Improve Business Practice

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 LO I

Diagnose the Business

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Purpose:
- Identify where the business stands in relation to
rivals
- Collect and use data to inform business decision
making
- Identify strengths and weaknesses in the business
- Use information to inform strategic planning

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 Acquiring Data for Business
Diagnosis
• Introduction
• Data is the raw material that is to be
processed for information or for collection of
details.
• It is unorganized data or facts that are to be
processed.

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 Conti..
• Information is processed data.
• The data that can be made useful is known as
information.
• Information is basically the data plus the meaning of
what the data was collected for.
• Data does not depend upon information but information
depends upon data.
• Information is meaningful when data is gathered and
meaning is generated

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Conti…

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The reason some small businesses succeed where
others fail is they have better access to information.
• Business access information to make smart decisions.

• Data has the power and play important role in

business decisions.
• Big business and governments use large data sets to
tell them about economic and social trends.
• It can be hard for small businesses to access the
same data or apply the same level of insight to
interpreting it.
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It starts with asking the right questions
• In every aspect of life, good advice comes from people who
know the right questions to ask.
• Small biz connect advisor can personalize advice to using the
questions in your small business diagnostic.
The tools included in the diagnostic are for clients who want to:
• Examine basic business issues
• Consider purchasing or starting a new business;
• Tackle common issues faced by new businesses
• Get a competitive edge online and in social media
• Find creative solutions in designing or manufacturing their
products.

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See how you measure up

• Knowing how your business compares to similar businesses

is an important way to see if there are any areas for
improvement.
• It also helps to tell you what your business is worth.
• Big businesses benchmark themselves against their
competitors all the time and on many different dimensions
profits, costs, customer feedback, employee engagement …
It is another thing that traditionally has been hard for small
businesses to do.

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Put yourself in the right place on the map

• The more information you have about different locations to

start, buy or expand a business, the better the decisions you
will be able to make about where to make an investment.
• Before you open in a place, you might estimate the demand
for your business by standing outside for a while to get an
idea of who is passing.
• If you want to make a truly informed decision, that’s just the
start.
• There is lots of information you can gather about a place.
• The trick knows what it is, where it is, how to get it and what
to do with it when you have it.

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Rationale for the business diagnostic
• The provision of supports to individual businesses will be an
important element in helping the industry overall to prepare for
growth; but there are many challenges.
• Despite the challenges, for supports to make any real, and lasting,
impact they must respond to clearly defined needs which naturally
vary from business to business.
• Diagnostic tools available for business have tended to focus upon
individual aspects of business operations, or on a limited number
of dimensions, and a holistic analytical tool has not featured to
date.

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Competitive Advantage
• The challenge for a marketing strategy is to find a way of
achieving a sustainable competitive advantage over the
other competing products and firms in a market.  
• A competitive advantage is an advantage over competitors
gained by offering consumers greater value, either by means
of lower prices or by providing greater benefits and service
that justifies higher prices.

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 Conti…
 As Porter suggested that there are four generic business
strategies that could be adopted in order to gain competitive
advantage.
 The strategies relate to the extent to which the scope of a
business' activities are narrow versus broad and the extent to
which a business seeks to differentiate its products.
• The differentiation and cost leadership strategies seek
competitive advantage in a broad range of market or industry
segments.
• By contrast, the differentiation focus and cost focus strategies
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conti…

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Cost leadership

• With this strategy, the objective is to become the lowest-

cost producer in the industry.
• Why is cost leadership potentially so important?
• Many market segments in the industry are supplied with
the emphasis placed on minimizing costs.
• If the achieved selling price can at least equal or near the
average for the market, then the lowest-cost producer will
or in theory enjoy the best profits.
• This strategy is usually associated with large-scale
businesses offering standard products with relatively little
differentiation that are readily acceptable to the majority of
customers.
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 Cost leadership…

• Occasionally, a low-cost leader will also

discount its product to maximise sales,
particularly if it has a significant cost
advantage over the competition and, in doing
so, it can further increase its market share.
• A strategy of cost leadership requires close
cooperation between all the functional areas
of a business.

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Cost leadership cont…
To be the lowest-cost producer, a firm is likely to achieve or use of
the following:
• High levels of productivity
• High capacity utilization
• Use of bargaining power to negotiate the lowest prices for
production inputs
• Lean production methods (e.g. JIT)
• Effective use of technology in the production process
• Access to the most effective distribution channels

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Differentiation focus
• In the differentiation focus strategy, a business aims to
differentiate within just one or a small number of target
market segments.
• The special customer needs of the segment mean that there
are opportunities to provide products that are clearly
different from competitors who may be targeting a broader
group of customers.
• Many small businesses are able to establish themselves in a
niche market segment using this strategy, achieving higher
prices than un-differentiated products through specialist
expertise or other ways to add value for customers.

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 Differentiation focus…

• The important issue for any business adopting

this strategy is to ensure that customers really
do have different needs and wants - in other
words that there is a valid basis for
differentiation - and that existing competitor
products are not meeting those needs and
wants.
• Differentiation focus is the classic niche
marketing strategy.
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Differentiation leadership
• With differentiation leadership, the business targets much larger
markets and aims to achieve competitive advantage across the
whole of an industry.
• This strategy involves selecting one or more criteria used by
buyers in a market - and then positioning the business uniquely
to meet those criteria.
• This strategy is usually associated with charging a premium price
for the product - often to reflect the higher production costs and
extra value-added features provided for the consumer.
• Differentiation leadership is about charging a premium price
that more than covers the additional production costs, and
about giving customers clear reasons to prefer the product over
other, less differentiated products.

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The methods include:
• Superior product quality (features, benefits, durability,
reliability)
• Branding (strong customer recognition & desire; brand loyalty)

• Industry-wide distribution across all major channels (i.e. the

product or brand is an essential item to be stocked by
retailers)
• Consistent promotional support – often dominated by
advertising, sponsorship etc

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 Cont…
• Great examples of a differentiation leadership
include global brands like Nike and Mercedes.
• These brands achieve significant economies of
scale, but they do not rely on a cost leadership
strategy to compete.
• Their business and brands are built on
persuading customers to become brand loyal
and paying a premium for their products.

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Low-Cost Focus
• The low-cost focus strategy is similar to the cost leadership
strategy except that it focuses on a niche market.
• Instead of marketing a product to the entire population it
is marketed to a particular segment of the population.
• The aim of the strategy is to then be the cheapest provider
in that segment.
For example, an electronics store might focus its market on a
single town; its goal would then be the cheapest in the
town but not necessarily the cheapest overall.

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SWOT ANALYSIS
• SWOT analysis is a strategic planning method used to evaluate
the Strengths, Weaknesses, Opportunities, and Threats in the
business environment.
• SWOT is often used as part of a strategic planning process.

• SWOT is basically a business tool that deals with the internal

and the external factors of the business. It is an acronym
which stands for; strength, weakness, opportunities and
threats. It uses the basic data of the business to identify what
strengths and weaknesses the business has.
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 Conti…
• How to perform a SWOT Analysis?
• A SWOT analysis can be done by a single
person or a group of people.
• Both cases involve performing only a few
steps.
• 1. Synthesis of the internal data to list the
weaknesses and the strengths of the firm
• 2. Collect the external data to identify the
possible threats and opportunities.
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Strengths
Strengths describe the positive factors of your
business.
• These are completely under your control, and
you decide how to utilize them for the benefit
of your company.
• Strengths are considered as an internal factor
and include the positive attributes of your
company.

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 Conti…
Characteristics of the business or team that give it an advantage over
others in the industry.
• A strong financial position; ample financial resources to grow the
business.
• Strong brand name, image of company, reputation.
• A widely recognized market leader and an attractive customer base.
• Ability to take advantage of economies of scale
• Cost advantages.
• Well positioned company, better product quality relative to
competitors.
• Wide geographic coverage and distribution capabilities.
• Skilled work force, harmonious work environment.

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Weaknesses
• Weaknesses are internal factors that are within
your control. Despite being in your control, these
factors somewhat detract you from performing at
an optimum level. These will hinder your progress
and give the competitive edge to your
competitors.
• Weaknesses may include:
• the lack of technologies,
• lack of capital invested in your business, and unskilled
labors or even the poor location of your business.
These factors are in your control but needs improvements so
that you are no longer at a disadvantage.

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 conti…
Characteristics that place the firm at a disadvantage relative to
others.
The absence of certain strengths may be viewed as a weakness.
• No clear strategic direction.
• Obsolete facilities/equipment/processes.
• A weak balance sheet(poor financial capabilities), debt
burdened.
• Higher overall unit costs.
• Missing some key skills or competencies/lack of management
depth.
• Poor sales/profits/growth.
• Manufacturing problems.
• Poor product quality.
• Poor customer/market orientation. 30
• Opportunities
• Opportunities are the positive external factors.

• Opportunities reflect the potential of the business and

marketing strategy implemented.
• These open up possibilities for the business to do well.

• If done right or taken advantage of them the business

will have a significant boost over its rivals or competitors.

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 Conti…
External chances to make greater sales or profits in the
environment.
• an unfulfilled customer need

• arrival of new technologies

• loosening of regulations

• removal of international trade barriers

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Threats
Threats are basically the factors which may put your
marketing strategy in jeopardy(risk). Not only that,
but your entire business is also at risk as well.
• A key part of SWOT analysis is the assessments of
the possible threats that may arise.
• Since it is an external factor, you have no control
over it.
• However, you can make a contingency plan to
combat such risks.

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 Conti..
External elements in the environment that could
cause trouble for the business.
Changes in the external environmental also may
present threats to the firm.
Some examples of such threats include:
• Shifts in consumer tastes away from the firm's
products
• Emergence of substitute products
• New regulations
• Increased trade barriers
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Benefits of SWOT analysis
The main advantages of conducting a SWOT analysis is that it has little or no
cost - anyone who understands your business can perform a SWOT analysis.
Using a SWOT, you can:
• Understand your business better
• Address weaknesses
• Deter threats
• Capitalize on opportunities
• Take advantage of your strengths
• Develop business goals and strategies for achieving them.
A SWOT analysis may be limited because it:
• Does not priorities issues
• Does not provide solutions or offer alternative decisions
• Can generate too many ideas but not help you choose which one is best
• Can produce a lot of information, but not all of it is useful.

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