1 Management Audit and Environmental Analysis Geoff Leese October 2005 Revised September 2006, July 2007, August 2008, August 2009

2 SWOT analysis n Strengths n Weaknesses n Opportunities n Threats Internal (Management audit) External (Environmental Scanning)

3 Management audit n The 7-S model n Value chain analysis n Network analysis

4 McKinsey’s 7-S Framework n Strategy n Structure n Systems n Shared Values n Staff n Skills n Style

5 an approach to organising n aid to building a cohesive strategy n all equally important n 7 interdependent variables n change one, impacts others n use this to evaluate strategy developments n soft is harder to measure n good for capturing importance of the links

6 Value chain analysis (Porter) n Views the organisation as a chain of value-creating activities. n Must create sufficient value to exceed their cost thus generating profit (or at least not generating loss!) n Primary and support value chain activities

7 Primary value chain activities Inbound logistics Operations Outbound logistics Sales and marketing Service Any or all of these can be important in a given scenario – sometimes defining them is not so simple!

8 Support value chain activities n Procurement n Technology development n Human Resource Management n Infrastucture management ä Legal, financial, QA, estates and buildings etc

9 Value chain analysis n Identify the activities and process flows n Identify linkages between activities n Identify ways to optimise the value chain ä Outsourcing? ä Involving the customer? –On-line booking –Self-assembly furniture ä Involving suppliers?

10 Organisational network analysis n Social network analysis applied to organisations n Maps “nodes” (people, groups, functions) and the interactions between them (relationships or flows) n Measures “centrality” of nodes (their importance) using mathematical criteria

11 Some ONA criteria n Degrees (number of direct connections) n Betweenness (nodes that connect other nodes ) n Closeness (short paths to many nodes)

12 An ONA diagram

13 Environmental scanning(1) n Macro environment ä PEST,SLEPT,STEP n Micro-environment ä Competitors, suppliers, distributors, customers n Methods ä Ad-hoc (usually in response to crisis!) ä Regular scheduled ä Continuous

14 Macroenvironmental scanning n PEST (STEP, SLEPT) analysis ä Political (includes legal!) ä Economic ä Social (includes “Green”) ä Technological

15 Political factors n Taxation n Employment/Health and Safety law n Regulation/deregulation n Trade restrictions and tariffs (or lack of them!) n Political stability

16 Economic factors n Connected to political ones n Economic cycle n Growth or recession? n Interest rates n Inflation rates n Exchange rates

17 Social factors n Demography n Age distribution n Geographical distribution n Cultural norms n “How we live”

18 Technology factors n Rate of technological change n Automation n Technology incentives n Emerging technologies n Levels of R&D activity

19 Microenvironmental scanning n Competitor analysis ä Competitor array ä Competitor profiling n Consumer analysis (market research) n Product innovations

20 Competitor array example Should we include ourselves?

21 The SWOT matrix

22 SWOT Strategies n Strength-Opportunity ä Make use of strengths to grasp opportunities that fit them n Strength-Threat ä Identify ways to use strengths to minimise external threats n Weakness-Opportunity ä Overcome weaknesses to pursue opportunities n Weakness-Threat ä Prevent weaknesses from encouraging threats

23 Summary n SWOT analysis ä Assess and analyse strengths and weaknesses –Seven S –Value chain –Organisational network analysis ä Assess and analyse opportunities and threats –PEST analysis –Competitor analysis –Market research ä Devise strategies based on all four

24 Further reading n Bennett Chapter 5 n Johnson and Scholes chapters 3 and 4 n For ONA – ä n General strategic management stuff ä t/6592/ t/6592/