Strategic Analysis I

Strategic Analysis
Strategic Analysis
The process of conducting research on

the business environment within which
an organization operates and on the
organization itself, in order to formulate
strategy.
Why & When
• To take advantage of the path of least

resistance to achieve your goal.
• When you are planning to make a change in
your organization, and you need to
determine the best path to take.
Some Basic Tools for Strategic Analysis
• SWOT Analysis
• Industry Analysis
• Driving Forces Analysis
• BCG Growth/ Share Portfolio Matrix
• GE Business Screen Matrix
• Value Chain Analysis
• McKinsey 7S Analysis
• Strategic Relationship Analysis
• Critical Success Factors Analysis
SWOT Analysis
This tool was developed by Albert Humphrey for
identifying opportunities and threats in the business
environment as well as strengths and weaknesses
within a firm.
It can be used for analysing the connectivity between

environmental forces and strategic capability, in so
doing identifying key factors that determine new
strategies, and providing a platform for testing and
validating strategic initiatives.
SWOT
Strength
Weaknesses Threats
Opportunities
Problems of SWOT Analysis
• The structure stresses occurrence of all opportunities
and threats must be external, meanwhile in reality
some are within a firm.
• Contradictory inputs give rise to error
• It’s too mechanistic

Conducting SWOT Analysis
• Indicate objectives of analysis
• Identify all the strengths and weaknesses of the firm
(weighing resources and competencies) in line with stated
objectives.
• Identify all the opportunities and threats pertaining to stated
objectives.
• Examine the interplay of strengths and weaknesses versus
opportunities and threats (SO, WO, ST & WT).
• Identify action points for achievement of stated objectives.
• Assess & Align
Using SWOT Analysis to Suggest and Test Strategies
Mission
Strengths Goals
Situation
Audit
Threats Competition
Base
Facilities
etc
Industry Analysis
This aims at identifying and evaluating all the

forces that operate within and around the
specific industry where a firm competes.
Porter’s Five Forces
This tool was developed by Michael Porter for
analysing a firm’s industry structure in
strategic processes.
Wherefore, it provides room for valuation of

market attractiveness by assessing total
effect of the five forces on a firm’s ability to
make profit while relating with its customers.
The Five Forces
Potential
Entrants
Threat of Entrants
Bargaining
Suppliers Power Competitive Bargaining Buyers
Rivalry Power
Threat of Substitutes
Substitutes
Applying The Five Forces
Force Factors for Consideration
Bargaining •Concentration of Customers •Quantity of Goods Purchased
Power of •Level of Fixed Cost in Industry •Importance of Product to Buyers
Buyers •Size of Customers
•Switching Cost
•Ease of Substituting Product
Bargaining •Availability of Substitutes
Power of •Switching Cost
Suppliers •Ease of Forward Integration
•Network among Suppliers
Threat of Entrants •Dearth of key resources •Intellectual Property

•Economies of Scale •Control of Channels
•Customer Loyalty •Legislation
•Initial Investment Level •Switching Cost
Threat of Substitutes •Level of Customer Relationship

•Customer Loyalty
•Switching Cost
•Price to Performance Ratio
Extent of •Exit Barriers
•Level of Differentiation
Competitive
•Growth Rate of Market
Rivalry
•identicalness of Strategy
Problems of Porter’s Five Forces
• It can’t be easily used for very complex
industries with diverse and hidden networks.
• It can’t cope with the cuff of dynamic markets.
• It can’t fit into a highly regulated industry
The Nine Forces
Political/Legal Potential Technological
Shifts Entrants Shifts
Industry
Suppliers Buyers
Competitors
Social Substitutes Economic

Shifts Shifts
The Thirteen Forces
Technological
Economic
Shifts
Shifts
Potential
Social Entrants
Environmental
Shifts
Shifts
Suppliers Industry Buyers

Competitors
Substitutes
Political
Demographic Shifts
Shifts
Legal
Ethical
Shifts
Shifts
Driving Forces Analysis
This tool is used for identifying the driving forces
of change and uncertainties in an industry, in
addition to assessing their impact, in order to
proffer solution.
How to Conduct Driving Forces Analysis
• Identify all the main driving forces in a
particular industry.
• Assess and rank the impact of each driving
force.
• Consider impact and proffer solution.
Identifying Driving Forces
Every set of stakeholders within a particular

industry and the ensuing macroenvironmental
factors would be examined in order to find out
associated driving forces.
Assessing and Ranking Driving Forces
A rating system of 1 to 10 (signifying weak to

strong) can be used to mark the strength of
each driving force as well as the ease of
influencing it. Thereafter, the sum of strength
and influence would be used to determine
rank of each driving force.
Problems of Driving Forces Analysis
• Improper assessment of stakeholders or

macroenvironmental factors.
• Corporate imagined
• It cannot independently determine a firm’s
strategy.
BCG Growth Share Portfolio Matrix
It was developed by Boston Consulting Group for
detecting areas of priorities in the business
portfolio of a firm.
The BCG Matrix
Stars Question Marks

Business Growth Rate (Market Growth)
high
Cash Cows Dogs
low
high low
Relative Position (Market Share)
Hot to Use BCG Growth Share Portfolio Matrix
i. Identify all the business units of a firm.

ii. Determine the growth rate and market share of each business
unit.
iii. Determine the stars, cash cows, dogs and question marks.
iv. Describe them as stated below.
Stars: Maintain your market share and use vertical or
horizontal integration, product development, market
penetration/ development to optimize.
Cash Cows: This should be well managed to enhance
profitability.
Dogs: This should be liquidated or divested.
Question Marks: Effort towards better positioning include
product development, market penetration/ development or
alternatively divestment can be implemented.
Problems of BCG Growth Share Portfolio Matrix
• The structure is too narrow.

• There are other indicators of market attractiveness
apart from market growth.
• Profitability is not synonymous to market share
• It does not account for synergy factor between
business units.
• It may be difficult to get full data on market share and
growth rate.

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Strategic Analysis

The process of conducting research on

• To take advantage of the path of least

It can be used for analysing the connectivity between

• Contradictory inputs give rise to error

• It’s too mechanistic

This aims at identifying and evaluating all the

Wherefore, it provides room for valuation of

Threat of Entrants •Dearth of key resources •Intellectual Property

Threat of Substitutes •Level of Customer Relationship

Social Substitutes Economic

Suppliers Industry Buyers

Every set of stakeholders within a particular

A rating system of 1 to 10 (signifying weak to

• Improper assessment of stakeholders or

Stars Question Marks

Cash Cows Dogs

i. Identify all the business units of a firm.

• The structure is too narrow.

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