1. Company Situation Analysis
Matching the company’s strategy to external market circumstances and to internal resources and competitive capabilities.
1. How well is the present strategy working?
2. What are the company’s resource strengths /weaknesses and external opportunities and threats?
3. Are the company’s costs and prices competitive?
4. How strong is the company relative to rivals?
5. What strategic issues does the company face?

2. 1. How well is the current strategy working?
What is the current strategy?
Is it achieving financial/strategic objectives?
Is market share increasing/decreasing?
Trends in profit margin, net profit, ROI, stock price, sales?

3. 2. SWOT Analysis Identifying:
Company STRENGTHS & competitive capabilities; Company WEAKNESSES & resource deficiencies; Company market OPPORTUNITIES; THREATS to a company’s future profitability…..

4. SWOT - Strengths & Weaknesses
Sources of Strength or Weakness
Skill or expertise (or lack of)
Physical assets - plant, equipment, location (or lack of)
Human assets / expertise (or lack of)
Organisation assets - quality control system, patents
Valuable intangible assets - brandname, loyalty, culture
Competitive capabilities - shorter development times, customising capability, supplier relations.
Strategic Balance Sheet - Competitive Assets & Liabilities

5. Core & Distinctive Competencies
Core competence is something a company does well relative to other internal activities.
Distinctive competence is something a company does well relative to competitors.
Whether a core competence represents a distinctive competence depends on how good the competence is relative to what competitors are capable of.

6. SWOT Analysis - Opportunities/Threats
Not every industry opportunity/threat is a company opportunity/threat - need to analyse and compare:
Impact on growth & profit potential
Impact on existing / potential sources of competitive advantage
Match with company resource capabilities

7. Drawing Conclusions from SWOT Analysis
How best to deploy resources in view of the company’s internal/external situation
Does the resource base need to be adjusted to respond to emerging issues?
Are there resource gaps that need to be filled?
In what ways does the company need to strengthen its (future) resource base?

8. 3. Are company prices/costs competitive?
Cost disparities can stem from:
Difference in raw materials prices
Difference in technology used
Difference in age of plant/equipment
Difference in production costs
Difference in marketing, sales, promotion &
advertising costs
Difference in exposure to inflation/taxes etc.

9. Strategic Cost Analysis - Benchmarking
Benchmark the costs of key activities to understand the best practices involved in performing an activity and to see if costs are in line with other companies.
Use info. from published reports, trade groups, industry analysts, customers, suppliers....
Used to identify areas of cost advantage/disadvantage.

10. Strategic Cost Analysis
Business as a collection of activities with costs
= cost structure
Compare a company’s costs activity by activity against those of rivals.
Learn which internal activities are a source of cost advantage or disadvantage.

11. Cost Analysis - Company Value Chain
Primary analytical tool of strategic cost analysis
Identifies the separate activities, functions and processes used in designing, producing, marketing, delivering and supporting a product or service.
Identifies the primary activities that create value for customers and the related support activities.

12. Cost Analysis - Company Value Chain
Primary
Activities
& Costs
Sales &
Marketing
Purchasing
Operations
Distribution
Service
Profit
Support
Activities
& Costs
R & D; Technology; HRM; Administration

13. Cost Analysis - Company Value Chain
Value chains of rival companies differ.
Company value chain is embedded in larger Value Chain System - part of and affected by value chains of upstream suppliers and downstream customers.

14. Value Chain Composition Differs by Industry & by
SOFT DRINKS
Processing ingredients
Syrup manufacture
Bottling/Can Filling
Wholesale distribution
Retailing
SOFTWARE
Programming
Disk Loading
Marketing
Distribution
ACCOUNTANCY
Human Resource
Management
Customer Service
Value Chain Composition
Differs by Industry & by
Company

15. Upstream Company Downstream Value Chains Value Chain Value Chains
THE VALUE CHAIN SYSTEM
Upstream Company Downstream
Value Chains Value Chain Value Chains
Activities,
Costs, and
Margins of
Suppliers
Internally
Performed
Activities, Costs
and Margins
Activities,
Costs, Margins
of Forward
Channels
END
USER
Adapted from Michael Porter, Competitive Advantage, 1985.

16. Strategic Options for Achieving Cost Competitiveness
Options to combat upstream disadvantage:
Negotiate more favourable prices with suppliers
Work with suppliers to help reduce costs
Integrate backwards
Source cheaper substitutes
Manage linkage between supplier & co. Eg JIT

17. Strategic Options for Achieving Cost Competitiveness
Options to combat downstream disadvantage:
Push distributors/forward channels to markups
Look for win-win opportunities to costs
Change to more economical distribution strategy
Forward integrate

18. Strategic Options for Achieving Cost Competitiveness
Options to combat internal disadvantage:
Streamline high cost activities
Reengineer business processes / work practices
Re-vamp value chain to eliminate some activities
Outsource activities if more economical
Invest in cost-saving technology
Simplify product design

19. 4. How strong is the company’s competitive position?
Whether mkt position will improve/deteriorate if present strategy continued?
How the firm ranks relative to key rivals on each industry success factor and each relevant measure of competitive strength
Whether the firm has a competitive advantage / disadvantage v.a.v rivals
Firm’s ability to defend mkt position in light of industry driving forces

20. Competitive Strength Assessment
Identify industry’s KSFs/determinants of competitive advantage/disadvantage (usually measures)
Rate firm and key rivals on each indicator (scale 1-10)
Sum individual ratings = competitive strength
Note which companies are strongest and areas of relative strength & weakness

21. Competitive Strength Assessment
EXAMPLE
KEY INDICATORS CO.A CO.B CO.C
PRODUCT QUALITY
BRAND IMAGE
CUSTOMER SERVICE
OPERATING COSTS
EXPERTISE
R & D
Overall Strength Rating

22. Weighted CSA Key indicators Weighting co.A co.B co.C
Product quality / / /.6
Brand image / / /.15
Customer service / / /1.0
Operating costs / / /2.4
Expertise / / /.6
R & d / / /.15
Sum of weights 1.0
Weighted overall strength rating

23. Strategic Group Mapping
Identify characteristics that differentiate firms in the industry
Identify and group firms with similar competitive approaches
Plot firms on a two variable map using pairs of these differentiating characteristics
Draw circles around each group proportionate to size of groups’ respective share of total industry sales revenue

24. Strategic Group Mapping
Distinguishing characteristics: price/quality range; geog scope; vertical integration; pdt line breadth; distribution channels; service; pdt attributes; technology
Number of groups - spread of groups
A number of maps can be useful
Whether some groups affected more by certain ind. forces
Movement between groups

25. Strategic Mapping - Jewellery Industry
High
PRICE
QUALITY
IMAGE
Med
Low
Specialty Full line craft
Diamonds/ jewellers
Watches etc
Ltd category
merchandise
retailers
Broad
category
retailers
PRODUCT LINE BREADTH

26. 5. What strategic issues does the company face?
Does the company have a competitive advantage?
Does it capitalise on resource strengths?
Which opportunities should be prioritised?
What corrective measures need to be taken?
How does the cost position compare to that of rivals?
Does the present strategy defend against the 5 forces?
Is it closely matched to the industry’s KSFs?
Should it be adjusted to better respond to driving forces?