1. Chapter 17 Formulating business strategy using gap analysis
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

2. Role of gap analysis Gap analysis completes the process:
Broad strategic possibilities were examined through:
Strategic quadrant and competitive position
Growth strategies
Corporate strategy
International strategy
Gap analysis completes the process:
It examines the gap between current strategy and the environment
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

3. Two elements of gap analysis
The strategy match with the current and predicted evolutions of the environment
5 forces
PEST
Trends
The firm compared with key competitors
Capabilities
Business models
Strategic position
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

4. Gap analysis and the environment
Industry
GAPS?
GAP?
GAP?
Current firm strategy
Trend analyses
5 Forces analyses
PEST analyses
As with initial environment analyses, gap analysis should proceed through checklists.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

5. Worked example: WineRidge
Gap analysis on 5 Forces
Force
Impact
Gap?
Threat of entrants
Threat of substitutes
Power of buyers
Power of suppliers
Rivalry
low
high No
Yes: broad product range and weak marketing (too many brands)
Yes: high vertical integration
Yes: declining market share in Australia
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

6. Gap analysis and competitors
GAPS?
GAP?
GAP?
Current firm strategy
Capabilities
Business models
Competitive positions
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

7. Worked example: WineRidge
Competitor AA Handy is far less vertically integrated than WineRidge or Southpark. It should therefore be more profitable
Share of grape growing
Wine market share
Grape growing to wine ratio
AA Handy
1.6%
14.3%
0.11
WineRidge
5.7%
13.8%
0.41
Southpark
5.5%
13.2%
0.42
Montecliff
3.1%
11%
0.28
Windy Orchards
1.5%
0.14
Dillinger Blast
2.4%
5.1%
0.47
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

8. Formulating Strategy Price
Focused
differentiation
High
Suicide
Price D
Differentiation
Ref
Broad dimensions are cost and differentiation
Broad dimensions are cost and differentiation C
Breakthrough
Low B
Low price A
No frills
High
Low
Perceived Quality
Trade offs:
Cost v benefit
Broad v niche
Standardised v customised
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

9. Formulating Strategy: cost v differentiation
process innovation
product innovation
R & D
narrow range – scale economy
broad range – scope economy
Product range
individual productivity
group – value creation HR
flat & lean
cross functional
Structure
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

10. Formulating Strategy: cost v differentiation
R & D
Product range HR
Structure
Cost
Differentiation
process innovation
narrow range – scale economy
individual productivity
flat & lean
product innovation
broad range – scope economy
group – value creation
cross functional
Resources and capabilities are embedded in firm characteristics.
Strategic options are limited by the extent these can be changed
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

11. 17.5 Strategic action at WineRidge
Based on gap analysis, recommend strategic actions for WineRidge
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

12. 17.5 Strategic action at WineRidge Possible actions
GAPS
ACTIONS
5 Forces
high buyer power
high rivalry
rationalise brands
weak brands
losing market share
improve marketing
PEST - trends
US supply likely to exceed demand
exposure with JV's, acquisitions
reduce exposure and increase exports
divest vineyards with commodity grape varieties
Competitors
low integration
largest vineyards
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

13. 17.6 Construct an idea tree for WineRidge
Then prioritise actions to take
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

14. Grow rare / valuable grape varieties
17.6 A possible idea tree solution
Focus on export
Divest acquisitions
International
Divest JV's
Strategy
Few strong brands
Domestic
Grow rare / valuable grape varieties
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

15. 17.6 A priority solution
1. Divest commodity vineyards to competitor best practice.
Reduces profit drag and raises capital
2. Divest US acquisitions and JV's while increasing exports.
Raises capital (with 1) for action 3 & reduces exposure to risk
3. Rationalise brands and market heavily to create consumer pull in domestic and US markets.
With 2, allows for scale economies and reduction of buyer power
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak