Lesson 2 Strategic Analysis.pptx

Overview of Strategic Analysis  Overview of the Strategic Analysis - Strategic Analysis is not just about collecting data; it’s about interpreting that data to make informed decisions that align with an organization’s goals. - It helps in understanding the external and internal factors t...

Overview of Strategic Analysis  Overview of the Strategic Analysis - Strategic Analysis is not just about collecting data; it’s about interpreting that data to make informed decisions that align with an organization’s goals. - It helps in understanding the external and internal factors that influence the organization’s success. 2  External Environment - This is the process of examining and evaluating the external environment to understand the factors that could impact the organization. It involves identifying and assessing macro and micro factors to help the organization make informed strategic decisions. - The analysis should include both macro (e.g., global trends) and micro (e.g., local market) factors.  1. PESTEL Analysis - PESTEL is a comprehensive framework that covers a wide range of external factors. It’s often the first step in environmental analysis. - Each factor in PESTEL can significantly influence business operations, so it’s important to understand the interrelationships between these factors. 4  PESTEL Example: For an electric car manufacturer SOCIAL ECONOMIC POLITICAL - Government - Rising oil prices may - Growing incentives for increase demand for environmental electric vehicles can electric cars. awareness could lead boost sales. to more customers choosing electric vehicles. TECHNOLOGICAL ENVIRONMENTAL LEGAL - Advances in - Stricter emissions - New safety standards battery technology regulations may force may require design can enhance the traditional car changes to the vehicles. range and efficiency manufacturers to pivot of electric cars. towards electric Made with Slidey vehicles. 5  2. Porter’s Five Forces - Porter’s Five Forces help determine the competitive intensity and attractiveness of an industry. It’s crucial for understanding where power lies in a business situation. - This model is useful for identifying potential opportunities and threats in the market. 6  Porter’s Five Forces 1. Threat of New Entrants - This force looks at how easy or difficult it is for new companies to enter the industry. If it’s easy for new competitors to start a business in the industry, they might take away market share from existing companies, increasing competition. - Factors: Barriers to entry, such as high startup costs, access to technology, and strong brand loyalty, can make it harder for new companies to enter. 2. Bargaining Power of Suppliers - This force examines how much power suppliers have to drive up prices or reduce the quality of goods and services. If there are few suppliers or if they provide essential materials, they have more power to affect prices and terms. - Factors: Number of suppliers, the uniqueness of their products, and the cost of switching suppliers influence their bargaining power. 3 3. Bargaining Power of Buyer - This force looks at how much power customers have to drive down prices or demand higher quality. When buyers have a lot of choices or if they buy in large quantities, they can negotiate better deals. - Factors: The number of buyers, the importance of each buyer to the company, and the availability of alternatives affect their bargaining power. 4. Threat of Substitute Products or Services - This factor looks at how likely customers are to choose other products or services instead of yours. If there are many alternatives that do the same job, it can limit how much you can charge for your product. - Factors: The availability of substitute products, their performance and price, and the cost of switching to them influence this threat. 5. Industry Rivalry - This force looks at the intensity of competition among existing companies in the industry. High rivalry can lead to price wars, increased marketing costs, and reduced profitability. - Factors: The number of competitors, the rate of industry growth, and the differentiation 3  Porter’s Five Forces Example: Consider a small bakery Threat of Newin a city Threat of Industry Rivalry Entrants Substitutes - The bakery competes - Low barriers to entry - Customers could with several other local mean that new choose to bake at bakeries and large bakeries can easily home or buy pastries chain stores, leading to open, increasing from grocery stores, intense competition on competition. posing a threat to the price and quality. bakery. Bargaining Power of Bargaining Power of Suppliers Buyers - If the bakery sources - If customers have many specialty ingredients alternatives, they can from few suppliers, demand lower prices, which those suppliers may could affect the bakery’s have high bargaining profit margins. 7  Internal Analysis - Internal analysis focuses on evaluating the organization’s strengths and weaknesses. This includes an assessment of resources, capabilities, and processes. - Understanding internal factors helps an organization leverage its strengths and improve its weaknesses.  3. Resource-Based View (RBV) - The Resource-Based View (RBV) suggests that an organization’s unique resources and capabilities are the key to achieving a competitive advantage. - Resources must meet the VRIN criteria (Valuable, Rare, Inimitable, and Non- Substitutable) to provide a sustainable competitive advantage. Example: A fashion brand that has a highly creative design team (a rare and valuable resource) and a strong brand reputation (difficult to imitate) can use these resources to maintain a 9  4. Value Chain Analysis - Value Chain Analysis helps identify the activities within an organization that add value to the final product or service. By analyzing these activities, organizations can find ways to enhance value or reduce costs. - The primary and support activities are interconnected, and optimizing one can often improve others. 10  Steps of Value Chain Analysis 1. Primary Activities- These are the main steps directly involved in making the product or delivering the service.  Inbound logistics- receiving, storing, and handling raw materials.  Operations- turning raw materials into the final product.  Outbound logistics- Distributing the product to costumers.  Marketing and Sales- promoting and selling the product.  Service- providing after-sales support and customer service. 2. Support Activities- these help make the primary activities more efficient.  Firm Infrastructure- management, finance, and planning.  Human Resource Management- Hiring and training employees.  4. SWOT Analysis - SWOT Analysis is a strategic tool used to identify internal strengths and weaknesses, as well as external opportunities and threats. It helps organizations understand where they stand and how they can improve. - The SWOT matrix can be used to develop strategies that align strengths with opportunities and to mitigate weaknesses and threats. - Conducting a SWOT analysis involves a systematic process of gathering information, analyzing it, and using it to create strategies that align with the organization’s goals. - The analysis should be revisited regularly to ensure it remains relevant as internal and external conditions change. 11 Example: For a local restaurant Innovative product ideas Limited seating capacity and a unique menu. S W and outdated equipment. kitchen Increasing rent costs and Growing trend of online new competitors in the food delivery services. O T area. 12 Thanks! 13