STRATEGY ANALYSIS

Knowledge Audit for Business Analysis – BSIS 3

 • Strategy is the direction and scope of an
organization over the long term, which
achieves advantage in a changing
What is Strategy? environment through its configuration of
resources and competencies with the aim of
fulfilling stakeholders’ expectations.
What is Strategy?
• Derived from the Greek word “strategia” which
means “generalship”. It has a “getting ready for
battle” sense to it and the deployment of troops,
weapons, aircraft and ships before engagement
with the enemy begins.
 • Strategies exist at different levels in an

Levels of organization. These are the typical levels

of strategy:

Strategy
• Corporate Strategy
• Business Unit Strategy
• Operational Strategy
Corporate Strategy
• This is concerned with the overall purpose and
scope of the business
• Strategies at this level are influenced by investors,
governments and global competition, and it is the
basis of all other strategies and strategic decisions
Business Unit Strategy
• These strategies are for the strategic business units (SBUs).
• SBUs are organizational units for which there are distinct
external markets that are different from other SBUs.
• SBU strategies address choic of products, pricing, customer
satisfaction and competitive advantage.
Operational Strategy

• This focuses on the

delivery of the corporate
and SBU strategies through
the effective organization
and development of
resources, processes and
people
Strategy
Development
• We can view an organization
as a political system that
manipulates the formation of
strategy through the exercise
of power. This power comes
from five main sources:
• Dependency
• Financial resources
• Position
• Uniqueness
• Uncertainty
 External
Environment Analysis
• Most organizations face a complex and
changing external environment of
increasing unpredictability.
• PESTLE analysis – a framework to help
organizations assess their broad
environment.
• Political influences
• Economic influences
• Socio-cultural influences
• Technological influences
• Legal influences
• Environmental influences
Political
Influences
• The stability of the government
or political situation
• Government policies
• Trade regulations and tariffs
Economic Influences
• Interest rates
• Money supply
• Inflation
• Unemployment
• Disposable income
• Availability and cost of energy
• The internationalization of business
Socio-cultural
Influences
• Demographics
• Social mobility
• Lifestyle changes
Technological
Influences
• Technological developments
• Government spending on
research
• The focus on technology
• The pace of technological change
Legal Influences
• Legislation about trade practices and competition
• Employment law
• Health and safety legislation
• Company law
• Financial regulation
Environmental
Influences
• Global warning and climate
change
• Animal welfare
• Waste
• Environmental protection
legislation
Five Forces Model by Michael Porter
Porter's Five Forces Model

Five Forces is a model that identifies and analyzes five Five Forces analysis is frequently used to identify an
competitive forces that shape every industry and helps industry's structure to determine corporate strategy.
determine an industry's weaknesses and strengths.
Porter's Five Forces Model

• Threats of new entrants – depends on the level of

barriers to entry
• Bargaining power of suppliers – pertains to the power
of the suppliers to raise the products' prices or lower
the quality of the products
• Bargaining power of buyers – pertains to the extent
the customers are able to put the company under
pressure, which also affects the customer’s sensitivity
to price changes.
• Threat of new products or services
• Rivalry among competitors – industry competition
Internal Environment Analysis

Successful strategies also depend on the capability of the organization

to perform.

MOST analysis - examines the current mission, objectives, strategy and

tactics, and considers whether or not these are clearly defined and
supported within the organization.
 Mission – a statement declaring what business the
organization is in and what it is intending to achieve

Objectives – the specific goals against which the

MOST Analysis
organization's achievements can be measured

Strategy – the medium to long-term approach that

is going to be taken by the organization in order to
achieve the objectives and mission

Tactics – the detailed means by which the strategy

will be executed
Resource • Resource audit can help us to identify core competences
or may highlight where there is a lack of competence
Audit that could undermine any competitive moves.
Resource Audit

• Five areas to be examined:

1. Physical resources
2. Financial resources
3. Human resources
4. Know-how of the
organization
5. Reputation of the
organization
Portfolio Analysis
• Portfolio of business units. Each offering their own
products and services may also be a source of strength or
weaknesses for an organization
• Boston Box is a tool for portfolio management. The idea is
to develop a balanced portfolio of products or business
units that either generate or consume cash. The Boston Box
– or Growth-Share-Matrix – was named after the Boston
Consulting Group, since it was developed by BCG’s founder,
Bruce D. Henderson and his colleagues.
Boston
Box
Star (High • Their markets are attractive, since they provide potential for further growth.
market share, • Stars already have an excellent position, compared to competitors. Their
high market value for the company as a whole lies in their potential to become cash
generating cash cows as soon as the market growth slows down.
growth)
Question Marks (Low market
share, high market growth)
• Their growing market is promising. Yet, the product is
in a weak position to capitalize on these prospects. To
increase market share requires the product to grow
above the market growth rate. In doing so it has to
attack competing products that will defend their
stronger position.
Cash cows (High market
share, low market growth)
• Cash cows generate the cash to be invested
elsewhere in the company. Their high share in a stable
market provides a secure position, which can be
maintained without major investments.
• Mature markets beyond their growth phase may
move on to a stage of decline.
• As soon as the overall market volume significantly
decreases, the products ability to generate cash will
be harmed, despite its strong position.
Dogs (Low market
share, low growth
market)
• These have low market share in
markets with low growth and
are often the areas that are
removed or allowed to wither
away
SWOT Analysis

An analysis that is often used to pull together the results of an

analysis of the external and internal environments

Strengths and weaknesses are found within the organization an can

be discovered through resource audit or Boston Matrix

Opportunities and threats arise from outside the organization and

can be found using PESTLE or the Five Forces Model
Executing
Strategy
• Executing new strategies implies
risk because it involves change.
• These are the 5 issues to be
considered in executing strategy:
1. Time
2. Scope
3. Capability
4. Readiness
5. Strategic leadership
McKinsey's 7-S
Model
 The 7-S model supposes that all organizations are
made up of seven components.

McKinsey's 7- Three are often described as "hard" components:

S Model Strategy Structure Systems

The other four are "soft" components:

Shared
Style Staff Skills
values
The Balanced
Business
Scorecard
The Balanced Business The Balanced Business Scorecard (BBS)
can be thought of as the strategic balance
sheet for an organization as it captures the
means of assessing the financial and non-
financial components of a strategy
Scorecard

The scorecard shows how the strategy

execution is working and the effectiveness
with which the levers for change are being
used
The Balanced Business Scorecard
• Each perspective answers questions like these:
• Financial – what level of income has been
generated? How profitable is the business?
• Customer – how will we assess our customer
satisfaction?
• Learning and Growth – how will we measure our
ability to change and improve so that we constantly
keep ahead of the competition?
• Internal Business Processes – how effective are the
business processes that we must excel at to deliver
customer value?
Thanks be to God