internally

generated.

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 Resources ?
Several categories:
-Human
-Financial
-Physical/Technics
-Informational
An Audit of resources would be likely to include
an evaluation of resources in terms of
Availability, Quantity,Quality, Extent of
employment/Use, Sources, Control systems and
Performance.
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 Strategic Resources and Strategic
Capacity
• Strategic resources: These are the various resources
resulting from the internal diagnosis and which make it
possible to guarantee the acquisition of a Competitive
Advantage. (Example: HR - Finance, Information and
Business Intelligence, etc ....).

• Resource’s Strategic Capacity : Often refers to the level of

measurement (quantitative, qualitative) to be achieved on a
strategic resource to ensure success in a market. (Example:
Level of Skills- Quality of service, Size of members on a
social network (database, relevance of strategic information
giving rise to an action, ...)

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 Strategic Resources and Strategic
Capacity
• The classification of Strategic Assets
(Strategic Assets)

– Intangibles (patents, reputation, customers ...)

– Human (workforce, age pyramid, flexibility,
adaptability, etc.)
– Financial (to S.T., to L.T., ability to mobilize ...)
– Techniques (equipment, buildings, stocks ...)
– Information (competitive intelligence, strategic
intelligence information, etc ...)

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 What is organizational Capabilities?

Organizational Capabilities = Entreprise’s capacity for

undertaking a particular activity. (Grant, 2002)

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 Core Competences
“…Core competences are combinations of
resources and capabilities which are unique to a
specific organization and which are responsible
for generating/gaining its Competitive
Advantage…”
(Fred, R.Davis, 2015)

“…Core Competence = capabilities that are

fundamental to a firm’s strategy and
performance...” (Hamel and Prahalad, 2004)
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 The relationships between Resources,
Capabilities and Core Competence
Resources Capabilities
Core competence
human, financial,
skills, technology
physical, skills, relationships, Perceived
relationships,
technological, + organizational = customer
knowledge and
legal, informational knowledge benefits/value
reputation of the firm
Intangible added
Unique, and
Tangible and and invisible
difficult to copy
visible assets assets

Inputs to Integration of Not all capabilities are core

the firm’s resources into competences – only those
processes value-adding that add greater value than
activities those of competitors

Core competence is the key element

regarding the defining of strategy
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