Strategy

Analysis and
Choice
Process for strategic
choice:
1. focusing on Alternatives – the
aim of this step is to narrow down the choice to a
manageable number of feasible strategies. It can
be done by visualizing a future state and
working backwards from it. Managers generally
use Gap Analysis purpose. By reverting to
business definition it helps the managers to think
in a structured manner along any one or more
dimensions of the business.
 A Gap analysis is the
process companies use to
compare their current
performance with their
desired, expected
performance. This analysis is
used to determine whether a
company is meeting
expectations and using its
resources effectively.
*At Corporate level of strategic
alternatives are :
expansion, stability , retrenchment,
combination
*At business level strategic alternatives
are:
cost leadership, differentiation, or
focused business strategy.
alternatives-
The alternatives have to be subjected to
a thorough analysis which rely on
certain factors known as selection
factors. These selection factors
determine the criteria of the basis of
which the evaluation take place. They
are:
Objective factors- These are based
on analytical techniques and are hard facts
used to facilitate strategic choice.

Subjective factors- these are based

on one’s personal judgment, collective or
descriptive factors.
3. Evaluation of Strategies- each factor is
evaluated for its capability to help the
organization to achieve its objectives. This
step involves bringing together analysis
carried out on the basis of subjective and
objective factors. Successive iterative steps
of analyzing different alternatives lie at the
heart of such evaluation.
4. Making a strategic Choice- A strategic
choice must lead to clear assessment of
alternative which is the most suitable
alternative under the existing conditions. A
blueprint has to be made that will describe
the strategies and conditions under which it
operates . Contingency strategies must be
also devised.
What is Strategic Analysis?
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
 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.
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.
Industry Analysis
 What is Industry Analysis?
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.
 Types of industry analysis
There are three commonly used and important
methods of performing industry analysis. The
three methods are:
 *Competitive
Forces Model (Porter’s 5 Forces)

*Broad Factors Analysis (PEST Analysis)

*SWOT Analysis
 What is the Competitive Forces Model?
The Competitive Forces Model is an important tool used
in strategic analysis to analyze the competitiveness in an
industry. The model is more commonly referred to as the
Porter’s Five Forces Model, which includes the following
five forces: intensity of rivalry,
threat of potential new entrants,
bargaining power of buyers, bargaining power of suppliers
, and threat of substitute goods and/or services.
#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 C
ompetitors.
”
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
 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
environment.
 1. Political
Political factors that impact an industry
include specific policies and regulations
related to things like taxes, environmental
regulation, tariffs, trade policies, labor
laws, ease of doing business, and 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).
 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
reached its saturation point.
 Corporate Portfolio
Analysis
-corporate portfolio analysis is simply a portfolio
analysis that is used for competitive analysis and
strategic planning in various small to large
companies including multi-product and multi
business firms.
Corporate portfolio Analysis can help to
create a competitive advantage.
- in this case, we can take an example of a
diversified company that can divert its business
from one business to another where faster
growth is possible, this is help to get maximum
returns or to achieve its corporate-level
objectives in an optimal manner.
Definition and meaning of corporate
portfolio analysis.
It can be define as set of techniques that
helps strategists in taking strategic
decisions with regard to individual
products or business in a firm’s portfolio.
 In this segment of company or
organization’s product line is evaluated this
include:

*sales
*product cost
*market share
*potential market share
Evolution of corporate portfolio
techniques

evolved in mid 1960’s

this techniques evolved somewhere

between mid 1960’s
Importance of corporate portfolio
analysis:
*to analyze the current business portfolio
*to decide SBU investment distributions
*to add new product or services or businesses
*to decide product retention or removal
Corporate portfolio analysis
Techniques

below is the list of various methods and

techniques used for CPA.
1. BCG Matrix or product portfolio

2. GE nine cell model

3. Hofer’s product market evolution

4. Directional policy and the strategic position

5. Action evaluation techniques

BCG matrix or product portfolio
this model was proposed by Boston
Consulting Group.

Two factors involved.

1.Relative market share

2.Market growth rate
BCG matrix model involves 4 scenario:

1. Star
2. Cash cow
3. Dogs
4. Question mark, also called problem
children
Contingency Strategies
Strategic Contingency Definition
A contingency is "a requirement of the activities of one subunit
which is affected by the activities of another subunit. What
makes such a contingency strategic is that the more
contingencies are controlled by a subunit, the greater is its power
within the organization. For example, an engineering subunit has
power because it quickly absorbs uncertainty by repairing
breakdowns that interfere with the different workflows for each
of several organizational outputs" (Hickson et al., 1971).
Three common methods used to mitigate contingencies
include:
1. Credit lines Tactical contingency plans will involve setting up
lines of credit when the business is still healthy to ensure credit
will be conveniently accessible in times of need i.e. when
negative events occur.
2. Insurance A company or organization can also take out an
insurance policy against the occurrence of such contingencies. ...
3. Capital raising and revenue retention
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