STFM Compiled Notes 1st Sem AY22 23

Mater Dei College Special Topics in Financial Management
Lesson 1 LEARNING TO THINK STRATEGICALLY

Learning Objectives
· Define strategic thinking and strategic planning

· Define the relationship of strategic thinking, strategic planning and strategic
implementation
· Identify formal and informal learning approaches
· Relate strategy to personal life experiences by reading the opinions of executives
Introduction
Learning to Think Strategically is structured around three key questions: (1) How do successful executives
learn to think strategically? (Is it something they are taught? Where? By whom? How?) (2) What learning
approaches are used by successful executive strategists? (3) What factors and conditions are essential for
learning to think strategically?
Being strategically competitive in today’s global, unpredictable, complex, and rapidly changing
environment requires a different way of looking at how we develop strategic thinkers. The strategic
landscape makes it difficult to distinguish and decide which of our interests are most vital at any given
time. Understanding how we learn to think strategically is increasingly critical for sustaining
competitiveness in a world that is becoming ever more turbulent.
How do we learn to think strategically?
We receive three educations, One from our parents, One from our school-masters, And One
from the world. The third contradicts All that the first two teach us. —Charles Louis de Secondat,
Baron de Montesquieu (1689–1755), French political philosopher
Strategic thinking is a problem-focused, intent-

driven approach to strategy based on critical theory
and supported by a complex cluster of cognitive
capabilities that are distinct and different from
strategic planning.
Cognitive Clusters for Strategic Thinking and

Strategic Planning
Figure 4.1 shows a cluster of cognitive functions

that are required for strategic thinking. These cognitive functions include conceptual, divergent, a-rational,
generative, nonlinear, metaphoric, conceptual, abstract, panoramic, polarity, symbolic, intuitive, and
creative cognitive processes, as well as critical reflective processes. The intent of strategic thinking is to
suspend problem solving in order to diverge and deep-dive with critical reflective processes.
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Figure 1.1 emphasizes the central role played by your memory in enabling you to recollect, in an accurate
and timely manner, information that can help you to formulate your strategy.
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Table 2.2 provides a more detailed comparison of strategic planning and strategic thinking, including
how the two approaches differ conceptually.
The Sloan Triad Model of Strategy
Strategic Thinking
Strategic thinking is often well outside the comfort

zone of those tasked with developing a strategy.
Strategic thinking is divergent in nature, nonlinear,
highly intuitive, and emotional, uses critical reflective
processes (critical inquiry, critical dialogue, critical
thinking, critical reflection), and is iterative, a-
rational, and inefficient. Tension is an important part
of strategic thinking.
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Strategic planning
In stark contrast to strategic thinking, the intent of strategic planning is to solve problems. It is convergent
in nature, linear, rational, logical, devoid of emotion, analytical, and efficient. In strategic planning, our
aim is to eliminate tension through resolution in the form of elimination and reductionist thinking with the
explicit aim of moving toward a solution. Thousands of linear, analytical models of strategic planning
exist today; many are excellent for the purpose of finding a solution in a predictable and relatively stable
context. However, none of the strategic planning models are a substitute for strategic thinking, as both the
purpose and the process of these two domains, or “dots” on the Sloan Triad Model of Strategy™, are
distinctly different based on their respective underlying cognitive clusters.
Strategic implementation
And lastly, let us consider the characteristics of strategic implementation, as it tends to be everybody’s
favorite and is ultimately, the aim of any successful strategy. Strategic implementation is “doing it!” This
domain is also highly convergent, rational, logical, and linear in nature. A quick reminder: while
executives sometimes assume that there is nothing strategic about implementation, the intent of
implementation is to be strategically aligned with a delineated strategic plan that has already been
rigorously tested and challenged through strategic thinking.
INFORMAL AND FORMAL LEARNING DEFINED
So how do we actually learn to think strategically? The CEO of a leading privately owned Polish
manufacturing company offered one explanation:
It’s not so simple as step by step. [Strategy] is not a formula or a simple pattern. It is a complex,
constantly developing process; it is not an ordered process. Making strategy is not a straight line
– I don’t sit at my desk and just build it like a model.
A Japanese financial executive declared:
I don’t even like the word strategy. It seems to mean that it is a model or . . . fixed steps to follow.
To be frank, I think all the models and theories, they are only complicated planning ideas.
Strategy is not so orderly.
Informal learning is contrasted with formal learning because, as previously noted, it is the informal
learning approach – rather than the formal one – that successful strategist’s credit with influencing their
own learning. These preferences were echoed by the CEO of an American technology company who
matter-of-factly stated:
It’s a hard thing to describe – I wouldn’t say it’s at all step by step. It’s more like a ball or
something that’s spinning. It’s not even a single thing. And nothing truly strategic has ever
occurred to me in the office. Never.
Another president of a manufacturing company endorsed strategic thinking as an informal process, noting:
It’s not this kind of problem solving, formula, straight-line thinking – it’s more about just opening
up – seeing what kinds of opinions you can draw on. How many different perspectives can you
find? What precedent has been set? Is there a new twist you can give? It’s not very linear.
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To Henry Mintzberg, the essence of strategy making is the process of learning as we act. As he reminds us:
“Strategies can develop inadvertently, without the conscious intention of senior management, often
through a process of learning. . . . Learning inevitably plays a, if not the, crucial role in the development of
novel strategies.”
INFORMAL LEARNING
Informal learning warrants particular attention in order to understand how successful executives learn to
think strategically, for the strategy and learning literature concur that it is informal learning, rather than
formal learning, that most influences strategic thinking. However, current strategic development practices
have not necessarily caught up with this notion.
During recent years, as informal learning has come into vogue, the term has sometimes been used to refer
loosely to any “accidental” behavior outside predicted or anticipated norms – learning related or not. Day-
to-day workplace banter makes little differentiation between informal and formal learning, and the word
informal is becoming a convenient catch-all term among executive development practitioners.
Several definitions are offered as a simple way of differentiating formal and informal learning. Informal
learning is regarded as learning that is predominantly unstructured, unplanned, experiential, non-
institutional, and non-routine. Informal learning takes place as people go about their daily activities at
work, at play, or elsewhere. By contrast, formal learning is considered to be structured, planned, pre-
programmed, and institutionally sponsored classroom-based learning where a trainer, teacher, manager,
professor, or some other “education agent” is responsible for planning, implementing, and evaluating the
learning that occurs.
Let us not forget that we human beings are, by our very nature, learning beings. We learn all the time by
identifying and solving problems, observing other people, asking questions of friends and colleagues,
requesting advice and help, and accessing records of human experience, such as stories, books, and online
information.
Although many people associate learning with their educational experiences, most learning actually occurs
outside any formal educational environment and is often simultaneous to our struggle with the challenges
of daily life and work. Learning to think strategically also follows this informal pattern.
A Hong Kong technology executive explained that strategy is not really a step-by-step process. It’s
not that black and white. It’s more ongoing and not really a structured sort of thing. There isn’t
anything methodical or scientific about it. I don’t think strategically in a meeting. It’s just where I
state my thinking – if I’m lucky!
Two subcategories of informal learning are particularly relevant to strategic thinking: intentional and
incidental learning.
Intentional learning is what we expect or anticipate we will learn. For example, if I have a phone
conversation with the company’s finance director to discuss a currency-valuation formula and I learn a
new currency-valuation formula, then intentional learning has occurred.
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On the other hand, incidental informal learning is “a byproduct of some other activity, such as task
accomplishment, interpersonal interaction, sensing the organization, trial-and-error experimentation, or
even formal learning,” as adult learning researchers Marsick and Watkins explain.
Incidental learning is unintentional and unexpected. We are virtually never conscious that it is occurring,
as its modes include learning by doing, learning from mistakes, and learning through a series of covert
interpersonal experiments. This type of learning is tacit, taken for granted, and implicit in its assumptions
and actions.
FORMAL LEARNING REFUTED
What role do all the strategy courses and consulting seminars play in learning to think strategically? There
is a seemingly weak and unconvincing role, according to the interview data.
Again, differentiating between learning to think strategically and learning to plan systematically is
important. As noted earlier, thinking strategically does not typically happen in meetings or at work –
thinking strategically tends to occur informally, outside work, and in a nonlinear manner. This point is
interesting for those responsible for strategic development. Thinking strategically is a considerably more
conceptual and complex exercise than rational, sequential, and linear planning.
When senior executives were asked a series of questions about how they learned to make strategy, none
referenced any formal learning approaches (e.g., courses, models, schools of thought, and theory), except
through negative connotation. The executives were asked to identify background factors, particular people,
or circumstances that influenced them, and to name the things to which they pay particular attention
when thinking strategically. Not only were the
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executives negative in their recollections of formal strategy-making approaches, but also, they discredited
these formal approaches or assessed them as factors of non-influence.
Formal learning refers to a type of learning program in which the goals and objectives are defined by the
training department, instructional designer, and/or instructor. Formal learning is also called structured
learning or synchronous learning. Examples of formal learning include classroom instruction, web-based
training, remote labs, e-learning courses, workshops, seminars, webinars, etc.
Formal approaches to learning tended to be rejected in favor of an informal approach, which referred
primarily to experience. The formal education and training that the executives received were dismissed
outright as being irrelevant to their actual learning for how to make good strategy. Therefore, formal
education for strategy making appears to have been neither an asset nor an impediment to their learning.
Such irrelevance is sobering, especially if we consider the budgets that are allocated for strategy courses.
A Japanese financial executive concluded: “Most of what I learned in courses was only technique – like a
nice craft.” And a German manufacturing executive said: “I tell [junior executives] they must talk to many
people and read everything. And I tell them not to worry about learning about the models of strategy.
(laughter)” When asked to explain more about this, she continued:
You know, I have taken strategy courses in Germany from American consulting firms and I have
read many books on how to make strategy. So I understand you have so many models to
choose from. But they are not accurate to what really happens if you must be responsible for
good strategy – because [strategic thinking] is not systematic.
This specter of doubt regarding the contribution of formal learning was further reflected by a young
president of a US technology company who said:
I learned about strategy when I was getting my MBA, but it was mostly about, umm, you know,
umm, well see, I can’t even remember! (laughter) I think it was mostly just theories and models
for analysis and whatever. This is not about thinking strategically. Maybe they’re okay for
planning. I will be honest with you, I haven’t used any of [the models]. I don’t think what I learned
– all of these different models and theories – is practical. It’s maybe okay for planning, but
strategy is so much bigger, and I don’t think this way. You know, I think it’s much better – much
better, to just teach people to talk to each other and to think in a hard way.
Reflecting on the factors that were most influential in his learning to think strategically, an executive of a
Hong Kong technology company described the way he learned to think strategically:
I think I had a pretty good education; I went to Harvard for my MBA, studied in France – so that
was probably good for basic education. But to be honest, I don’t remember much about strategic
thinking. (laughter) Maybe I just don’t remember specifics – but I’ve learned the most important
things traveling and living in a different country. These are the things that really contribute to
enriching your thinking – you know, you get to see all kinds of things and hear things. And most
of it doesn’t make sense at the time. But that – knowing how to make sense of things – that’s
what’s required, I think, for learning to think strategically.
The oldest executive in the study, a 61-year-old CEO of a Polish manufacturing company, noted:
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As I continue to travel, I learn more about different ways of looking at things, and that’s a certain
kind of experience too, and it’s valuable – I’d say critical to making strategy. Experience, I say, is
like the answer book to your new questions. I don’t really think that being young or being old is
an advantage per se. I’m still learning, and I think experience is probably the best teacher.
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Lesson 2 STRATEGIC ANALYSIS
Learning Objectives:
 Define strategy and strategic analysis

 Identify the types of strategic analysis
 Recognize the significance of strategic analysis and market research
 Identify the strengths and weaknesses of strategic analysis
What is Strategic Analysis?

Strategic analysis is a process that involves researching an organization’s business environment within
which it operates. Strategic analysis is essential to formulate strategic planning for decision making and
smooth working of that organization. With the help of strategic planning, the objective or goals that are set
by the organization can be fulfilled.
Strategic analysis refers to the process of conducting research on a company and its operating environment
to formulate a strategy. The definition of strategic analysis may differ from an academic or business
perspective, but the process involves several common factors:
1. Identifying and evaluating data relevant to the company’s strategy

2. Defining the internal and external environments to be analyzed
3. Using several analytic methods such as Porter’s five forces analysis, SWOT analysis, and
value chain analysis
In a constant strive to improve, organizations must periodically conduct a strategic analysis which will, in
turn, help them determine what areas need improvement and areas that are already doing well. For an
organization to function efficiently, it is important to think about how positive changes need to be
implemented.
Strategic analysis is essential if a company has a goal and a mission for themselves. All leading
organization who are well known for their achievements have years of strategic planning being
implemented at various stages. Strategic planning is a long-term task involving continuous and systematic
planning and resource investment. The main question that a company should consider when performing a
strategic analysis is: How is the market constituted? How are the active clients in this sector? While
conducting strategic analysis, organizations must know their competitors and thus be able to define a
strategy that will help them an unbeatable player in that market. One of the most important functions of
strategic planning is to predict future events and deduce alternative strategies if a certain plan doesn’t work
out as expected.
What is Strategy?
A strategy is a plan of actions taken by managers to achieve the company’s overall goal and other
subsidiary goals. It often determines the success of a company. In strategy, a company is essentially asking
itself, “Where do you want to play and how are you going to win?” The following guide gives a high-level
overview of business strategy, its implementation, and the processes that lead to business success.
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Vision, Mission, and Values
To develop a business strategy, a company needs a very well-defined understanding of what it is and what
it represents. Strategists need to look at the following:
 Vision – What it wants to achieve in the future (5-10 years)

 Mission Statement – What business a company is in and how it rallies people
 Values – The fundamental beliefs of an organization reflecting its commitments and ethics
After gaining a deep understanding of the company’s vision, mission, and values, strategists can help the
business undergo a strategic analysis. The purpose of a strategic analysis is to analyze an organization’s
external and internal environment, assess current strategies, and generate and evaluate the most successful
strategic alternatives.
Strategic Analysis Process
The following infographic demonstrates the strategic analysis process:
1. Perform an environmental analysis of current strategies
Starting from the beginning, a company needs to complete an environmental analysis of its current
strategies. Internal environment considerations include issues such as operational inefficiencies, employee
morale, and constraints from financial issues. External environment considerations include political trends,
economic shifts, and changes in consumer tastes.
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2. Determine the effectiveness of existing strategies
A key purpose of a strategic analysis is to determine the effectiveness of the current strategy amid the
prevailing business environment. Strategists must ask themselves questions such as:
Is our strategy failing or succeeding? Will we meet our stated goals? Does our strategy align with our
vision, mission, and values?
3. Formulate plans
If the answer to the questions posed in the assessment stage is “No” or “Unsure,” we undergo a planning
stage where the company proposes strategic alternatives. Strategists may propose ways to keep costs low
and operations leaner. Potential strategic alternatives include changes in capital structure, changes in
supply chain management, or any other alternative to a business process.
4. Recommend and implement the most viable strategy
Lastly, after assessing strategies and proposing alternatives, we reach a recommendation. After assessing
all possible strategic alternatives, we choose to implement the most viable and quantitatively profitable
strategy. After producing a recommendation, we iteratively repeat the entire process. Strategies must be
implemented, assessed, and re-assessed. They must change because business environments are not static.
Levels of Strategy
Strategic plans involve three levels in terms of scope:
1. Corporate-level (Portfolio)
At the highest level, corporate strategy involves high-level strategic decisions that will help a
company sustain a competitive advantage and remain profitable in the foreseeable future.
Corporate-level decisions are all-encompassing of a company.
2. Business-level
At the median level of strategy are business-level decisions. The business-level strategy focuses on
market position to help the company gain a competitive advantage in its own industry or other
industries.
3. Functional-level
At the lowest level are functional-level decisions. They focus on activities within and between
different functions, aimed at improving the efficiency of the overall business. These strategies are
focused on particular functions and groups.
Types of Strategic Analysis
Internal strategic analysis: As the name suggests, through this analysis organizations look inwards or
within the organization and identify the positive and negative points, and establish the set of resources that
can be used to improve the company’s image within the market. Internal analysis starts from evaluating the
performance of the organization. This includes evaluating the potential of an organization and its capacity
to grow.
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The analysis of the strengths of the company should be oriented to the market, focusing on the
client. The strengths only make sense when they help the company to fulfill client’s needs. When doing an
internal strategic analysis one should also know the weaknesses and limitations that a company faces
existentially or in the future.
SWOT analysis is one of the most reputed techniques for internal strategic analysis. There is no better way
to benefit from a strategically performed analysis than to use it to detect the strengths, opportunities,
weaknesses, and threats that your project may suffer.
Performing SWOT analysis will help you create a strong and long term vision through strategic planning
for your organization. The important thing is to constantly evaluate the environment in which the company
operates, and act accordingly. It is essential for an organization to take into account the SWOT principle in
order to be able to plan efficiently. Through a thorough SWOT analysis companies will be able to prevent
a number of problems that can arise if there is no systematic analysis.
Let us further break down these attributes and understand how an organization can conduct a complete
strategic analysis to be able to plan and perform better with each passing year.
1. Strengths of a company: There are several attributes within the company that are positive,
that you can control in order to obtain better results, they are your strengths, which makes you
stand out from others. Surely there are certain resources or strategies that have led to your
organization’s process year on year. Knowing these resources or strategies are also considered
as strengths. Knowing this type of information is very important because these are the elements
that give you an advantage over your competition.
2. Business weakness: It is practically impossible for an organization or a company to have
only strengths and not have weaknesses. Therefore, there are certain characteristics of an
organization that they need to be improved in order to be able to perform better and compete in
the market. These are called business weaknesses. Most of the factors are foreseeable and an
organization needs to identify them well in advance and approach the problems with a
corrective measure.
3. Threats to an organization: There are going to negative factors that will affect the growth
of the organization and these factors can be analyzed too. These factors need to detected and a
risk management strategy needs to be put in place so that threats like stronger brand value of
the competitors, better relationship of competitors with retailers etc. don’t have an adverse
effect on the company’s growth. Also, threats like multiple players in the market with the
same products, downturn in economy, better
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advertising of the same product by competitors are some threats that have to be dealt with
carefully so that competitors don’t take advantage of the situation.
4. Opportunities for the company: Detect the opportunities you have to grow. Knowing the
path organizations must follow is a great step towards success. Take advantage of all those
external factors that are positive for the organization. Identify all the opportunities and take
advantage of them.
External strategic analysis: Once the organization has successfully completed its internal analysis, the
organization needs to know about external factors that can be a hindrance in their growth. To do so, they
need to know how the market functions and how consumers react or behave to certain products or services.
Measuring customer satisfaction is a common external analysis method. PESTLE analysis is one of the
most widely used external analysis techniques. The process one is most likely to adopt when using a
PESTLE technique is relatively a simple one.
PESTLE analysis (Political, Economic, Social, Legal and Environmental) describes a framework of
macro-environmental factors used in the environmental scanning component of external strategic analysis.
The model has been extended by adding Ethics and Demographic factors. It is a part of the external
analysis when conducting a strategic analysis or doing market research and gives an overview of the
different macroenvironmental factors that the organization has to take into consideration. By using
PESTLE analysis one can:
1. Find out the key issues beyond the organization’s control, like changes in political
scenario changing rules that can be implemented at any point in time.
2. Identify the impact of each issue.
3. See how important these issues are to the organization.
4. Rate the likelihood of its occurrence.
5. Briefly consider the implications if the issue did occur.
Strategic Analysis and Market Research

Market research can provide you with the necessary information to know the different market scenarios
and suggest strategies to achieve more sales. Market research is either qualitative or
quantitative in nature of conduct. Market research can provide you with the necessary information to know
the different market scenarios and propose strategies to achieve
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more sales. For example, through market research, an organization can know the degree of recognition that
the brand has and plan marketing campaign correctly.
Organizations can also bet effectively the introduction of a new product into the market, or innovate
through the new ideas of customers. Ask the right questions to customers and get their feedback. The
data provided by the investigation will help you to plan correctly what you have to do, for example, in case
your competitors lower their prices, or are there changes in the behavior of your consumers?
Strengths of Strategic Analysis

1. Strategic analysis allows you to have clarity of the internal positive attributes of the
organization that are under control. By knowing these positive attributes an organization can
focus on the factors that lead to positive performance and can replicate the strategy wherever
applicable.
2. It helps identify strength of both internal as well as external resources, such that it leads to
an increasing competitive advantage.
3. It offers you the internal components that add value or offer a competitive advantage to your
business. When you have a reasonable competitive advantage over you competitors half the
game plan is clear. The only aspect that would need clarity is what is not going the company’s
way.
Weaknesses of Strategic Analysis

1. Strategic analysis can generate too many ideas, but doesn’t help to choose which one is the best.
2. Sometimes too much time is spent on existential problem solving, such that there is little or no
time left for innovating new products or making service level changes at the organizational
level.
Strategic Analysis Examples
Some organizations struggle to differentiate strategic analysis from other types of analysis; that means
they’re also usually confused about what software tools should be used for the job. As co-founder of the
strategy software company ClearPoint, I often find myself having conversations with prospective
customers to clarify their activities (are they doing strategic planning or not?) and discuss whether
ClearPoint can help. Below are summaries of three such conversations—do any of them reflect what
you’re currently doing?
Story #1: Strategic Analysis Vs. Operational Data
A local government prospect asked me if ClearPoint’s software could track individual

court cases and budget line items.
I explained that ClearPoint is designed to track information that enables organizations to do strategic
analysis. We can track summary information—such as the total number of cases each month or budget
status for projects—but not individual court cases or department expenses. Here’s why:
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 Analyzing summary information is strategically useful because it provides

direction for an organization’s long-term strategy.
 Tracking individual court cases or standalone budget items is operational data and
not as helpful for strategic analysis.
Story #2: Strategic Analysis Vs. Data Analytics
I met with a manager at a large media corporation who inquired if ClearPoint could
provide insights on its media campaigns, similar to what data visualization software like
Tableau offers.
ClearPoint can report on the status, progress, and results of different campaigns or initiatives, but again
is not designed to provide individual data points. For example, our platform cannot provide impressions
from thousands of individuals or tweak information by demographic groups. That is data analytics,
and very different from strategic market analysis.Story #3: Strategic Analysis Vs.
Customer Relationship Management
A nonprofit organization asked me if ClearPoint could replace its customer relationship

management (CRM) software.
CRM software cannot do strategy management. Managing customers and managing strategy requires very
different functions and capabilities within a software platform...and it won’t surprise anyone if the strategy
planning office and sales team have different opinions on which software has the biggest benefit for an
organization.
Performance Task
Instruction: Upon learning about strategic analysis, you may conduct a simple research and complete the
table below. I will group the class into 4 groups and you may submit your output by group.
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WHAT IS CHANGING OUT THERE?
It is helpful to think about what might have changed, be changing, or will be changing, in the areas of
technology, the economy, markets, politics, law, ethics and society.
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Lesson 3 OPERATION ANALYSIS
 Define operation analysis

 Identify the areas of operation analysis
 Identify the strategies to improve operations
An operation analysis is a procedure used to determine the efficiency of various aspects of a business
operation. Most reports include a careful scrutiny of a company's production methods, material costs,
equipment implementation and workplace conditions. Professional consultants are often brought in from
outside a company to perform an unbiased operational analysis, which provides a company with hard data
concerning waste issues and operational risks. Many companies use the information from such an analysis
to decide on what changes need to be made to improve operations.
The process typically begins with a period of observation: the person or group performing the analysis
watches and takes detailed takes notes on all the day-to-day operations of the business in this initial stage.
Some details of a business's production and customer service may be timed or tracked during the
observational period to produce statistical information for the report. Employees are commonly asked to
perform tasks as they normally would and try to ignore the presence of the evaluators. On-site observation
may last a day or several weeks, depending on the size of the company.
Employees are usually brought in separately to voice their opinions and concerns about the business to the
operations analysis staff during the second step in the evaluation. Notes from the observation stage are
commonly reviewed to design helpful questions for the employee interviews. Those conducting the
analysis almost always seek beneficial insight and ideas from the employees that they can later include in
the analysis report. Workers are normally asked to fully explain their job and the level of production they
maintain. Some employees fear these evaluation interviews and feel they are being made to defend their
position within the company; clear communication of the purpose of the analysis may be helpful not only
for employee morale, but also for obtaining the most accurate, truthful information.
KEY POINTS OF OPERATION ANALYSIS
 Use operation analysis to improve the method by asking what.

 Focus on the purpose of operation by asking why.
 Focus on design, materials, tolerances, processes, and tools by asking how.
 Focus on the operator and work design by asking who.
 Focus on the layout of the work by asking where.
 Focus on the sequence of manufacture by asking when.
 Always try to simplify by eliminating, combining, and rearranging
Why questions?
 Why is this operation necessary?

 Why is this operation performed in this manner?
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 Why are these tolerances this close?

 Why has this material been specified?
 Why has this class of operator been assigned to do the work?
The question why immediately suggests other questions, including how, who, where, and when. Thus,
analysts might ask,
1. How can the operation be performed better?

2. Who can best perform the operation?
3. Where could the operation be performed at a lower cost or improved quality?
4. When should the operation be performed to yield the least
amount of material handling?
Relation with Lean Manufacturing
Lean manufacturing originated with the Toyota Motor Corporation as

a means of eliminating waste in the aftermath of the 1973 oil embargo and
followed the footsteps of the Taylor sytem of scientific management but in
much broader approach, targeting not only manufacturing costs, but also
sales, administrative, and capital costs.
Highlights of the Toyota Production System (TPS)

included seven types of muda or waste (Shingo, 1987):
(1) overproduction, (2) waiting for the next step, (3)

unnecessary transportation, (4) inappropriate processing,
(5) excess inventory, (6) unnecessary motion, and (7)
defective products
A corollary to the seven mudas is the 5S system to reduce

waste and optimize productivity by maintaining an orderly
workplace and consistent methods. The 5S pillars are (1)
sort (seiri), (2) set in order (seiton), (3) shine (seiso), (4)
standardize(seiketsu) and (5) sustain(shitsuke).
Sort focuses on removing all unnecessary items from the

workplace and leaving only the bare essentials.
Set in order arranges needed items so that they are
easy to find and use. Once the clutter is removed, shine ensures further cleanliness and tidiness. Once the
first three pillars have been implemented, standardize serves to maintain the order and consistent approach
to housekeeping and the methods. Finally, sustain maintains the full 5S process on a regular basis.
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Operation Analysis Main Items
I. Operation Purpose
II. Part Design
III. Tolerance and Specifications
IV. Materials
V. Manufacturing Sequence and Processes
VI. Setup and Tools
VII. Materials Handling
VIII. Plant Layout
IX. Work Design
I. OPERATION PURPOSE
The most important of the nine points of operation analysis. The best way to simplify an operation is to
devise some way to get the same or better results at no additional cost. An analyst’s cardinal rule is to try
to eliminate or combine an operation before trying to improve it. 25 percent of the operations being
performed can be eliminated if sufficient study is given to the design and process.
In many instances, the task or the process should not be simplified or improved, but eliminated entirely.
Eliminating an activity saves money on the installation of an improved method, and there is no
interruption or delay because no improved method is being developed, tested, and installed.
Operators need not be trained on the new method, and resistance to change is minimized when an
unnecessary task or activity is eliminated. With respect to paperwork, before a form is developed for
information transfer, analysts should ask, Is the form really needed? Today’s computer-controlled systems
should reduce the generation of forms and paperwork.
Unnecessary operations frequently result from improper planning when the job is first set
up.
Once a standard routine is established, it is difficult to change, even if such a change would eliminate a
portion of the work and make the job easier. Unnecessary operations often develop because of the
improper performance of a previous operation. A second operation must be done to “touch up” or make
acceptable the work done by the first operation.
To eliminate an operation:
Analysts should ask and answer the following question: Can an outside supplier perform the operation
more economically- Can we omit the operation without affecting the performance or quality or
productivity. The need to establish the purpose of each operation before endeavoring to improve the
operation. Once the necessity of the operation has been determined, the remaining nine steps to operation
analysis should help to determine how it can be improved
II. PART DESIGN
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Methods engineers are often inclined to feel that once a design has been accepted, their only recourse is to
plan its economical manufacture. While introducing even a slight design change may be difficult, a good
methods analyst should still review every design for possible improvements.
Designs can be changed, and if improvement is the result and the activity of the job is significant, then the
change should be made.
To improve the design, analysts should keep in mind the following pointers for lower-cost designs on
each component and each subassembly:
1. Reduce the number of parts by simplifying the design.

2. Reduce the number of operations and the length of travel in manufacturing by joining the parts
better and by making the machining and assembly easier.
3. Utilize a better material.
4. Liberalize tolerances and rely on key operations for accuracy, rather than on series of closely
held limits.
5. Design for manufacturability and assembly, and transportation
III. TOLERANCE AND SPECIFICATIONS
While tolerances and specifications are always considered when reviewing the design, this is usually not
sufficient; they should be considered independently of the other approaches to operation analysis.
Designers may have a tendency to incorporate specifications that are more rigid than necessary when
developing a product. This can be due to a lack of knowledge about cost and the thought that it is
necessary to specify closer tolerances and specifications than are actually needed to have the
manufacturing departments produce to the actual required tolerance range.
Methods analysts should be well versed in the details of cost and should be fully aware of what
unnecessarily close tolerances and/or rejects can do to the selling price. Relationship between the increased
cost of tighter machining tolerances.
Developing quality products in a manner that actually reduces costs is a major tenet of the approach to
quality instituted by Taguchi (1986). This approach involves combining engineering and statistical
methods to achieve improvements in cost and quality by optimizing product design and manufacturing
methods. Inspection is a verification of quantity, quality, dimensions, and performance. Such inspections
can usually be performed by a variety of techniques:
 Spot inspection is a periodic check to ensure that established standards are being realized.
 Lot-by-lot inspection is a sampling procedure in which a sample is examined to determine the quality
of the production run or lot. The size of the sample depends on the allowable percentage of defective
unity and the size of the production lot being checked.
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 A 100 percent inspection involves inspecting every unit of production and rejecting the defective
units. However, experience has shown that this type of inspection does not ensure a perfect product.
The monotony of screening tends to create fatigue, thus lowering operator attention. The inspector
may pass some defective parts, or reject good parts. Because a perfect product is not ensured under
100 percent inspection, acceptable quality may be realized by the considerably more economical
methods of lot-by-lot or spot inspection.
By investigating tolerances and specifications and taking action when desirable, the company can reduce
the costs of inspection, minimize scrap, diminish repair costs, and keep quality high. Also the company is
addressing the muda of defective products.
IV. MATERIALS
One of the first questions an engineer considers when designing a new product is, What material shall be
used? Since choosing the correct material may be difficult because of the great variety available, it is often
more practical to incorporate a better and more economical material into an existing design.
Methods analysts should consider the following possibilities for the direct and indirect materials utilized in
a process:
1. Finding a less expensive and lighter material.

2. Finding materials that are easier to process.
3. Using materials more economically.
4. Using salvage materials.
5. Using supplies and tools more economically.
6. Standardizing materials.
7. Finding the best vendor from the standpoint of price and vendor stocking.
V. MANUFACTURE SEQUENCE AND PROCESS
The methods engineer must understand that the time utilized by the manufacturing process is divided into
three steps: inventory control and planning, setup operations, and in-process manufacturing.
To improve the manufacturing process, the analyst should consider
 Rearranging the operations;

 Rearranging operations often results in savings.
 Combining operations usually reduces costs.
 Before changing any operation, however, the analyst must consider possible detrimental effects on
subsequent operations down the line. Reducing the cost of one operation could result in
higher costs for other operations.
 Mechanizing manual operations;
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Today, any practicing methods analyst should consider using special-purpose and automatic equipment
and tooling, especially if production quantities are large. Notable among industry’s latest offerings are
program controlled, numerically controlled (NC), and computer controlled (CNC) machining and other
equipment. These afford substantial savings in labor cost as well as the following advantages: reduced
work-in-process inventory, less parts damage due to handling, less scrap, reduced floor space, and
reduced production throughput time. The application of mechanization applies not only to process
operations, but also to paperwork. For example, bar coding applications can be invaluable to the
operations analyst. Bar coding can rapidly and accurately enter a variety of data. Computers can then
manipulate the data for some desired objective, such as counting and controlling inventory, routing
specific items to or through a process, or identifying the state of completion and the operator currently
working on each item in a work-in-process.
 Utilizing more efficient facilities on mechanical operations;
If an operation is done mechanically, there is always the possibility of a more efficient means of
mechanization. One company in the food industry was checking the weight of various product lines with a
balance. This equipment required the operator to note the weight visually, record the weight on a form, and
subsequently perform several calculations. A methods engineering study resulted in the introduction of a
statistical weight control system. Under the improved method, the operator weighs the product on a digital
scale programmed to accept the product within a certain weight range. As the product is weighed, the
weight information is transferred to a personal computer that compiles the information and prints the
desired report.
 Operating mechanical facilities more efficiently;
A good slogan for methods analysts is, “Design for two at a time.” Usually multiple-die operation in
presswork is more economical than single-stage operation. Multiple cavities in diecasting, molding, and
similar processes are viable options when there is sufficient volume. Many machine tools are operated at a
fraction of their possible output.
 Manufacturing near the net shape
Using a manufacturing process that produces components closer to the final shape can: Maximize material
use Reduce scrap Minimize secondary processing such as final machining and finishing Permit
manufacturing with more environmentally friendly materials. For example, forming parts with powder
metals (PM) instead of conventional casting or forging often provides the manufacture of near-net shapes
for many components, resulting in dramatic economic savings as well as functional advantages.
 Using robots
For cost and productivity reasons, it is advantageous today to consider the use of robots in many
manufacturing areas. The principal advantage of integrating a modern robot in the assembly process is its
inherent flexibility. It can assemble multiple products on a single system and can be reprogrammed to
handle various tasks with part variations. In addition, robotic assembly can provide consistently repeatable
quality with predictable product output. A robot’s typical life is
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approximately 10 years. If it is well maintained and if it is used for moving small payloads, the life can be
extended to up to 15 years. Also, if a given robot’s size and configuration are appropriate, it can be used in
a variety of operations.
VI. SETUP AND TOOLS
1- REDUCE SETUP TIME Just-in-time (JIT) techniques
 Have become popular in recent years, emphasize decreasing the setup times to the minimum
by simplifying or eliminating them.
 The SMED (single minute exchange of die) System of the Toyota Production System
(Shingo, 1981) is a good example of this approach.
 A significant portion of setup time can often be eliminated by ensuring that raw materials are
within specifications, tools are sharp, and fixtures are available and in good condition.
Several points should be considered in reducing setup time:
1. Work that can be done while the equipment is running should be done at that time.
2. Use the most efficient clamping.
3. Eliminate machine base adjustment.
4. Use templates or block gages to make quick adjustments to machine stops.
2- UTILIZE THE FULL CAPACITY OF THE MACHINE
A careful review of many jobs often reveals possibilities for utilizing a greater share of the machine’s
capacity. Analysts should also consider positioning one part while another is being machined.
3- INTRODUCE MORE EFFICIENT TOOLING
Just as new processing techniques are continually being developed, new and more efficient tooling should
be considered. Coated cutting tools have dramatically improved the critical wear- resistance/breakage-
resistance combination. For example, TiC-coated tools have provided a 50 to 100 percent increase in
speed over uncoated carbide where each has the same breakage resistance. Advantages include harder
surfaces, thus reducing abrasive wear; excellent adhesion to the substrates; low coefficient of friction with
most work piece materials; chemical inertness; and resistance to elevated temperatures. Carbide tools are
usually more cost-effective than high-speed steel tools on many jobs.
VII. MATERIAL HANDLING
Material handling includes motion, time, place, quantity, and space constraints:
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1- Material handling must ensure that parts, raw materials, in-process materials, finished products,
and supplies are moved periodically from location to location.
2- Material handling ensures that no production process or customer is hampered by either the early
or late arrival of materials, since each operation requires materials and supplies at a particular time
3- Material handling must ensure that materials are delivered to the correct place.
4- Material handling must ensure that materials are delivered at each location without damage and in
the proper quantity.
5- Material handling must consider storage space, both temporary and dormant.
A study conducted by the Material Handling Institute revealed that between 30 and 85 percent of the cost
of bringing a product to market is associated with material handling.
The following five points should be considered for reducing the time spent in handling material:
 Reduce the time spent in picking up material;

 Use mechanized or automated equipment;
 Make better use of existing handling facilities;
 Handle material with greater care; and
 Consider the application of bar coding for inventory and related applications.
VIII. PLANT LAYOUT

The principal objective of effective plant layout is: to develop a production system that permits the
manufacture of the desired number of products with the desired quality at the least cost.
Physical layout is an important element of an entire production system that embraces operation cards,
inventory control, material handling, scheduling, routing, and dispatching.
All these elements must be carefully integrated to fulfill the stated objective. Poor plant layouts result in
major costs.
The indirect labor expense of long moves, backtracking, delays, and work stoppages due to bottlenecks in
the transportation muda are characteristic of a plant with an antiquated and costly layout.
Is there one type of layout that tends to be the best? The answer is no. A given layout can be best in
one set of conditions and yet poor in a different set of conditions.
In general, all plant layouts represent one or a combination of two basic layouts:
a. The product or straight-line layout:
 the machinery is located such that the flow from one operation to the next is minimized for any
product class.
 This type of layout is quite popular for certain mass-production manufacture, because
material handling costs are lower than for process grouping.
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b. Process or functional layout
 It is the grouping of similar facilities. Thus, all turret lathes would be grouped in one
section, department, or building. Milling machines, drill presses, and punch presses would
also be grouped in their respective sections.
 This type of arrangement gives a general appearance of neatness and orderliness, and tends to
promote good housekeeping.
 Also, if production quantities of similar products are limited and there are frequent “job” or
special orders, a process layout is more satisfactory.
IX. WORK DESIGN
Work design refers to the “content and organisation of one’s work tasks, activities, relationships and
responsibilities”.
Work design applies to the physical, biomechanical, cognitive, and psychosocial characteristics of the
job.
The way our work is designed affects how we feel about our job and can influence whether we feel
motivated, engaged, bored, or stressed at work.
Work design can also impact an organisation’s outcomes, with well-designed work contributing to
increased productivity, financial growth, and lower rates of accidents and incidents.
What is the SMART Work Design Model?
The SMART Work Design model- link will open in a new window, developed by Professor Sharon
Parker at the Centre for Transformative Work Design- link will open in a new window, can be used by
employees and employers when considering the psychosocial aspects of work, including addressing
psychosocial risks.
Based on empirical research, the SMART model identifies five themes of work characteristics for positive
outcomes.
 Stimulating work involves having varied, interesting, and meaningful tasks in a job.
 Mastery at work comes from knowing what your role is, knowing how you are going on your tasks,
and understanding how your work fits into the bigger picture.
 Agency in a job means having a sense of autonomy and control over when and how you do your
tasks, as well as being able to make decisions about your job. Agency is also supported when you are
asked for input into departmental decisions, and consulted about change.
 Relational work design recognises that people need connection and support at work. Example
aspects of relational work include being part of a team, having support from your peers and
supervisor, and knowing how your work impacts’ on others’ lives.
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 Tolerable demands at work means the things you are expected to do at work are not
overwhelming. Tolerable demands can mean, for example, having reasonable work hours, not
being tightly monitored, and having reasonable and consistent expectations for performance.
The SMART model can be used as a tool to optimise employees’ work design.
Ask yourself: can the job characteristics that sit within each SMART theme be used to describe the work
in your organisation?
Consult with your employees to ask if there are tasks or responsibilities that could be added, removed, or
restructured to make their work smarter.
Using the themes of the SMART Work Design model to guide work redesign can help you ensure that
the work at your organisation is motivating and not too stressful, which will enhance positive outcomes
for your organisation and your employees.
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Lesson 4 FINANCIAL ANALYSIS
 Define financial analysis

 Identify the areas of financial analysis
 Evaluate the results of the financial analysis
Financial analysis is the process of evaluating businesses, projects, budgets, and other finance- related
transactions to determine their performance and suitability. Typically, financial analysis is used to analyze
whether an entity is stable, solvent, liquid, or profitable enough to warrant a monetary investment.
Financial analysis involves using financial data to assess a company’s performance and make
recommendations about how it can improve going forward. Financial Analysts primarily carry out their
work in Excel, using a spreadsheet to analyze historical data and make projections of how they think the
company will perform in the future.
KEY TAKEAWAYS
 If conducted internally, financial analysis can help managers make future business
decisions or review historical trends for past successes.
 If conducted externally, financial analysis can help investors choose the best possible
investment opportunities.
 Fundamental analysis and technical analysis are the two main types of financial analysis.
 Fundamental analysis uses ratios and financial statement data to determine the intrinsic value of
a security.
 Technical analysis assumes a security's value is already determined by its price, and it focuses
instead on trends in value over time.
Understanding Financial Analysis
Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for
business activity, and identify projects or companies for investment. This is done through the synthesis of
financial numbers and data. A financial analyst will thoroughly examine a company's financial statements
—the income statement, balance sheet, and cash flow statement. Financial analysis can be conducted in
both corporate finance and investment finance settings.
One of the most common ways to analyze financial data is to calculate ratios from the data in the financial
statements to compare against those of other companies or against the company's own historical
performance.
Corporate Financial Analysis

In corporate finance, the analysis is conducted internally by the accounting department and shared with
management in order to improve business decision making. This type of internal analysis may include
ratios such as net present value (NPV) and internal rate of return (IRR) to find projects worth executing.
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Many companies extend credit to their customers. As a result, the cash receipt from sales may be delayed
for a period of time. For companies with large receivable balances, it is useful to track days sales
outstanding (DSO), which helps the company identify the length of time it takes to turn a credit sale into
cash. The average collection period is an important aspect of a company's overall cash conversion cycle.
A key area of corporate financial analysis involves extrapolating a company's past performance, such as net
earnings or profit margin, into an estimate of the company's future performance. This type of historical
trend analysis is beneficial to identify seasonal trends.
For example, retailers may see a drastic upswing in sales in the few months leading up to Christmas. This
allows the business to forecast budgets and make decisions, such as necessary minimum inventory levels,
based on past trends.
Investment Financial Analysis

In investment finance, an analyst external to the company conducts an analysis for investment purposes.
Analysts can either conduct a top-down or bottom-up investment approach. A top- down approach first
looks for macroeconomic opportunities, such as high-performing sectors, and then drills down to find
the best companies within that sector. From this point, they further analyze the stocks of specific
companies to choose potentially successful ones as investments by looking last at a particular company's
fundamentals.
A bottom-up approach, on the other hand, looks at a specific company and conducts a similar ratio
analysis to the ones used in corporate financial analysis, looking at past performance and expected future
performance as investment indicators. Bottom-up investing forces investors to consider microeconomic
factors first and foremost. These factors include a company's overall financial health, analysis of financial
statements, the products and services offered, supply and demand, and other individual indicators of
corporate performance over time.
Types of Financial Analysis
Using financial data to assess a company’s performance and make recommendations for
the future
Types of Financial Analysis
The most common types of financial analysis are:

1. Vertical 7. Efficiency
2. Horizontal 8. Cash Flow
3. Leverage 9. Rates of Return
4. Growth 10. Valuation
5. Profitability 11. Scenario & Sensitivity
6. Liquidity 12. Variance
Vertical Analysis
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This type of financial analysis involves looking at various components of the income
statement and dividing them by revenue to express them as a percentage. For this exercise to be
most effective, the results should be benchmarked against other companies in the same industry
to see how well the company is performing.
This process is also sometimes called a common-sized income statement, as it allows an analyst
to compare companies of different sizes by evaluating their margins instead of their dollars.
Horizontal Analysis
Horizontal analysis involves taking several years of financial data and comparing them to each
other to determine a growth rate. This will help an analyst determine if a company is growing or
declining, and identify important trends.
When building financial models, there will typically be at least three years of historical financial
information and five years of forecasted information. This provides 8+ years of data to perform a
meaningful trend analysis, which can be benchmarked against other companies in the same
industry.
Leverage Analysis
Leverage ratios are one of the most common methods analysts use to evaluate company
performance. A single financial metric, like total debt, may not be that insightful on its own, so
it’s helpful to compare it to a company’s total equity to get a full picture of the capital structure.
The result is the debt/equity ratio.
Common examples of ratios include:
 Debt/equity
 Debt/EBITDA
 EBIT/interest (interest coverage)
 Dupont analysis – a combination of ratios, often referred to as the pyramid of ratios,
including leverage and liquidity analysis
Growth Rates
Analyzing historical growth rates and projecting future ones are a big part of any financial
analyst’s job. Common examples of analyzing growth include:
 Year-over-year (YoY)
 Regression analysis
 Bottom-up analysis (starting with individual drivers of revenue in the business)
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 Top-down analysis (starting with market size and market share)

 Other forecasting methods
Profitability Analysis
Profitability is a type of income statement analysis where an analyst assesses how attractive the
economics of a business are. Common examples of profitability measures include:
 Gross margin
 EBITDA margin
 EBIT margin
 Net profit margin
Liquidity Analysis
This is a type of financial analysis that focuses on the balance sheet, particularly, a company’s
ability to meet short-term obligations (those due in less than a year). Common examples of
liquidity analysis include:
 Current ratio Cash ratio
 Acid test  Net working capital
Efficiency Analysis

Efficiency ratios are an essential part of any robust financial analysis. These ratios look at how
well a company manages its assets and uses them to generate revenue and cash flow.
Common efficiency ratios include:

 Asset turnover ratio Cash conversion ratio
 Fixed asset turnover ratio  Inventory turnover ratio
Cash Flow

As they say in finance, cash is king, and, thus, a big emphasis is placed on a company’s ability to
generate cash flow. Analysts across a wide range of finance careers spend a great deal of time
looking at companies’ cash flow profiles.
The Statement of Cash Flows is a great place to get started, including looking at each of the
three main sections: operating activities, investing activities, and financing activities.
Common examples of cash flow analysis include:

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 Operating Cash Flow (OCF)  Free Cash Flow (FCF)
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 Free Cash Flow to the Firm (FCFF)  Free Cash Flow to Equity (FCFE)
Rates of Return
At the end of the day, investors, lenders, and finance professionals, in general, are focused on
what type of risk-adjusted rate of return they can earn on their money. As such, assessing rates of
return on investment (ROI) is critical in the industry.
Common examples of rates of return measures include:

 Return on Equity (ROE) Capital Gain
 Return on Assets (ROA)  Accounting rate of return (ARR)
 Return on invested capital (ROIC)  Internal Rate of Return (IRR)
 Dividend Yield

Valuation Analysis
The process of estimating what a business is worth is a major component of financial analysis,
and professionals in the industry spend a great deal of time building financial models in Excel.
The value of a business can be assessed in many different ways, and analysts need to use a
combination of methods to arrive at a reasonable estimation.
Approaches to valuation include:
 Cost Approach
o The cost to build/replace
 Relative Value (market approach)
o Comparable company analysis

o Precedent transactions
 Intrinsic Value
o Discounted cash flow analysis
Scenario & Sensitivity Analysis
Another component of financial modeling and valuation is performing scenario and sensitivity
analysis as a way of measuring risk. Since the task of building a model to value a company is an
attempt to predict the future, it is inherently very uncertain.
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Building scenarios and performing sensitivity analysis can help determine what the worst-case or
best-case future for a company could look like. Managers of businesses working in financial
planning and analysis (FP&A) will often prepare these scenarios to help a company prepare its
budgets and forecasts.
Investment analysts will look at how sensitive the value of a company is as changes in
assumptions flow through the model using Goal Seek and Data Tables.
Variance Analysis
Variance analysis is the process of comparing actual results to a budget or forecast. It is a very
important part of the internal planning and budgeting process at an operating company,
particularly for professionals working in the accounting and finance departments.
The process typically involves looking at whether a variance was favorable or unfavorable and
then breaking it down to determine what the root cause of it was. For example, a company had a
budget of $2.5 million of revenue and had actual results of $2.6 million. This results in a $0.1
million favorable variance, which was due to higher than expected volumes (as opposed to
higher prices).
Financial Analysis Best Practices
All of the above methods are commonly performed in Excel using a wide range of formulas,
functions, and keyboard shortcuts. Analysts need to be sure they are using best practices when
performing their work, given the enormous value that’s at stake and the propensity of large data
sets to have errors.
Best practices include:
 Being extremely organized with data

 Keeping all formulas and calculations as simple as possible
 Making notes and comments in cells
 Auditing and stress testing spreadsheets
 Having several individuals review the work
 Building in redundancy checks
 Using data tables and charts/graphs to present data
 Making sound, data-based assumptions
 Extreme attention to detail, while keeping the big picture in mind
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Lesson 5 PERFORMANCE IMPROVEMENT

 Define performance improvement and performance improvement plan (PIP)

 Identify the guidelines on how to prepare PIP
 Acknowledge the importance of PIP for the benefit of the company and the employees
After an employee receives a poor performance review, management can give him a final chance to step
up his game through a performance improvement plan (PIP or sometimes also called a performance action
plan). A performance improvement plan provides the employee with clear objectives to meet to avoid
dismissal, demotion, or transfer.
Performance improvement is measuring the output of a particular business process or procedure, then
modifying the process or procedure to increase the output, increase efficiency, or increase the
effectiveness of the process or procedure. Performance improvement can be applied to either individual
performance, such as an athlete, or organisational performance, such as a racing
team or a commercial business.
https://en.wikipedia.org/wiki/Performance_improvement
Performance improvement is a strategy under the umbrella of performance management to help

employees achieve better performance and growth. Managers typically use performance improvement
plans to help underperforming employees meet the organization’s standards and requirements, both in
terms of productivity and behavior. This is called operational or individual performance improvement. On
the other hand, performance improvement also occurs at a team level, department level, and organization
level. This is known as organizational performance improvement.
Performance improvement is a form of organisational development focused on increasing outputs and

improving efficiency for a particular process or procedure. Performance improvement can occur at
different levels including the employee level, team level, the division or unit level and the organisation as
a whole.
Quality control is a common form of performance improvement as a means to ensure consistency of

output and consistency of performance analysis. The Seven Basic Tools of Quality are used to measure
quality and make improvements.
Performance improvement can range from a formal, rigid process conducted at timely intervals to a
continuous, software-driven, real-time system that continuously looks at ways efficiency and output can be
increased.
A performance improvement plan (PIP) is a document that lists where an employee is falling short
and what he can do to improve. For instance, the performance action plan may detail skills or training the
employee lacks. Alternatively, it could specify how the employee needs to change his behavior. In either
case, the PIP will clearly state the steps the employee needs to take to make the necessary improvements.
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The purpose and benefits of a performance improvement plan
Why do employers use performance improvements plans to resolve issues leading to poor performance
when they could simply fire the employee? There are actually several benefits to using PIPs.
1. Better company culture
Using PIPs promotes a sense of accountability. Employees know that they must meet expectations or face
disciplinary action.
This contributes to positive company culture. Hard-working employees feel appreciated, as they know that
everyone must pull their weight. Employees who are struggling know that managers will support them if
they fall behind, by providing them with actionable objectives. Everyone better understands what is
expected of them.
Bear in mind that you can use performance improvement plans for more than just problematic employees.
A performance improvement plan is also appropriate for workers who want to move up in the company
(but are unsure how to do so) as well as for employees who would be a better fit for a different position —
i.e. they would like to move laterally.
In other words, PIPs help workers feel valued in the company, as they know their employer will support
them to reach their long-term career goals. At the same time, performance action plans allow companies to
improve their workforce with better-motivated employees.
2. Save time and money
Every employer wants to minimize staff turnover, as this saves time and money. Helping current
employees improve their performance eliminates the expenses associated with firing workers and
searching for applicants to fill positions.
It also prevents the need to hold interviews and schedule training for new hires. Although the employee
receiving a PIP may need training, it will still be less training than what a new worker would require.
3. More effective than reviews
Reviews rarely have consequences. Plus, some people react poorly to criticism, even when it is
constructive feedback. To make matters worse, most people believe that feedback is inaccurate. These
factors combined mean that employees often dismiss reviews and continue performing exactly the same as
before.
In contrast, PIPs provide employees with a clear idea of where they are failing and what they need to do to
improve. When framed the right "why", performance improvement plans can even encourage employees to
try harder.
Performance improvement plan examples
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After your initial conversation with the employee, his manager should draw up a draft performance
improvement plan and send it to HR for review. Here are a few performance plan examples you can use
for your own PIPs.
#1 Example to improve customer service
Our first sample performance improvement plan is for customer service. This kind of performance
improvement plan could be necessary if clients are complaining about the attitude or support they receive
from a particular employee.
Goal: The overall goal of such a PIP may be to improve interactions with clients.
Objectives: Possible objectives to meet such a goal could be to see better customer retention or
engagement.
Action: To achieve the above objectives, the employee could work more closely with customers to
resolve problems or attend a customer service training session.
Metrics: The most appropriate metrics would likely be the customer churn rate or customer satisfaction
score.
#2 Example to improve the low-quality of work
In other situations, an employee may have little or no contact with customers, but he could still be
delivering poor-quality work in other ways.
Goal: Improve the quality of work.
Objectives: Meet deadlines or produce work that is free from errors.
Action: The first objective is simple — the employees need to miss no deadlines within the timeframe set
out in the PIP. The second objective requires collaboration with a senior team member to check for errors
and judge whether the quality is acceptable.
Metrics: Number of late deadlines and quality of work (the latter may be subjective). #3
Example for productivity
This next example is most suited to someone in a middle management position. Let’s say that the
employee is in charge of growing a program by increasing the number of subscribers. After several
months, there is minimal (if any) change.
Goal: Grow program by X amount of subscribers.
Objectives: Increase the number of clients subscribed to the program and decrease the number of
unsubscribes.
Action: Improve campaigns, better advertise (or increase) the benefits of the program, and implement a
retention strategy.
36 Compiled Notes
Metrics: Subscriptions and unsubscribes. #4
Example for unprofessional behavior
The last of our performance improvement plan samples is for unprofessional behavior. This type of PIP
could be necessary for a variety of situations, ranging from mistreatment of subordinates or coworkers to
persistent lateness and unauthorized absences.
Goal: Cease behavior entirely.
Objectives: Arrive on time, treat others with respect, or attend all required meetings.
Action: Only miss work when authorized for personal or medical reasons. Receive appropriate workplace
behavior training.
Metrics: Some behaviors are easily measurable (for instance, did the employee arrive no more than 5
minutes late every day?) Other situations are more subjective. For example, you may need to talk to
subordinates who were finding it difficult to work with the employee.
How to Create Effective Performance Improvement Plans (PIPs) That Drive Success
At one point or another, every manager is going to have an underperforming employee. Whether he/she
isn’t meeting job requirements or is consistently exhibiting behaviors that are not in line with company
expectations, the manager will reach a point where it is clear that the situation has to change. When an
employee is not performing well or reaching their full potential, not only do the manager and employee
suffer but the entire team and company also eventually feel the domino effect of these behaviors. The
overall result is frustration, wasted time, and deflated people.
Firing an employee might seem to be the logical course of action at this point, but we urge HR and
Managers to consider another approach: formal performance improvement plans (PIPs). The process of
identifying root causes of poor performance, outlining clear expectations for improvement, and giving the
employee a chance to remedy shortcomings, could not only save time and costs related to termination and
re-hiring, it creates a culture of performance accountability for employees and their managers.
5 Steps to create a performance improvement plan that truly works
1: Determine acceptable performance
State what would be acceptable performance and compare this to what you are currently seeing from your
employee. Be specific as to where exactly the employee is falling short, including examples of behavior
and performance.
Tip: Collaborate
Instead of presenting an employee with a PIP unexpectedly, have a meeting beforehand where you discuss
performance issues.
37 Compiled Notes
All parties (the manager, HR, and the employee) should have the chance to provide input. You want the
employee to feel engaged and committed to meeting targets.
2: Create measurable objectives
Use the SMART framework to define the objectives your employee needs to meet. Determine how you
will measure success.
Tip: Determine the Reason for Performance Issues
You need to be sure that a PIP is worth the effort. Find out what is causing the poor performance.
It could be that the employee feels overwhelmed by expectations at work or perhaps he is dealing
with personal problems you are unaware of. Alternatively, the problem may be that the employee has no
interest in staying with your company in the long term.
3: Define what support the employee will receive
List how the employee’s manager will help him reach the PIP goal. This could include training, coaching,
or using additional resources.
Tip: Think of Ways You Can Best Help the Employee
The whole point of a PIP is to help the employee improve to keep him on your team. Rather than expecting
him to achieve the objectives alone, consider what he may be lacking from you that could better his
performance.
4: Draw up a schedule for check-Ins
Specify how often you will meet with the employee to provide feedback. Create a calendar of check-ins.
Tip: Don’t Wait Until the Deadline
It’s no use creating a PIP and then waiting until the deadline to check the employee’s progress.
Regular check-ins will allow the employee to voice any doubts or difficulties. Plus, they will allow you to
confirm that he is on the right track or if further action is necessary.
5: State the consequences of a lack of improvement
Make it clear what the consequences are if the employee fails to meet the improvement goal.
By this point, you should know why you want to use a PIP, how to create a performance plan for your
unique situation, and what exactly to include. There is still one thing left: your employee needs to know
how to respond and pass the PIP. Share the following advice with your employee to ensure that the process
runs as smoothly as possible.
Tip: Focus on Improvement Rather Than Punishment
38 Compiled Notes
It is critical that your employee doesn’t perceive the PIP as a sign he will soon be fired.
Remember to talk about where he is excelling and make it clear that you want to see him improve. Set a
goal the employee feels confident he can achieve and that will be beneficial to everyone.
How can you improve the effectiveness of a performance improvement plan?
Listen to your employee and allow them to respond to any of your points. The PIP is a collaborative
process. Employees become disengaged when they feel they are misunderstood or when they feel as
though they aren’t being met halfway.
Pare down to the cause of any issues at work. Does the employee feel as though they don’t have a
future with the organization? Are they ready for a more challenging role? Or are they dealing with
personal issues outside of the spectrum of the business? Issues should be specific and supported with
examples to ensure the employee understands the opportunities and changes needed.
Focus on the positive aspects of the employee’s relationship with the company.
Emphasize their valuable attributes and work with them to find ways to improve on these positives, rather
than harping on the negatives.
Give them a clear path. Employees need to understand their goals and the actions to take to meet
expectations of performance and behavior. The more precise their goals are, the easier they will be to
obtain. Vague goals can feel confusing or frustrating and can make employees feel as though they are
spinning their wheels.
Regularly review employee progress. Track the employee’s performance and touch base with them
at regular intervals to keep them motivated. Employees will appreciate being given a chance to talk about
any concerns they’ve developed and have access to support and resources to execute the plan. We suggest
formal 30-60-90 day meetings with frequent informal check-ins in between. All encounters should be
focused on progress and the employee should be allowed to comment on improvements and ask questions
or for clarification.
Of course, just as a PIP needs to be rewarding, there also need to be clear consequences outlined for a
failure to meet goals. The PIP establishes an agreed-on plan between the employee and the organization
regarding the best way to improve their results. If the employee breaks this contract, there should be a
transparent set of circumstances. These should be outlined at the beginning of the PIP process and
employees should confirm that they understand.
How to respond to and survive a performance improvement plan
As an employee, you need to know how to get past a performance improvement plan and gain something
positive from the experience.
How to respond to a performance improvement plan
39 Compiled Notes
Your manager should have set performance objectives that are reasonable and attainable. Now it’s up to
you to decide whether these targets are worthwhile. If you are uninterested in staying at the company for
much longer, you can save everyone time and stress by starting a search for a new job instead.
If you do decide that your job is worth keeping (which should be the case the majority of the time), try to
see the PIP positively. Consider it useful feedback to help you learn and grow both within the company
and in your career as a whole.
How to survive a performance improvement plan
The next step is to survive your performance improvement plan and come out as a better- qualified, more
valuable worker. This involves:
Making your job a priority.
Avoid staying out late on work nights, accept all the optional invitations to work events, and spend
your time at work on job-related activities only.
Seeking help when you need it.
A PIP is often an indication that your company believes you are worth having as an employee. Talk to
your manager or HR if you are unclear about anything.
Being positive.
Go to work every day with a great attitude. Don’t let small challenges get you down.
A PIP is a great strategy to retain an employee whose performance has been lacking recently but who
does have the potential and motivation to remain a strong team player.
Whether you are the employer or the worker, you should never see a performance improvement plan as a
superficial step before termination. Rather, it should be a useful tool to transform a struggling employee
into a valuable asset for the company.
40 Compiled Notes
Employee Name: Supervisor Name: Date:
Performance Improvement Plan (examples)
Target area Performance Expected Agreed Support Review Review notes Date to
Concern standard of Improvement Date achieve
performance actions expected
Detail specific Detail specific Detail what has Detail improvement standard
Duties / dates and Detail what is Detail what actions been agreed in made and any
Responsibilities examples of expected of the need to be taken to terms of support future
where where the employee in meet expected (incl. additional commitments and
performance standards have terms of their standard of coaching and/or any
standards have not been met performance performance training) to achieve future/negotiated
not been met (i.e. S.M.A.R.T. the expected review dates
goals) standard of
performance
41 Compiled Notes armarcojoscpa

References:
PERFORMANCE IMPROVEMENT PLAN (PIP) GUIDELINES
Please read through prior to preparing PIP
 Consult with Local HR Employee-Labor Relations prior to issuing a Performance Improvement Plan (PIP).
 A PIP can be an effective tool to monitor and measure performance behaviors, processes and work products that need improvement outside
of the annual performance evaluation.
 Inform the employee that the PIP is being issued to assist them in raising their performance levels to meet acceptable standards,
expectations and requirements (S.M.A.R.T.)
 Define the problem and the improvement that is required to meet performance standards
 Identify the changes that must be met and by when (define due dates whenever possible) and how the outcome will be measured
 Establish action plan, goals, resources (i.e. training to achieve desired outcome, if available) and timetables for meeting the standards
(S.M.A.R.T.)
 Maintain communication and evaluate whether his/her standards have been met.
 Involve the employee in resolution of the deficiencies. Get the employee to commit to improvement. Avail yourself and others as resources.
 The clearer the expectations, the easier it will be for you to manage/monitor the situation.
 PIP’s are not “written warnings” and therefore are not disciplinary actions.
 The PIP is a living document that is updated on a regular basis by both the employee and the supervisor
 It is recommended that you meet with the employee in a one-on-one meeting weekly to monitor progress and to maintain communication
between the supervisor and the employee.
 Written confirmation of a counseling session is not grievable.
Pointers:
 Give on-going feedback to the employee and respond in writing whether or not there has been improvement on the subject of the
counseling session.
 If an employee shares with you any personal difficulties he/she is experiencing, refer employee to EAP. (The EAP language is typically good
to include regardless).

Lesson 6 PRODUCT AND MARKET ANALYSIS
 Define product analysis and market analysis

 Know the steps and considerations in preparing the these analysis
 Prepare a product analysis
We purchase products everyday by reviewing various details to ensure the quality, cost and certain
features/functionality are what we expect. The purpose of product analysis is to provide manufacturers
with the deliverables necessary to understand and perfect the product. The analysis ensures that the
product is market ready, reaches the intended target market and achieves the desired results.
Product analysis breaks down the product from end to end analyzing everything from components,
functions, technology, costs and demands to marketing materials, websites and sales approach. What the
product does, should match what the company claims it does. Analysis on cost/quality ratios, alternative
designs along with competition come into play to determine whether the product is cost effective while
meeting the customer requirements. It is highly beneficial If the company can make small tweaks to the
design and maintain the quality of the product while reducing their cost. This is an extensive process, but
the results can aid the business in manufacturing, QA, logistics, and sales.
Product analysis is an excellent task to complete prior to submitting a product design and/or
development technology for a patent. You will want to determine which patent is appropriate for a
product prior to submission; design, utility or plant. Although a design patent may work for the appearance
of your product it may not protect the functionality that would be a covered by a utility patent.
Product analysis involves examining product features, costs, availability, quality, appearance and other
aspects. Product analysis is conducted by potential buyers, by product managers attempting to understand
competitors and by third party reviewers
Product analysis can also be used as part of product design to convert a high-level product description into
project deliverables and requirements. It involves all facts
of the product, its purpose, its operation, and its characteristics.
PRODUCT ANALYSIS EXAMPLE
A simple product analysis example could be a t-shirt. First, look at various factors
of this t-shirt to analyze the quality. Some of the questions for this shirt would be:

What is the material of the t-shirt? The quality? And what occurs with that material after it is
washed.
What colors are on the t-shirt? Will the colors bleed? If printed on, is the print ink of higher quality or not?
Where is the t-shirt manufactured and is it easy to manufacture the product there? What
are the capabilities of the manufacturer for future orders?
What is the minimum order quantity (MOQ)?
Minimum order quantity is the fewest number of units a business is willing to sell to a single
customer at once. While a retail store may be happy to sell a single t-shirt or one head of lettuce, it isn't
usually profitable to sell a single unit.
Is the manufacturer certified and audited for proper compliance?
How to Do a Competitive Product Analysis: Evaluate Your Industry Position
Understanding your position in the industry is important to any successful business. That’s why it’s
critical to ensure that you know how to do a competitive product analysis.
A competitive product analysis will help you to determine where you stand within your industry and
what you need to do to outperform your competitors.

Performing this type of analysis is simple, but to make sure that you do it correctly, we’ve provided a list
of steps that you should follow.
 Understand Your Competition
Before conducting a competitive product analysis, there are a few things you need to consider. First, you
must understand who your competitors are. Those selling similar products and services located within the
same geographic areas are your direct competitors. These are the businesses you need focus on.
 Start Your Research
Once you have a list of your direct competitors, you need to start your research. The best way to do this is
to perform a professional market research study for each competitor. This helps you get to know the
similar businesses in your industry so you can better market your company as the optimal choice for
consumers.
To do this, gather information regarding the companies you’re competing against. How much are they
selling their goods and services for? What makes consumers want to buy from them? What are some
negatives about the company? These are just a few of the questions you need to answer while conducting
your research.
 Gather and Analyze Product Information Details
From there, you need to learn more about your competition’s products and services. We recommend
reading their sales brochures, browsing their website and, if available, going over their annual reports.
These sources provide a wealth of helpful details. They show you how much other businesses are pricing
their services and products for and gives you an idea of how well they’re performing to determine how
you stand against your competition.
On top of that, these details will help you to understand the overall goals of other similar businesses,
whether they’re looking to increase their market shares, maximize short- or long- term profits, or establish
themselves as market leaders.
 Develop Your Competitive Strategy
Use the information gathered in your research to create your competitive strategy. This should outline
what you need to do to set your business apart from others and what you should do to market yourself as
the better consumer option. For example, if you notice that your competitors are offering lower prices for
their goods and services, you can lower your prices.
Your research details should also show you how your competitors are marketing their products and
services. This information can help you to improve how you showcase your own selection to better meet
your sales goals. Plus it can help you to improve your advertising efforts. For instance, you can enhance
your website or social media presence if you notice that your competition doesn’t have a good online
marketing campaign.

As soon as everything in your competitive strategy has been executed, you should see your business
climbing higher within the industry.
 Continue Your Research
However, doing a competitive product analysis right once isn’t enough. With new businesses forming
every day, you’ll face more and more competitions.
With that said, you must continuously perform competitive research and improve your business strategies.
This will help you to maintain your ranking within the industry and even help you to boost sales and
production.
Performing a competitive product analysis is key to understanding your place in the industry and what you
can do to improve your rank, so follow the steps above to give your business a better chance at success.
Analysis: Current Product(s)
Describe the Organization’s Current Product(s) Offerings in Terms of:
 Product Attributes
Describe the main product features, major benefits received by those using the product, current branding
strategies, etc.
 Pricing
Describe pricing used at all distribution levels, such as pricing to final users and to distributors, incentives
offered, discounts, etc.
 Distribution
Describe how the product is made accessible to final users, including channels used, major benefits
received by distributors, how product is shipped, process for handling orders, etc. (Note: More discussion
of distribution is addressed in Analysis: Current Distributor Network(s) below.)
 Promotion
Describe promotional programs and strategies in terms of advertising, sales promotion, personal selling
and public relations, how product is currently positioned in the market, etc.
 Services Offered
Describe support services provided to final users and distributors before, during and after the sale
What is a market analysis?
A market analysis is a thorough qualitative and quantitative assessment of the current market.

It helps you understand the volume and value of the market, potential customer segments and their buying
patterns, the position of your competition, and the overall economic environment, including barriers to
entry, and industry regulations.
A market analysis is the process of gathering information about a market within an industry. Your analysis
studies the dynamics of a market and what makes potential customers tick.
A market analysis may seem complex, but it’s necessary if you want to lead your business in the direction
of success.
When you conduct a market analysis, you learn the following:
 Who are my potential customers?

 What are my customers’ shopping and buying habits?
 How large is my target market?
 How much are potential customers willing to pay?
 Who is my competition?
 What are my competitors’ strengths and weaknesses?
Your market analysis can make or break your startup. Analyzing markets helps you reduce risks because
you can better understand your customers and market conditions.
Your analysis also helps you clarify what makes you different from the competition. That way, you
know what makes you stand out. Or, you know what you need to do to set yourself apart.
Whether you’re starting a venture, introducing a new product, or growing your small business, market
research can help take you to the next level.
Why you should conduct a market analysis
Whether you are writing a Lean Plan or putting together a detailed business plan for a bank or other
investor, a solid market analysis is expected. But, don’t just do a market analysis because you’re
developing a plan. Do it because it will help you build a smarter strategy for growing your business.
Once you have in-depth knowledge of your market, you’ll be better positioned to develop products and
services that your customers are going to love. And while diving into market research may seem like a
daunting task it can be broken up into four simple elements:
1. Industry overview: You’ll describe the current state of your industry and where it is
headed.
2. Target market: Who are your actual customers? You’ll detail how many of them are there,
what their needs are, and describe their demographics.
3. Competition: Describe your competitors’ positioning, strengths, and weaknesses.
4. Pricing and forecast: Your pricing will help determine how you position your company in the
market, and your forecast will show what portion of the market you hope to get.

How to conduct a market analysis
Now, let’s go into each step in more detail so you know exactly what you need for your market analysis.
1. Industry overview
In this step, you’ll describe your industry and discuss the direction that it’s headed. You’ll want to include
key industry metrics such as size, trends, and projected growth.
Industry research and analysis is different than market research. When you’re researching your industry,
you’re looking at all of the businesses like yours. This is different than market research, where you are
learning about your customers.
Your industry overview shows investors that you understand the larger landscape that you are competing
in. More importantly, it helps you understand if there’s going to be more demand for your products in the
future and how competitive the industry is likely to be.
For example, if you are selling mobile phones, you’ll want to know if the demand for mobile phones is
growing or shrinking. If you’re opening a restaurant, you’ll want to understand the larger trends of
dining out. Are people eating at restaurants more and more over time? Or is the market potentially
shrinking as consumers take advantage of grocery delivery services?
If you’re in the United States, the U.S. Census has excellent industry data available. I’ve also found
Statista to be useful. You should also look up your industry association—they often have a wealth of
information on the trends in your industry.
2. Define your target market
Your target market is the most important section of your industry analysis. This is where you explain who
your ideal customer is.
You may find that through the course of your analysis, that you identify different types of customers.
When you have more than one type of customer, you do what’s called market segmentation. This is where
you group similar types of customers into segments and describe the attributes of each segment.
You’ll need to start broadly and refine your research by defining the following elements.
Market size
Unlike industry size, which is usually measured in dollars, your market size is how many potential
customers there are for your product or service. We’ve got a great method for figuring out your market
size that you can read about here.
Demographics
Describe your customer’s typical age, gender, education, income, and more. If you could paint a picture of
your perfect customer, this is where you’ll describe what they look like.

Location
Where are your customers located? A specific country, region, state, city, county, you’ll want to describe
that here. You may even find that your customer base is segmented based on location which can help you
determine where you’ll be doing business.
Psychographics
It’s here that you need to get inside the mindset of your customers, know their needs, and how they’ll
react. What are your customers’ likes and dislikes? How do they live? What’s their personality?
This piece can even help you better approach analyzing the competition.
Behaviors
This is essentially an extension of some of your psychographic information. Explain how your customers
shop for and purchase products like yours.
Trends
Customer behavior is always changing. If there are trends that you’ve noticed with your target market,
detail them here.
3. Competition
Your market analysis isn’t complete without thinking about your competition. Beyond knowing what other
businesses you are competing with, a good competitive analysis will point out competitors’ weaknesses
that you can take advantage of. With this knowledge, you can differentiate yourself by offering products
and services that fill gaps that competitors have not addressed.
When you are analyzing the competition, you should take a look at the following areas.
Direct competition
These are companies that are offering very similar products and services. Your potential customers are
probably currently buying from these companies.
Indirect competitors
Think of indirect competition as alternative solutions to the problem you are solving. This is particularly
useful and important for companies that are inventing brand new products or services. For example, the
first online task management software wasn’t competing with other online task managers—it was
competing with paper planners, sticky notes, and other analog to-do lists.
How you’re different

You don’t want to be the same as the competition. Make sure to discuss how your company, product, or
service is different than what the competition is offering. For a common business type, such as hair salons,
your differentiation might be location, hours, types of services, ambiance, or price.
Barriers to entry
Describe what protections you have in place to prevent new companies from competing with you. Maybe
you have a great location, or perhaps you have patents that help protect your business.
The best way to research your competition is to talk to your prospective customers and ask them who they
are currently buying from and what alternate solutions they are using to solve the problem
you are solving. Of course, spending some time on Google to figure out what else is out there is a great
idea as well.
4. Pricing and forecast
The final step in a market analysis is to figure out your pricing and create a sales forecast to better
understand what portion of the market you think you can get.
Pricing your product or service
First, think about your pricing. Of course, you should ensure that your price is more than what it costs you
to make and deliver your product or service. But, beyond that, think about the message that your price
sends to consumers.
Customers usually link high prices to quality. But, if you are pricing on the higher end of the spectrum,
you need to make sure the rest of your marketing is also signaling that you are delivering a high-quality
product or service. From what your business looks like to its logo and customer service experience, high-
prices should come with a high-quality experience during the entire sales process.
On the other end of the spectrum, maybe you’re competing as a low-priced alternative to other products or
businesses. If that’s the case, make sure your marketing and other messaging are also delivering that same,
unified message.
Forecasting for initial sales volume
Once you have an idea of your pricing, think about how much you expect to sell. Your industry research
will come into play here as you think about how much of the overall market you expect to capture. For
example, if you’re opening a new type of grocery store, you’ll want to know how much people spend on
groceries in your area. Your forecast should reflect a realistic portion of that total spend. It’s probably not
realistic to gain 50 percent of the market within your first year.
However, don’t make the mistake of assuming that you can easily get 1 percent of a very large market. 1
percent of a 3 billion dollar market is still $30 million and even though 1 percent seems

like a small, attainable number, you need to understand and explain how you will actually acquire that
volume of customers.
Analysis: Current Target Market(s)
1. Describe the Target Market Approach
 What general strategy is used to reach targeted customers’ In most cases approaches include:
o mass market – aim to sell to a large broad market
o segmentation approach – aim to selectively target one (niche) or more markets
2. Describe Demographic/Psychographic Profile of the Market
 Profile criteria may include gender, income, age, occupation, education, family life cycle,
geographic region, lifestyle, attitudes, purchasing characteristics, etc.
3. Describe the Following Characteristics of Targeted Customers
 Needs/benefits sought by market
 Product usage
o Consider answers to these questions related to customers using the product such as:
o who is using the product?
o why do they use the product?
o when do they use the product?
o how is the product used?
 Product positioning
o Evaluate how customers perceive the product in relation to competitor’s products or to other
solutions they use to solve their problems
 Attitudes
o What is the target market’s attitude regarding the organization’s product?

o What is the target market’s attitude regarding the general product category?
o i.e., examine the general attitudes regarding how products from all competitors serve the
target market’s needs
4. Describe the Purchasing Process
 How does the target market make their purchase?

 What does the decision-making process involve?

 What sources of information are sought?

 What is a timeline for a purchase (e.g., impulse vs. extended decision-making)?
 Who makes the purchase?
 Does user purchase or is another party responsible (e.g., parent purchasing for children)?
 Who or what may influence the purchase?
5. Provide Market Size Estimates (Note: Keep in mind these are estimates for the market not for a
specific product.)
 Provide size estimates for the potential market

 What is the largest possible market if all buy?
 Provide estimates of size for the current target market
 What percent of the potential market actually purchased?
 Provide estimates of future growth rates
 At least through the time frame for the plan (e.g., 1 year) but most likely longer (e.g., 3-5 year
projections)
Activity
Instruction: Make your own product analysis for at least 2 brand names with the same product line. It
could be school supplies, household items, RTW’s, food products etc. We will agree with the class what
particular product you like so that each student has individual assigned product.
Product Analysis Criteria: Open this link for better understanding.

https://www.designoutthebox.com/page27.html
 Aesthetics
 Suitability for Consumer  Function
 Cost  Materials
 Environment  Ease of Use
 Safety  Product Life Cycle
 Size  Production
 Packaging


Lesson 7 INDUSTRY ANALYSIS

 Define industry analysis

 Describe the components of industry structure
 Identify the methods of industry analysis
 Understand the relevance of industry analysis for the success of the business
 Know the updates of the industry sector of the Philippines
Industry analysis is a tool that facilitates a company's understanding of its position relative to other
companies that produce similar products or services. Understanding the forces at work in the overall
industry is an important component of effective strategic planning. Industry analysis enables small
business owners to identify the threats and opportunities facing their businesses, and to focus their
resources on developing unique capabilities that could lead to a competitive advantage.
Industry analysis is a market assessment tool used by businesses and analysts to understand the
competitive dynamics of an industry. It helps them get a sense of what is happening in an industry, e.g.,
demand-supply statistics, degree of competition within the industry, state of competition of the industry
with other emerging industries, future prospects of the industry taking into account technological changes,
credit system within the industry, and the influence of external factors on the industry.
Industry analysis, for an entrepreneur or a company, is a method that helps to understand a company’s
position relative to other participants in the industry. It helps them to identify both the opportunities and
threats coming their way and gives them a strong idea of the present and future scenario of the
industry. The key to surviving in this ever-changing business environment is to understand the differences
between yourself and your competitors in the industry and use it to your full advantage.
"Many small business owners and executives consider themselves at worst victims, and at best observers
of what goes on in their industry. They sometimes fail to perceive that understanding your industry
directly impacts your ability to succeed. Understanding your industry and anticipating its future trends and
directions gives you the knowledge you need to react and control your portion of that industry," Kenneth J.
Cook wrote in his book The AMA Complete Guide to Strategic Planning for Small Business. "However,
your analysis of this is significant only in a relative sense. Since both you and your competitors are in the
same industry, the key is in finding the differing abilities between you and the competition in dealing with
the industry forces that impact you. If you can identify abilities you have that are superior to
competitors, you can use that ability to establish a competitive advantage."
An industry analysis consists of three major elements: the underlying forces at work in the
industry; the overall attractiveness of the industry; and the critical factors that determine
a company's success within the industry.

One way in which to compare a particular business with the average of all participants in the industry is
through the use of ratio analysis and comparisons. Ratios are calculated by dividing one measurable
business factor by another, total sales divided by number of employees, for example. Many of these ratios
may be calculated for an entire industry with data available from many reports and papers published by the
U.S. Departments of Commerce and Labor.
8 Main Components of the Industry Structure – Explained!

The industry attractiveness as measured by the long-term return on investment depends largely upon the
industry structure. In case of beverages, the big question is tea or coffee? (Figure 6.8).
The industry structure has five components as Figure 6.9 indicates—competitors, potential competitors,
substitute products, customers, and suppliers. Each plays a role in determining the intensity of
competition in explaining why some industries are historically more profitable than others.
1. Competitors:
The intensity of competition from existing competitors will depend on several factors
including:
1. The number of competitors
2. Their relative size
3. Whether their product offering and strategies are similar
4. The existence of high fixed costs
5. The commitment of competitors and
6. The size and nature of exist barriers
2. Potential competitors:
Potential competitors who might have an interest in entering an industry. Whether potential competitors,
identified or not, actually do enter, however, depends in large part upon the size

and nature of barriers to entry. Thus, an analysis of barriers to entry is important in projecting the likely
competitive intensity and profitability levels in the future.
Entry barriers include:

a. Capital investment required.
b. Industries like mining, refinery or automobiles require huge investments and larger gestation periods
that increase the risk.
3. Economies of scale:
If scale economies exist in production, advertising, distribution, or other areas, it becomes necessary to
obtain a large volume quickly. Such an effort not only increases the investment but it also increase the
risk of retaliation from existing competitors. Reliance Fresh opted this strategy for reducing the price of
fruits and vegetables in its retail outlets.
4. Distribution channels:
Gaining distribution in some industries can be extremely difficult and costly. Even large established firms
that sell products with substantial marketing budgets have trouble obtaining space on the supermarket shelf
Competition between Pepsi and Coke limit the customers’ choice on cola as most of the retail outlets have
a policy of eliminating one cola product (either Coke or Pepsi brands) from their shelves.
5. Product differentiation:
Established firms may have high levels of
customer loyalty caused and maintained by
protected product features, a brand name and
image, advertising, and customer service.
Industries in which product differentiation
barriers are particularly high include soft
drinks, beer, cosmetics, over-the-counter
drugs, and banking. Just look at the story
board of Bajaj Pulsar in March 2008 (Figure
6.10). It is an attempt to lure the adventurous
motorist.

Unfortunately Transport Department of Govt. of India banned this advertisement by citing the reason such
as youth tend to follow the ad, violate traffic rules and risk their life.
6. Substitute products:
Substitute products are represented by those sets of competitors that are identified as competing with less
intensity than the primary competitors.
7. Customer power:
When customers have relatively more power than sellers do, they can force prices down or demand more
services, thereby affecting profitability. A customer’s power will be greater when its purchase size is a
large proportion of the seller’s business, when alternative suppliers are available, and when the customer
can integrate backward and make all or part of the product.
8. Supplier power:
When the supplier industry is concentrated and sells to a variety of customers in diverse industries, it will
have relative power that can be used to influence prices. Power will also tend to be enhanced when the
costs of customers to switch suppliers is high.
Types of industry analysis
There are three commonly used and important methods of performing industry analysis. The three
methods are:
1. Competitive Forces Model (Porter’s 5 Forces)

2. Broad Factors Analysis (PEST Analysis)
3. SWOT Analysis
#1 Competitive Forces Model (Porter’s 5 Forces)
One of the most famous models ever developed for industry analysis, famously known as
Porter’s 5 Forces, was introduced by Michael Porter in his 1980 book “Competitive Strategy: Techniques
for Analyzing Industries and Competitors.”
According to Porter, analysis of the five forces gives an accurate impression of the industry and makes
analysis easier. In our Corporate & Business Strategy course, we cover these five forces and an additional
force — power of complementary good/service providers.

1. Intensity of industry rivalry
The number of participants in the industry and their respective market shares are a direct representation of
the competitiveness of the industry. These are directly affected by all the factors mentioned above.
Lack of differentiation in products tends to add to the intensity of competition. High exit costs such as high
fixed assets, government restrictions, labor unions, etc. also make the competitors fight the battle a little
harder.
2. Threat of potential entrants
This indicates the ease with which new firms can enter the market of a particular industry. If it is easy to
enter an industry, companies face the constant risk of new competitors. If the entry is difficult, whichever
company enjoys little competitive advantage reaps the benefits for a longer period. Also, under difficult
entry circumstances, companies face a constant set of competitors.
3. Bargaining power of suppliers
This refers to the bargaining power of suppliers. If the industry relies on a small number of suppliers, they
enjoy a considerable amount of bargaining power. This can particularly affect small businesses because it
directly influences the quality and the price of the final product.
4. Bargaining power of buyers
The complete opposite happens when the bargaining power lies with the customers. If consumers/buyers
enjoy market power, they are in a position to negotiate lower prices, better quality, or additional services
and discounts. This is the case in an industry with more competitors but with a single buyer constituting a
large share of the industry’s sales.
5. Threat of substitute goods/services

The industry is always competing with another industry producing a similar substitute product. Hence, all
firms in an industry have potential competitors from other industries. This takes a toll

on their profitability because they are unable to charge exorbitant prices. Substitutes can take two
forms – products with the same function/quality but lesser price, or products of the same price but of better
quality or providing more utility.
#2 Broad Factors Analysis (PEST Analysis)

Broad Factors Analysis, also commonly called the
PEST Analysis stands for Political, Economic, Social
and Technological. PEST analysis is a useful
framework for analyzing the external
To use PEST as a form of industry analysis, an analyst will analyze each of the 4 components of the model. These compo
1. Political
Political factors that impact an industry include specific policies and regulations related to things like taxes, environmenta
overall political stability.
2. Economic
The economic forces that have an impact include inflation, exchange rates (FX), interest rates,
GDP growth rates, conditions in the capital markets (ability to access capital), etc.
3. Social
The social impact on an industry refers to trends among people and includes things such as population
growth, demographics (age, gender, etc.), and trends in behavior such as health, fashion, and social
movements.
4. Technological
The technological aspect of PEST analysis incorporates factors such as advancements and developments
that change the way a business operates and the ways in which people live their lives (e.g., the advent of
the internet).
#3 SWOT Analysis
SWOT Analysis stands for Strengths, Weaknesses, Opportunities, and Threats. It can be a great way of
summarizing various industry forces and determining their implications for the business in question.

1. Internal
Internal factors that already exist and have contributed to the current position and may continue to exist.
2. External
External factors are usually contingent events. Assess their importance based on the likelihood of them
happening and their potential impact on the company. Also, consider whether management has the
intention and ability to take advantage of the opportunity/avoid the threat.
Importance of Industry Analysis
Industry analysis, as a form of market assessment, is crucial because it helps a business understand market
conditions. It helps them forecast demand and supply and, consequently, financial returns from the
business. It indicates the competitiveness of the industry and costs associated with entering and exiting the
industry. It is very important when planning a small business. Analysis helps to identify which stage an
industry is currently in; whether it is still growing and there is scope to reap benefits, or has it reached its
saturation point.
With a very detailed study of the industry, entrepreneurs can get a stronghold on the operations of the
industry and may discover untapped opportunities. It is also important to understand that industry analysis
is somewhat subjective and does not always guarantee success. It may happen that incorrect interpretation
of data leads entrepreneurs to a wrong path or into making wrong decisions. Hence, it becomes important
to collect data carefully.
The industry analysis you performed before sitting down to write your business plan can be incorporated
into it to provide data on the industry and markets in which your company conducts business. Drawing
upon the data you collected using the various industry analysis resources mentioned earlier allows you to
identify the risks and opportunities confronting the company as it prepares to enter the marketplace with
its products or services. This information

permits you to develop strategies to take full advantage of business opportunities while minimizing or
avoiding the identified risks.
When written as a section of a company’s business plan, an industry analysis can be

presented as a five-step process.
 Step 1: Give a brief overview of the industry. Define the industry in terms of historical
background, the geographic area it services, and its products.
 Step 2: Review trends and growth patterns that have existed within the industry.
 Step 3: Identify factors that influence the industry. These might include government
regulatory policies and competitive practices of other businesses.
 Step 4: Using data gathered through research, the industry forecast anticipated growth. The
predictions should be both long- and short-term.
 Step 5: Describe how your company will position itself within the industry. Focus on how
your company can take advantage of opportunities identified within the industry.
For sample of industry analysis, open this link:
https://www.clarion.edu/sbdc/what-we-do/research-assistance/4SampleIndustryAnalysis.pdf
To get the update of the industry of the Philippines, open this link:
https://ycpsolidiance.com/article/opportunities-in-the-philippines-key-growing-sectors-despite- covid-
19-pandemic

Lesson 8 CUSTOMER ANALYSIS
 Define customer analysis

 Describe the significance of customer analysis
 Identify the steps of effective customer analysis
 Understand the relevance of customer analysis for the growth of the business
 Know the current technology used to perform customer analysis
You don't communicate the same way with the different groups of people in your life – family, friends,
colleagues. Nor do you buy them the same type of gifts. The same applies to your customers.
Your customers have unique needs, wants, likes and dislikes. Treating them as one uniform group won’t
do you any favors. In fact, research shows that 71% of customers feel frustrated when a shopping
experience feels impersonal.
Customer analysis combines qualitative and quantitative research methods with the goal of better
understanding of your customer base. Knowing what makes your customers tick means you’ll be able to
cater to their specific needs.
It's a tide that lifts all boats: marketing can create campaigns with better wording, sales can come up with
better pitches, product development will know what features to prioritize, etc.
A customer analysis (or customer profile) is a critical section of a company’s business plan or
marketing plan. It identifies target customers, ascertains the needs of these customers, and then specifies
how the product satisfies these needs.
Customer analysis is the practice of using qualitative and quantitative data to gain insight into your
customers. The goal is to understand their wants, needs, pain points, and objectives. At the same time,
customer analysis helps us understand what drives people to make a purchase, how and when these
purchases happen, the frequency of these purchases, and other relevant information.
Organizations that conduct customer-centric data analysis use research methods like focus groups, in-
depth interviews, social media analytics, existing customer feedback — and more — to understand their
customer base. In turn, this allows them to adapt their business processes to meet their customers’ real
needs.
Why Is Customer Analysis Important?

Here are a few concrete reasons why you need to implement customer analysis, it:
 Enables you to shape your communications and marketing to address customers’ goals (and
really speak their ‘language’).
 Lets you better target customers through segmentation and increase ROI (otherwise known
as targeted marketing).
 Helps you to define what marketing channels will reach customers best, and where to invest
ad dollars.

 Helps you understand how to improve your products or services.

 Lets you build better relationships with clients and improve customer loyalty overall.
What Is a Customer Profile?

A customer profile is a fictionalized description of your ideal client — the “perfect” fit for your business
solutions. You may also have heard of buyer persona — a closely linked concept that describes a range of
different types of client characteristics. It might include information on your customer’s demographics,
professional status, purchasing habits, values and goals, influences, and challenges, and anything else
that’s relevant to your particular situation. Overall, the main goal of customer analysis is to create a
customer profile and a range of buyer personas.
Customer profiles and buyer personas are also made to be shared across the entire organization
— including with the sales, design, marketing, and product teams. So, they need to be concise and easy to
understand.
For example, your team might not need to know if your ideal customer likes strawberry ice cream, wears
orange socks, and is a Sagittarius. These assumptions won’t help anyone make smarter business
decisions. However, the real, in-depth insights we mention above will. Make sure to ask yourself (and your
team) if the information you seek and include will have an impact on the way you are making decisions in
the company.
Customer analysis can be broken down into:

 a behavioral profile (why your product matches a customer’s lifestyle) and
 a demographic profile (describing a customer’s demographic attributes).
A customer profile is a simple tool that can help business better understand current and potential
customers, so they can increase sales and grow their business. Customer profiles are a collection of
information about customers that help determine why people buy or don’t buy a product. Customer
profiles can also help develop targeted marketing plans and help ensure that products meet the needs of
their intended audience.
Behavioral Analysis (Customer Buying Criteria)

A behavioral analysis of customers (or psychographic profile) seeks to identify and weigh the relative
importance of factors consumers use to choose one product over another. These factors, sometimes called
buying criteria, are key to understanding the reasons that customers choose to buy your product (or
service) versus the products offered by your competitors. The four major criteria that customers use to
distinguish competing products are: price, quality, convenience and prestige.
In consumer transactions, price and quality tend to be the dominant factors. However with business-to-
business (B2B) transactions (also called industrial marketing), service issues such as reliability, payment
terms, and delivery schedule become much more important. The sales transaction in an industrial
marketing scenario also differs from consumer marketing in that the purchase decision is typically made
by a group of people instead of one person, and the selling process can be much more complex (including
stages such as: request for bid, proposal preparation and contract negotiations).
By identifying customer needs through market research and analysis, companies can develop a clear and
concise value proposition which reflects the tangible benefits that customers can expect from the
company’s products. And once the primary buying criteria have been identified,

marketing efforts can influence the customer’s perception of the product along the four main dimensions
(price, quality, convenience and prestige), relative to the competition’s product.
Behavioral Analysis (Purchase Process and Patterns)
Occasionally, customer behavior analysis requires a more in-depth understanding of the actual decision-
making process of the customer purchase. This may be especially true in an industrial marketing scenario.
Examples of purchase process questions to be answered here include:
* What steps are involved in the decision-making process?
* What sources of information are sought?
* What is a timeline for a purchase (e.g., impulse vs. extended decision-making)?
* Will the customer consult others in their organization/family before making a decision?
* Who has the authority to make the final decision?
* Will the customer seek multiple bids?
* Will the product/service require significant modifications?
Behavior profiles can also focus on actions, such as: which types of items were purchased, how frequently
items are purchased, the average transaction value, or which items were purchased in conjunction with
other items. To understand the buying habits and patterns of your customers, answer the following
questions:
* Reason/occasion for purchase?
* Number of times they’ll purchase?
* Timetable of purchase, every week, month, quarter, etc.?
* Amount of product/service purchased?
* How long to make a decision to purchase?
* Where does the customer purchase and/or use the product/service?
Customer Demographics
The second major component in customer analysis is identifying target market segments that are
predisposed to preferring your products over those of your competitors. A market segment is a sub-set of a
market made up of people or organizations with one or more characteristics that cause them to demand
similar product and/or services based on qualities of those products such as price or function. A marketing
program aimed at individual segments needs to understand and capitalize on the group’s differences and
use them strategically in all advertising campaigns.
Gender, age, ethnicity, geography and income are all market-segmenting criteria based on demographics.
Typical questions to ask when determining the demographics of the target market include:
* What is the age range of the customer who wants my product or service?
* Which gender would be most interested in this product or service?
* What is the income level of my potential customers?
* What level of education do they have?
* What is their marital or family status: Are they married, single, divorced? Do they have kids,
grandkids?
* What are the hobbies of my target customers?

The target market segments are specified by demographic factors: age, income, education, ethnicity,
geography, etc. Then by having a well defined set of demographic factors, marketing will be able to
identify the best channels to reach these specific demographic segments.
Customer analysis combines qualitative and quantitative research methods with the goal of better
understanding of your customer base. Knowing what makes your customers tick means you’ll be able to
cater to their specific needs.
It's a tide that lifts all boats: marketing can create campaigns with better wording, sales can come up with
better pitches, product development will know what features to prioritize, etc.
Customer analysis typically moves through the following stages:
 Identifying who your customers are.

 Discovering their needs and their pain points.
 Grouping customers according to similar traits and behaviors.
 Creating a profile of your ideal customer(s).
Effective customer analysis is based on in-depth research, shared with the entire team, and focused on
what really matters: customer pain points and goals — and insights on what influences their buying
decisions.
7 STEPS TO CUSTOMER UNDERSTANDING
Step 1 Structure your existing customer database

The best place to start is with your existing customer database. You are likely already sitting on a wealth
of data, although it might need some structuring in order to make sense out of it.
The first step in doing this is to divide your customer database into groups with similar characteristics.
This process of dividing up data is called segmentation .
By segmenting your customers, you’ll be able to differentiate between customers and focus your
marketing efforts on specific groups.
Customers are typically segmented into the following categories:
 Demographic: Age (range), gender, income

 Geographic: Location-specific
 Psychographic: Values, beliefs, interests, personality
 Technographic: Based on the device/platform a customer is using, i.e. desktop vs. mobile
 Behavioral: Behavioral segmentation methods , habits, frequent actions
 Needs-based: Specific needs for a product/service
 Value-based: Value to the company, typically measured by Customer Lifetime Value (CLV).
This the amount of profit your company is expected to generate from a single customer over the
whole period of their relationship with you.
 Industry: For B2B, what industry the customer belongs to.
 Business size: Also for B2B, the number of employees or the revenue size.

Step 2 Identify your most valuable customers

The next step is to assess who your most valuable customers are.
The Pareto Principle holds true in most companies' customer bases: 80% of business comes from 20% of
customers. It makes sense to first get a crystal-clear view of these customers before moving on to the other
80%.
You can identify your most valuable customers by taking important customer metrics and looking for
patterns in your database. Do customers with certain characteristics tend to have a higher average customer
lifetime value, for example?
In a previous post, we discussed the metrics you should be using to measure retention :
 Customer Lifetime Value (CLV)
 Customer Retention Rate
 Repeat Purchase Rate

 Redemption Rate
In another of our blog posts, we discussed effective methods for measuring loyalty :
 Repurchase Ratio
 Upselling Ratio
 Customer Loyalty Index (CLI)

 Customer engagement numbers
Your customer database also offers other valuable insights. For instance, demographic information about
your customers may not affect product usage, but knowing their age and backgrounds will be important for
how you communicate with them.

Step 3 Talk to your customers
Data tells only part of the story. To get inside your customers’ heads and understand their needs, you need
to talk to them. This involves reaching out, scheduling calls or asking them to come to the office.
Interviewing is often paired with focus groups and usability studies.
One-to-one interviews. Interviewing customers in a one-to-one setting gives them the opportunity to
share the emotions driving their purchases, their pain points and their deepest needs.
Asking the right questions is crucial here. This is where the 5 Whys technique comes into play: by
asking ‘why’ five times, you peel away the layers of an issue and get to the root cause of a problem.
It's important to realize that people make 95% of their purchasing decisions based on emotions. To
discover the emotional drivers behind purchases, an interview should feel like a conversation where your
customer feels relaxed and safe enough to trust you with their true thoughts and feelings.
HelpScout provides excellent tips for conducting a customer interview which include:
 Asking open-ended questions

 Practicing active listening
 Paying attention to body language
Customer focus groups. A focus group gathers a selection of customers in a room to discuss specific
topics under the guidance of a trained facilitator.
Due to the diversity of participants, focus groups can be useful in eliciting a wide range of opinions on
your products and services. On the flipside, groupthink may inhibit free discussion or one person may
dominate the group with their opinions.
Usability study. Observing how just a few customers use the product can uncover problems with a
website or an app. The key here is to observe with an open mind to avoid inattentional blindness .
You can document your observations through notes, video recordings or photographs.

Step 4 Collect customer voices from the field
Although interviews are valuable, they are also biased. There is a selection bias, for example, with
customers with positive experiences more willing to participate than those with negative ones. Also, the
answers that people give don't always align with their actual behavior.
Because of this, it also makes sense to collect customer opinions from the field – from customer
interactions, social media and review sites.
Service conversations. Your support department is in constant contact with your customers. They are
the destination for product issues, pain points and improvement suggestions.
Adding live chat such as Userlike to your website provides a stock of conversations. Support emails are
also another resource for gleaning insights. The benefit of these support channels is that they are written,
which allows those doing the customer analysis to easily tap in.
Social media - sentiment analysis. If your customer has a brand experience or they want to rave
about your new product, chances are, they’ll talk about it on social media. Unrestricted by survey-like
questions, people tend to leave no-holds barred feedback on forums like Twitter, Facebook, Reddit and
Quora.
Sentiment analysis tools can help to gauge tone and sentiment which are trickier to measure than
vanity metrics such as likes and follower counts:
 Brandwatch
 Critical Mention

 Lexanalytics
Review sites. These can provide more concrete insights than social media forums. They also often make
or break a customer’s decision to make a purchase. At Userlike, we regularly check Capterra and
G2 .
Gregory Ciotti from HelpScout recommends apps like Trello and Campfire to gather feedback into a
collective tool. This removes the headache of analyzing feedback from different, dispersed sources and
keeps track of unmet customer needs.
Step 5 Run surveys

Talking to customers and collecting customer voices from the field are qualitative methods. Their purpose
is to get a sense of the motivations and concerns of your customers. However, these will be hypotheses at
best. To test and proof these hypotheses, it makes sense to run customer surveys.
Let's say that by having gone through your database and talking to customers, you have gotten the intuition
that your European customers care more about data privacy issues than your American customers. That
could be a powerful insight, as it could inform how you tailor your messaging to these two audiences.
A survey could prove or disprove this hunch, by asking a significant number of customers to rate the
importance of data privacy compared to other features.

In a previous blog post , we discussed various ways in which you can conduct a survey:
 In-app surveys
 Post-service surveys
 Long email surveys
This list of do’s and don’ts will steer you in the right direction.
Survey templates:
 SurveyMonkey
 Google Forms
 Typeform
 Zoho

Conjoint analysis. This is a choice-based survey technique which asks customers to place a value on
each product or service feature via hypothetical questions.
For example, “would you rather buy a phone plan at §80 with 1200 minutes and no option to
rollover unused data or buy a plan at $60 with only 800 minutes but with the option to rollover
data?”
This type of trade-off question shows what customers are willing to give up to get what they need. Resources to help
you set up a conjoint analysis:
 QuestionPro
 Qualtrics
 Conjointly
Step 6 Create buyer personas

The next step after segmenting your customers is to use all the insights from the above steps to create
customer personas of your target customer(s).
Customer personas are simplifications of reality. They are stereotypes of your most valuable
customers, including their demographics, motivations, behavior patterns, goals and pain points. The
advantage of creating such personas is that they make it possible to think and talk about your
customers. Our brains aren't wired to think about large groups of heterogeneous people. We can,
however, think in individuals.
Since different customers may buy your products for different reasons, consider creating more than one
buyer persona.
Hubspot provides free, customizable templates to help you get started.

Step 7 Create a customer journey map
After you’ve conducted your customer analysis, you’ll want to analyze the data collected to identify
common themes and patterns.
As a customer behaves differently at each stage of the buyer’s journey, a customer journey map can help to
connect the dots, and uncover pain points and factors that could make or break their experience.
A journey map is a visual representation of all the touchpoints and interactions a customer has to go
through to reach his goal.
In the following example of customer journey map, we can see that there are a number of points at which
the customer is at risk of churning:

 The information presented on interfaces doesn’t live up to the descriptions in the commercial.
 The customer has to exert a lot of effort to search for and view new cars.
Example customer journey map: The Nielsen Group
By mapping the customer’s journey, the car company can take measures to improve messaging and the
mobile app to prevent churn at the early stages.
How do you create a customer journey map? For each of your customer personas:
1. List all the touchpoints

2. List all possible actions
3. Chart emotions for each action
4. Identify pain points


Voice of the customer analytics captures customers' experiences, expectations, preferences, and
aversions. Brands that understand the VoC, that listen to consumers, will find insights that when actioned,
will give them the competitive advantage. I'm going to show you how to employ a VoC methodology, act
on your customer feedback, and prove the ROI of your marketing efforts.
What is voice of the customer analysis?
Voice of customer analytics is a market research technique, that

gives brands a comprehensive understanding of customer needs
and wants. It collects data from a wide variety of sources - email,
phone calls, social media, surveys, call center transcripts, CRM
systems - creating a powerful overview of the customer.
Identifying intentions, desires, and aversions. Enabling data-
driven decision making across your company, that'll help multiple
teams - sales, marketing, product, customer service, PR, and
more.
Why is voice of customer important for your brand?
We're living in a post-pandemic world and subsequent

economic changes will see a decrease in consumer spending power over the next few years. Voice of
customer research helps your brand grab a large share of that available spend...

 Voice of the customer finds the gaps in your customer experience

VoC identifies what people expect from your brand, and where real-life experience falls short
of those customer expectations. Which in turn, lead to a better customer experience overall.
 Customer experience - CX - leads to customer loyalty

CX drives over two-thirds of customer loyalty, as all consumer/brand interactions
combine to create a simple perception... If I enjoy a brand's products, I'll want to buy it again.
 Loyalty helps maintain sales

During a crisis, consumers rely on the brands they are loyal to. When spending power is cut,
people still turn to the brands they love for the day to day essentials - from the weekly shop, to
one-off treats.
With effective voice of the consumer monitoring, you can build brand loyalty, retain customers,
and increase existing spend. With customer retention a more cost effective sales driver
than acquisition, which is essential when budgets are being cut.
And that’s not all. Listening to your customers can also help with...
 Product conception
Consumers often discuss products they would love to see. If an idea gets enough buzz, that
identifies a concept you know would pay off.
 Product development
Adapt your flavors, packaging, products, or services, etc., based on what your clients say. What
they want. The more you meet their needs, the more sales.
 Crisis aversion
Spot product complaints and major issues as in real time, then join the conversation to tackle
an issue before it becomes a PR crisis.
 Customer journey analysis

Find the gaps in your customer journey, to help boost sales, encourage faster
purchases, and keep your customers happy.

Social media listening
Pros - Social media gives you valuable voice of consumer insights, that aren't shaped by any
preconceptions. It’s raw, real-time voice of the customer data, that molds itself around the current trends
and topics. If you want the most current category insights, social media listening is the only accurate way.
Cons - The data is raw, with few ways to shape the conversation as you want. You can try to herd
consumers, by raising questions through owned channels, otherwise, you need to monitor your data
effectively to pull actionable intelligence.
Focus groups/interviews
Pros - Focus groups and interviews bring the niche details you want information on. You get to shape the
questions, and investigate your audience’s perception. Plus, consumers appreciate the personal touch this
method offers.
Cons - Focus groups and interviews are time consuming and costly. Plus, the data provided is time-
specific. A new crisis or global change can make the data irrelevant overnight, so you should try to
combine your findings with more sources.
Surveys
Pros - Surveys sit somewhere between social media and focus groups. You can automate them, to get
instantaneous results, while still maintaining a level of depth to your data. You can also adapt them for
various stages of your buying journey, to gather relevant data.
Cons - Surveys have to be carefully designed. You may want to try and gather as much information as you
can, but too many questions and consumers will click away. You also run the risk of focusing on one area
and missing a major issue. Additional data will help you shape the questions you need to be asking.
Net promoter score® - NPS
Pros - I’ve covered the net promoter score before, as it’s a valuable metric that brands can use to quickly
benchmark their customer satisfaction performance. It also helps track people who'll promote your brand -
those that rank you 9 or above - and those that'll criticize your brand - people scoring 9 or above are likely
to promote your brand, and those ranking you 6 or below.

Your overall score can be reviewed regularly to help predict a crisis. Or to assess the impact of a brand
awareness campaign.
Cons - The score is just a number. It doesn’t provide any clues as to why people scored you as they did.
Therefore, you need to include other tangible information to help you track why your score has changed -
for better or worse.
Email, chat, call data
Pros - This is where consumers contact you and tell you what you’re doing right or wrong. It’s up- to-date
and constant, providing you with a steady stream of insights.
Cons - This data is often siloed, held by the customer service team, marketing, sales, product, etc. Trying
to add it to the rest of your data, can be tricky, unless a solution with adequate integration capabilities is
found.
Reviews
Pros - Much like email and call data, reviews help you see what consumers are saying at a macro level.
Often, they will be created based on a highly positive or negative experience, so will highlight the extreme
highs or lows of the customer relationship.
Cons - Depending on your industry, you could find your reviews segmented across numerous sites. This,
along with the complication of collating and understanding a quantity of long-form content, makes
monitoring them a challenge.
Blogs and forum mentions
Pros - Blogs and forums are similar to social media mentions. User-generated content talking about your
products. This tends to be long-form content - offering more detailed perspectives of the topics being
discussed.

Cons - As with social media data, the content can be raw and unexpected. Your brand can be pulled into a
wide range of topics and conversations. Some positive. Some negative. Managing the data effectively is
vital for understanding what’s important to your brand, and what’s just noise.
How to analyze voice of customer data?

With all that data, you need the right VoC tools to manage effectively. Especially if you’re looking at
handling potentially millions of bits of data. But there are great techniques you can use to make the
task easier.
Sentiment analysis
Sentiment analysis uses the power of AI to identify and categorize the sentiment of a mention - is it
positive, negative or neutral? You can then quickly divide your analysis into two sections...
 What people like, that you should increase
 What people hate, that you should improve
Sentiment at scale isn’t as easy as it sounds. You need a system that understands sarcasm and context, to
ensure accuracy. And, the ability to customize the analysis to fit your use case, so that it learns from you
as you review the data over time, and helps improve your workflow and time-efficiency.
Check out Meg’s blog on online sentiment analysis to discover more.
In this example, sentiment analysis helped a brand spot a peak in negative mentions. It
reacted quickly, and turned a negative into a positive.

Using Customer Analytics To Impact Your Business Profit
In What Way Can Customers Analysis Help Your Business Grow?

Customer analytics can help you improve your business in the following areas:
1. Marketing Efficiency
Focusing on the individual customer takes your marketing analysis beyond just knowing your spend and
the eyeballs you received in return. Knowing which marketing channels bring the highest value customers
in terms of order size, retention rate and profitability allows you to either cut marketing costs or expand
your reach more efficiently.
2. Customer Retention
Customer acquisition is expensive, so it’s important to understand what causes customers to leave.
Customer analysis can help you identify common denominators among lost customers and give you an
early warning that existing customers may be in danger of leaving if you don’t take corrective action.
3. Increased Sales
Understanding customer purchasing decisions is the key to increasing sales. Use customer analysis to
identify factors that have both a positive and negative impact on sales. This could include shipping times,
how customer service interactions are handled, whether you have a minimum order or bundled discount, or
the customer’s location or income.
4. Improved Profit Margins

Not all customers are equal. Some customers are more profitable than others, and some may even cost you
money. Factors that affect customer profitability include order size, cost of handling the order, time spent
servicing the account and returns.

Amazon has gained notoriety for issuing lifetime bans to customers who cost the company money by
returning too many items. Customer service representatives at banks have varying discretion to waive fees
and grant other policy exceptions depending on how profitable a customer is.
If you don’t want to take direct action against unprofitable customers, you can learn what attracts these
customers versus more profitable ones so you can shift your focus to attracting higher- value customers.
Ever-expanding customer insights
Running a customer analysis is one of the most valuable things you can do for your business, but it's
not a set-it-and-forget-it tactic. There will always be more insights to be won.
What's more, the market never sits still. New products, competitors, circumstances, targets groups, etc.
will enter the scene. The companies that are able to make the most sense out of this complexity are in the
best position to benefit from it.
Stay close to your customers and re-run some form of customer analysis on a regular basis
Activity: Role Play

Rubrics
Clarity of speech 20%
Expression of feeling 20%
Props 10%
Content 20%
Overall impression 30%
Total 100%

Lesson 9 COMPETITORS ANALYSIS
 Define competitor/competitive analysis

 Describe the significance of competitor analysis
 Identify the steps of effective competitive analysis
 Understand the relevance of competitive analysis for the growth of the business
 Know the current technology used to perform competitive analysis
How well do you know your competitors? Are they working on anything new? Do you know anything
about the strategies they’re using for success? If you don’t then maybe you should. Conducting a
competitor analysis is vital for not only matching your competitors, but giving you an edge.
A competitive analysis is the process of identifying your competitors and evaluating their strategies to
determine their strengths and weaknesses relative to your own business, product, and service. The goal of
the competitive analysis is to gather the intelligence necessary to find a line of attack and develop your go-
to-market strategy.
Competitive analysis in marketing and strategic management is an assessment of the strengths and
weaknesses of current and potential competitors.[1] This analysis provides both an offensive and defensive
strategic context to identify opportunities and threats. Profiling combines all of the relevant sources of
competitor analysis into one framework in the support of efficient and effective strategy formulation,
implementation, monitoring and adjustment.[2]
Competitive analysis is an essential component of corporate strategy. [3] It is argued that most firms do
not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is
called "informal impressions, conjectures, and intuition gained through the tidbits of information about
competitors every manager continually receives." As a result, traditional environmental scanning places
many firms at risk of dangerous competitive blindspots due to a lack of robust competitor analysis. [4] It is
important to conduct the competitor analysis at various business stages to provide the best possible product
or service for customers.[5]
The Definition of Competition
Competitors are individuals or organizations that provide similar products or services as you. They don’t
even have to be the same products, nor do they have to be marketed to the same audience. Any company
that provides a product or service even remotely related to yours could be considered a competitor. Even if
you haven’t entered a particular niche yet, you could consider companies working in that niche as
potential competitors.
Competitors can be grouped into three main categories: primary, secondary and tertiary.
 Primary competitors offer the same or similar products or services as you. They also target
pretty much the same audience, which makes them your direct competitors.
 Secondary competitors target a slightly different market segment. They may sell higher- or
lower-end products, or they may sell a brand that is different from yours.
 Tertiary competitors are those that offer products or services that are somehow related to yours.

If you sell pet supplies, for instance, a company that sells pet food or pet accessories could be considered a
tertiary competitor. You could generally identify tertiary competitors by their potential value to your
business or the likelihood that you will partner with them in the future.
What is the point in doing a competitor analysis?
The purpose of a competitor analysis is to understand your competitors’ strengths and weaknesses in
comparison to your own and to find a gap in the market.
A competitor analysis is important because:
 It will help you recognise how you can enhance your own business strategy.
 It will tell you how you can out-do your competitors in these areas to keep your customer
attention.
 Resulting in a competitive edge over others in your sector.
Why You Should Conduct a Competitive Analysis
You’ve likely heard the saying “Keep your friends close, but keep your enemies even closer.” When it
comes to conducting a SaaS competitive analysis, that’s not the whole story.
In the SaaS industry, keeping your enemy close won’t prevent you from getting ambushed. Sometimes you
don’t even know who your enemies are. The “enemy,” after all, could be acquired by Amazon and put
you out of business overnight. Or Google could build a competing product in your market.
Here’s why you should conduct a SaaS competitive analysis, or “study the enemy.” Studying the ‘enemy’
can help you understand the battlefield. It can help you identify where the “enemies” are and how they’re
approaching the business. It can help you discover strategic areas where you can position yourself for a
win.
Software-as-a-service (SaaS) is becoming an increasingly viable choice for organizations in search of
accessibility, functionality, and versatility in a cutthroat business environment.
It will, however, help you develop a high-impact go-to-market (GTM) strategy. An effective GTM strategy
requires a deep understanding of your ideal customer, market and competition, product offering and

pricing, and channels necessary to reach your customers. Competitive analysis helps you understand market
dynamics so you can find an optimal way to reach your target customers. Analyzing your market and
competition also helps you determine how your company and your product fits in the current environment.
How Not to Use a Competitive Analysis
You’ll never be able to fully understand or duplicate a competitor’s strategy. A competitive analysis is just one
input in your growth strategy — and a limited one at that. You don’t want to look to your competitors for
marketing tactics. They might be spending thousands on Facebook ads, but that doesn’t mean it’s working.
You also don’t want to launch a new feature just to keep up with a competitor. For all the talk of the data-
driven workplace, you’d be surprised how many product decisions are driven by petty internal politics or a
micromanaging HiPPO (Highest Paid Person’s Opinion).
Don’t use competitive analysis to make decisions on what to build next. Your next idea isn’t going to come
from your competitors. It should come from customer feedback, talking to prospects, and ideas your
colleagues are sharing internally across your company.
Avoid industry research. Industry analysts aren’t good at predicting disruptive companies and cutting- edge
trends because such changes occur at the bottom of the market, which is generally not on their radar.
Research giants like Forrester and Gartner provide industry consensus after major shifts have already
occurred. Plus, they derive their research by analyzing large organizations, so startups won’t find what they’re
looking for here.
Don’t spend too much time on it. Treat your competitive analysis as an ancillary activity. It shouldn’t
consume too much of your time and resources. Focus on what your customers are telling you, whether through
feedback, interviews or their in-app behavior. They will always be your strongest source of data and insights.
Here’s what you need your organization to align on first:
1. Customer (WHO)
Who are your target customers (and companies)?
2. Problem (WHAT)
What core problem does your product solve for your target customers?
3. Product Category (HOW)

How do you solve this problem? Are you solving this problem with a unique technology or process?
The importance of comparing yourself to your competitors
Before you can start you need to understand who your competitors are. But how do you
do this? The best way to determine if another business is a key competitor you need to
ask yourself:
 What services are they providing?

 Are you targeting similar target audiences?
 Are they operating closing to you?
You’ll have the competitors you typically think of locally, but also those competing for the same search
terms as you too. According to Study.com there are 3 main types of competitors:
 Direct competitors:
“A direct competitor offers the same products and services aimed at the same target market and customer
base, with the same goal of profit and market share growth. This means that your direct competitors are
targeting the same audience as you, selling the same products as you, in a similar distribution model as
you.”
 Indirect competitors:
"An indirect competitor is another company that offers the same products and services, much like
direct competitors; however, the end goals are different.”
 Substitute competitors:
“Another company offering a product or service to your customers that you also provide.”
How to Perform Competitive Analysis

and Research on a Company
Identify Competitors
The first step in doing competitive research is
identifying your competitors. Knowing who
your competitors are will help you develop a
more effective approach for retaining your
audience and possibly even drawing them
away from the competition.
There are many effective strategies for

identifying competitors, from attending
conferences to doing in-depth industry
research. Both of these approaches

certainly have their benefits. In many ways, there is nothing more effective than simply rolling up your
sleeves, hunkering down, and doing a lot of old-fashioned research.
But these days, you will probably find most of the information you need on Google and Amazon. You can
dig up a surprising amount of information by searching for specific products and business concepts. You
could even find several companies in similar niches by searching for your business name. The goal is to
pinpoint companies like yours and to copy off what they are doing right and to avoid what they are doing
wrong in digital marketing. You will look at their visual marketing, including video marketing, as well as
other forms of content marketing.
Research Competitor Websites and Marketing Channels
The process of identifying your competitors should give you an idea of where in the industry you choose
to position yourself. The next step is to figure out what you are up against, which involves researching the
websites and marketing channels of your competitors.
You will want to look into your competitor’s products and pricing structures. We’re going to go more into
that later, but at this point, you should take note of how competing sites display their products and
communicate product information.
Every bit of information you can obtain is valuable, from the photography to the product descriptions, and
the site layout to the color scheme. Identifying common features and strategies and knowing what works
and what doesn’t will help you develop your own marketing strategy and tell you which mistakes to
avoid.
Compare Products and Prices
Products and pricing are so crucial to your marketing strategy that they deserve more focus when
doing competitive research. Although you definitely want to give your customers the most value possible,
you don’t necessarily want to bankrupt your company doing it!
Your pricing strategy is crucial to giving your business a competitive advantage. Checking out how your
competitors price their products will give you a good idea of what your potential customers are willing to
pay.
Always keep in mind the need to maintain a healthy profit margin to keep your business afloat.
Competitive pricing isn’t always about having the lowest prices. If you offer higher quality products and
services than your competitors, don’t be shy about pricing them accordingly.
Read Reviews or Speak with Competitor Customers

To get an accurate picture of how your competitors are serving their customers, you need to go straight to
the source: the customers themselves. User reviews will tell you how satisfied – or dissatisfied – your
competitors’ customers are with the products or services they are receiving.
Just as researching competing websites and social media channels, this will help you develop a more
effective approach for dealing with your own customers.
Don’t just stop at customer reviews. Check out business reviews and comments on social media
pages of competing firms as well.

Treat every review or testimonial as a valuable source of information. There’s no shame in adopting
methods that have been proven to be effective. All is fair in love and war, and marketing. There is no need
to reinvent the wheel if you can get some mileage from strategies that your competitors already
implemented.
Create Alerts and Check in Frequently

Competitive analysis is a never-ending process. You should always keep tabs on what your competitors
are doing, even if you’ve already hit on a winning formula for your own marketing. There is always
something new to learn and some new market development to use in your campaign.
An easy way to keep track of the competition is to set up Google Alerts so that you will receive email
updates based on specific keywords. You could set up alerts for your competitors’ brand names and
standard industry terms, which let you know about new developments that could potentially affect your
business.
A competitor analysis can help you uncover essential business insights that can inform other areas of
marketing. You will benefit from partnering with a company that excels in full service marketing strategies
when conducting a competitor analysis. You can use the results of the analysis to strengthen your video
marketing strategy. The analysis will have a heavy influence on your content strategies, as well. You can
use the results to understand how visual marketing can impact brand awareness, and you will better
understand how engagement and traffic are not always the same. The analysis will help you determine what
type of content is the most engaging, easily allowing you to devote your time and resources toward certain
types of content
creation that will prove a strong ROI. Even businesses that are brand new will benefit from a competitor
analysis.
Competitive Analysis: How To Conduct A Comprehensive Competitive Analysis
In this guide, you will learn how to conduct a competitive analysis: understand market trends, identify
your competitors, evaluate opportunities, analyze threats to your organization, and adjust your go-to-
market and positioning strategy accordingly.

Questions you need to be Asking in your Competitor Analysis
The Product
 Are their products the same as yours?

 What is their pricing positioning like?
 Do their products have any unique selling points (USPs) over yours?
 What keywords are they using to describe their products?
The Brand
 Does their brand target the same audience as yours?

 Who do competitors target?
 Are there a lot of mentions of their brand on Google?

Marketing
 What channels do they use to market these products?

 Do they use social media? If so, then how are they using it? Look at content, followers, activity
and engagement.
 Do they have marketing materials like a podcast, webinar, blogs, eBooks or anything else?
 What campaigns are they running? (both online and offline)
 What kind of content are they writing? Is this something you can replicate or do better?
 What tone of voice do they use?
Technology
 What is their website made with (you can use the tool Built With to identify this)
 Is their website easy to use?
 What is their website page speed like?
 What other sites are linking back to your competitor's site, but not yours?
Customers
 Do customers engage with them? How do they communicate?

 What sort of content do they respond well to?
 What platforms are they using to engage?
Then, add anything else that you think would be useful in formulating your strategy. Now you can begin to
identify what your competitive advantage is (if you have one), where you need to improve and how you
can act on this information.
How Often Should I Conduct a Competitor Analysis?
To stay ahead you will need to continue to understand your customer requirements while keeping up with
the latest industry trends.
Whilst this can differ depending on the industry, we recommend conducting a competitor analysis
anytime from once a quarter to once a year. This gives you time to react to your discoveries and
benchmark your progress.
Tools and Resources and Techniques
Technology and techstack:

 Datanyze - As mentioned earlier, this tool analyzes millions of websites and finds snippets
of code that tell you what integrations, platforms and plugins are behind a company’s
product.
 Similartech - Similar to Datanyze.
 Builtwith - Find out what technologies are being used on specific websites.

Company Profiles:
 Crunchbase - Discover industry trends, investments, and news about your competitors.
 LinkedIn - Where you can find out a competitor’s “biographical” info. Usually the best
source to find an active employee count.
 Angel.co - See which startups are hiring and for what positions.
 Owler - Similar to Crunchbase.
 DataFox - Its database shows which companies use more than 14,000 technology
solutions, which you can search through using the Similar Company Algorithm.
 Mattermark - See company profiles, key personnel, and growth signals related to your
competitors.
 Slideshare - Find competitor product or funding slide decks here.
Product reviews:
 G2Crowd - The best resource to learn what customers think about your products and
competitors.
 GetApp - Similar to G2Crowd.
 TrustRadius - Similar to G2Crowd.
 Quora - See questions or discussions about certain products or topics that might be helpful
in your competitive analysis.
YouTube - Find product demos and presentations.
Website traffic:
 SimilarWeb - Provides website traffic comparison.
SEO & SEM:
 SEMrush - Helps you understand your competitors’ focus in search engine marketing,
including best-performing keywords, along with their spend.
The primary goal of a competitive analysis is to understand the marketplace and how you can differentiate
from other players. At the end of a competitive analysis, you should create a battlecard for each
competitor. A competitive battlecard is essentially a quick visual reference for your sales and marketing
team, guiding them as they position your organization against competitors.
Sample Battlecard: PublishNOW vs WordPress
Here’s a fictitious battlecard using two real companies, describing how a new PublishNOW
product will be positioned against WordPress. PublishNOW is a content publishing platform for marketers
and writers to improve content engagement, content stickiness, and reach. WordPress is a blogging
platform.

The battlecard helps sales understand the strengths and weaknesses of WordPress and how to win
customers when going up against them.
Concluding Remarks
In an ever-changing industry, there are always new innovative ways to expand your strategy to stay ahead
of your competitors as well as keeping the attention of your customers.
The importance of a competitor analysis cannot be over-estimated. Analysing your competitors is a simple,
yet effective marketing tactic to make sure you are keeping up and matching the efforts of others in the
industry.
This prevents you from getting ‘lost in the noise’ of your competitor’s efforts, so you can implement a
marketing strategy that will strengthen your online position and expand your online footprint.
Remember: The idea of a competitive analysis isn't to overly focus on the competition but to understand
where your company stands in the marketplace and identify opportunities to further differentiate. At the
end of the day, a focus on the customer will serve your company far more than a focus on the competition.
Done well, a competitive analysis can help you find ways to outplay the competition by better serving
customers — theirs and yours.

Lesson 10 SUPPLY CHAIN ASSESSMENT
 Define supply chain and supply chain assessment

 Describe the significance of supply chain assessment
 Identify the areas of supply chain to evaluate and assess
 Familiarize the content of a supply chain assessment and its relevance to strategic planning
What is a Supply Chain?
A supply chain is an entire system of producing

and delivering a product or service, from the very
beginning stage of sourcing the raw materials to the
final delivery of the product or service to end-users.
The supply chain lays out all aspects of the
production process, including the activities involved
at each stage, information that is being
communicated, natural resources that are transformed
into useful materials, human resources, and other
components that go into the finished product or
service.
Why Should A Company Understand Its Supply Chain?
Mapping out a supply chain is one of the critical steps in performing an external analysis in a
strategic planning process. The importance of clearly laying out the supply chain is that it helps a company
define its own market and decide where it wants to be in the future. In developing corporate-level
strategies, a company often needs to make decisions on whether to operate a single line of business or
enter into other related or unrelated industries.
Each stage of a supply chain is essentially a different industry, for example, raw material extraction and
manufacturing. The supply chain enables a company to understand others that are involved in each of the
stages, and thereby provides some insights on the attractiveness or competitiveness in industries the
company might want to enter in the future.
Supply Chain Examples
Let’s look at two different examples of a supply chain.
Generic Supply Chain
The generic supply chain begins with the sourcing and extraction of raw materials. The raw materials are
then taken by a logistics provider to a supplier, which acts as the wholesaler. The

materials are taken to a manufacturer, or probably to various manufacturers that refine and process them
into a finished product.
Afterward, it goes to a distributor that wholesales the finished product, which is next delivered to a
retailer. The retailer sells the product in a store to consumers. Once the consumer buys it, this completes
the cycle, but it’s the demand that then goes back and drives the production of more
raw materials, and the cycle continues.
Supply Chain for an e-Commerce Company
In this example, the e-commerce company operates a website, and that website sells various products.
When a customer places an order for a product, the product order is being processed by technology such as
a checkout cart, an order system, or a third-party product such as Shopify The payment processors then.
come in and deal with payment transactions for the order, which actually opens up a new supply chain.
The payment processors use their own systems but, in most cases, third parties such as PayPal
and Stripe are employed, and they involve banks and other providers. When a product order is placed,
the warehouse receives the order and ensures the product is ready for
delivery. The warehousing company can be either in-house or a third-party logistics provider.

The order then goes from the warehouse to the shipping company. Once again, the shipping may be in-
house or a third-party shipping company. After shipping, the package arrives at the customer’s door and
the customer receives it.
The first step of creating your Supply Chain Strategy is to conduct an Assessment. The Assessment
provides a road map for organizational improvements that the client can use on their own, or often we are
asked to assist and facilitate the development and implementation of the strategy.
Supply Chain Optimization and Supply Chain Analysis are two important, but separate methodologies for
profitably growing sales through great customer service and disciplined cost management.
Supply Chain Optimization is the evaluation of tradeoffs in your supply chain, including delivery times,
inventory availability, transportation costs, facility costs, inventory investment and which suppliers to
purchase from, to find the highest service and lowest cost supply chain design. These design decisions
include:
1) the number and location of your factories and/or warehouses,
2) the level of your inventory investment (raw materials, work-in-process and finished goods, 3) the
choice of your transportation mode and design of your routing system, and
4) your strategic sourcing decisions.
Supply Chain Analysis involves a comprehensive review into your data to find unseen patterns in
demand and cost data. We use various statistical modeling and data analytics tools to determine where
cost-reduction and service improvement opportunities may exist. In addition, we combine analytics with
Supply Chain Management Best Practices including the Bullwhip Effect, Supply Chain Collaboration,
product development, strategic – tactical – operational supply chain decisions, global supply chain
management, choosing the best supply chain design

for your products and understanding the importance of information technology in implementing supply
chain management.
With the end of the year looming, it’s once again that time of the year when businesses plan for the
upcoming year. For organizations committed to a continuous improvement process for their supply chain
and other business processes, now might be an excellent time to perform a supply chain management
assessment.
Understanding What a Supply Chain Management Assessment Entails
It’s essential to note that, while a supply chain management assessment may help identify gaps in business
processes that can be solved with technology solutions, a supply chain management assessment differs
from a technology assessment.
A technology assessment looks at existing technology solutions, IT governance, and security to make
determinations on improving current practices with new solutions or enhancing existing ones. Making a
supply chain management assessment takes a more holistic look at the business’ supply chain
management practices from demand planning all the way to distribution.
Our whitepaper on Supply Chain Management Assessment outlines four main areas that should be the
focal point of your supply chain management assessment, namely:
1. The level of coordination between different operations from forecasting to

manufacturing to order fulfillment as well as the effectiveness of the current supply
chain planning operations
Collaboration and coordination is a vital part of any effective supply chain process. Whenever there are
gaps or breaks in the communication process from cross-functional teams, it causes waste which could
soar up growing costs. For instance, a break in communication between the sales and demand planning
teams could create an excess or shortage of inventory leading to unsatisfied customers or high inventory
costs. In
2. A comparison of the operations with best-in-class operations to determine areas of

improvement
Using industry benchmarks from best-in-class operations can help you identify where your business might
be lacking and in need of improvement. Benchmarking also presents you with ideas on how you could
implement certain improvement projects, making a daunting task look attainable.
3. An assessment of the Information Technology (IT) systems currently being used to

support the operations, to identify specific gaps and improvement potential
In most cases, what differentiates innovators from laggards is the ability to “not leave good enough alone.”
Organizations committed to continuous improvement and innovation do not only fix systems that are
broken. They either enhance existing systems or find better suited ones to improve productivity or save
valuable business time. For such businesses, finding best-in-class supply chain solutions that solve their
specific business challenge is top on the list of technology enhancements.

4. Business process changes and organizational needs to support a best-in-class

supply chain operation
To sum everything up, the final step in your supply chain management assessment is to document all the
business process changes and needs for supporting your identified best-in- class supply chain operation.
This involves creating analyses on current and past operations, as well as a well detailed plan on how to
improve your current supply chain operations.
Five Key Supply Chain Assessment Areas

In the end, depending on the business involved, an assessment may focus on one or two of the areas listed
above. It’s also essential to note that, some areas of improvement are not mutually exclusive. For instance,
you may not be able to achieve your data visibility goals if your systems are not integrated or if you don’t
have the right data integrity processes in place.

How Evolved Is Your Supply Chain – A Self Assessment

Four Stages of Supply Chain Evolution
 Stage 1: Multiple Dysfunction. The (potential) nucleus firm [organization] lacks clear
internal definitions and goals and has to external links other than transactional ones.
 Stage 2: Semi-Functional Enterprise. The nucleus firm [organization] undertakes initiatives
to improve effectiveness, efficiency, and quality within functional areas. While some or all
functions engage in initiatives designed to increase efficiency within their departmental walls,
there is little or no overlap in decision-making from one department to another.
 Stage 3 – Integrated Enterprise. The firm [organization] break down silo walls and
brings functional areas together in processes such as sales and operations planning (S&OP)
with a focus on company-wide processes [and cost reductions] rather than individual
functions.
 Stage 4 – Extended Enterprise. The firm [organization] integrates its internal network with
the internal networks of selected supply chain partners to improve efficiency, product
/ service quality or both. The starting point is generally one inside / outside partnership that
points the way to a completely networked enterprise.
Today, most organizations fall in the middle of the supply chain evolution continuum operating
somewhere in or between Stage 2 and Stage 3. While many aspire to achieve Stage 4, few have
successfully achieved this level of evolution and built sustainable partnerships with multiple members of
their supply and customer base. Regardless of where your organization is on the continuum today,
achieving higher levels of evolution in the future is possible. The future depends on…YOU. By ensuring
that you think outside the box; integrate and collaborate with suppliers and customers (internal as well as
external); and look to create win-win solutions throughout your daily activities, process execution, and
interactions you can play an active role in your organization’s supply chain evolution.

References:
Sloan, J.(2020).Learning to Think Strategically 4th Edition.Routedge
Wootton,S.Horne,T.(2010).Strategic Thinking 3rd Edition.Kogan Page Limited
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STFM Compiled Notes 1st Sem AY22 23

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STFM Compiled Notes 1st Sem AY22 23

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Mater Dei College Special Topics in Financial Management

Lesson 1 LEARNING TO THINK STRATEGICALLY

· Define strategic thinking and strategic planning

How do we learn to think strategically?

Strategic thinking is a problem-focused, intent-

Cognitive Clusters for Strategic Thinking and

Figure 4.1 shows a cluster of cognitive functions

The Sloan Triad Model of Strategy

Strategic thinking is often well outside the comfort

INFORMAL AND FORMAL LEARNING DEFINED

A Japanese financial executive declared:

FORMAL LEARNING REFUTED

Lesson 2 STRATEGIC ANALYSIS

 Define strategy and strategic analysis

What is Strategic Analysis?

1. Identifying and evaluating data relevant to the company’s strategy

Vision, Mission, and Values

 Vision – What it wants to achieve in the future (5-10 years)

Strategic Analysis Process

The following infographic demonstrates the strategic analysis process:

1. Perform an environmental analysis of current strategies

2. Determine the effectiveness of existing strategies

4. Recommend and implement the most viable strategy

Types of Strategic Analysis

Strategic Analysis and Market Research

Strengths of Strategic Analysis

Weaknesses of Strategic Analysis

Strategic Analysis Examples

Story #1: Strategic Analysis Vs. Operational Data

A local government prospect asked me if ClearPoint’s software could track individual

 Analyzing summary information is strategically useful because it provides

Story #2: Strategic Analysis Vs. Data Analytics

A nonprofit organization asked me if ClearPoint could replace its customer relationship

WHAT IS CHANGING OUT THERE?

Lesson 3 OPERATION ANALYSIS

 Define operation analysis

KEY POINTS OF OPERATION ANALYSIS

 Use operation analysis to improve the method by asking what.

 Why is this operation necessary?

 Why are these tolerances this close?

1. How can the operation be performed better?

Relation with Lean Manufacturing

Lean manufacturing originated with the Toyota Motor Corporation as

Highlights of the Toyota Production System (TPS)

(1) overproduction, (2) waiting for the next step, (3)

A corollary to the seven mudas is the 5S system to reduce

Sort focuses on removing all unnecessary items from the

Operation Analysis Main Items

II. PART DESIGN

1. Reduce the number of parts by simplifying the design.

III. TOLERANCE AND SPECIFICATIONS

1. Finding a less expensive and lighter material.

V. MANUFACTURE SEQUENCE AND PROCESS

To improve the manufacturing process, the analyst should consider

 Rearranging the operations;

 Mechanizing manual operations;

 Utilizing more efficient facilities on mechanical operations;

 Operating mechanical facilities more efficiently;

 Manufacturing near the net shape

VI. SETUP AND TOOLS

1- REDUCE SETUP TIME Just-in-time (JIT) techniques

Several points should be considered in reducing setup time:

2- UTILIZE THE FULL CAPACITY OF THE MACHINE