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Business Studies A2 > Unit 6. Chapter 35. Strategic analysis > Flashcards

Unit 6. Chapter 35. Strategic analysis Flashcards

1
Q

Strategic analysis

A

the process of conducting research into the business environment within which an organisation operates, and into the organisation itself, to help form future strategies.

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2
Q

Strategic analysis tries to find answers to 3 questions

A
  • Where the business now?
  • How might the business be affected by what is happening or likely to happen?
  • How could the business respond to these likely changes?
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3
Q

Effective strategic analysis

A
  • Clearer and more relevant business goals
  • Better-quality strategic decisions
  • Less risky future for a business
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4
Q

SWOT analysis

A

a form of strategic analysis that identifies and analyses the main internal Strengths, Weaknesses, external Opportunities and Threats that will influence the future direction and success of a business.

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5
Q

Internal strengths

A

real advantages, basis for developing a competitive advantage.
- undertaking an internal audit of the firm (specialist management consultants)
+ specialist marketing expertise
+ a new, innovative product or service
+ location of your business
+ quality processes and processes
+ any other aspect that adds value to product/ service

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6
Q

Weaknesses

A
  • lack of marketing expertise
  • undifferentiated products or services (in relation to competitors)
  • location of business
  • poor-quality goods and services
  • damaged reputation
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7
Q

Opportunities

A

potential areas for expansion and future profits

  • A developing market (e.g. Internet)
  • Mergers, joint ventures or strategic alliances
  • moving into new market segments that offer improved profits
  • A new international market
  • A market vacated by an ineffective competitor
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8
Q

Threats

A

analyses the business and economic environment, market conditions and strength of competitors.

  • A new competitor in your home market
  • Price wars with competitors
  • A competitors has a new, innovative product or service
  • Competitors have superior access to channels of distribution
  • Taxation of product or service
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9
Q

Evaluation of SWOT evaluation

A
  • no 2 managers would arrive at the same assessment of the company
  • not a quantitative form of assessment so the cost of correcting a weakness cannot be compared with the potential profit from pursuing an opportunity.
  • management guide for future
  • helps managers assess the most likely successful future strategies an the constraints on them
  • common starting point, rarely sufficient.
  • further analysis and planing needed before strategic choices can be made.
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10
Q

PEST analysis

A

the strategic analysis of a firm’s macro-environment, including Political, Economic, Social and Technological factors

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11
Q

Political and legal

A
  • Stability of the government
  • Are changes in the law likely to impact on a particular industry?
  • Environmental regulations
  • Employment law
  • Competition regulations
  • Consumer protection laws
  • Government attitude to free market or controls over business
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12
Q

Economic

A
  • Rate of economic growth/ recession
  • Exchange rate stability
  • Contry’s membership of free-trade areas
  • Membership or likely membership of a common currency scheme (EURO)
  • Tax rates and likely changes
  • Interest rates and likely changes
  • Inflation rates and stage of business cycle
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13
Q

Social

A
  • Demographic changes, e.g. ageing ot more youthful population
  • Dominant religion and impact, e.g. on marketing strategies
  • Education standards, e.g. skilled labour force
  • Roles of men and women in society
  • Social and environmental issues could be of increasing concern to the population
  • Labour and social mobility, such as migration between countries or from rural areas to cities as in China and India.
  • One or many languages spoken
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14
Q

Technological

A
  • Rapidly changing technology allowing products to be made more cheaply
  • Government support for R&D spending
  • Internet access, speed of broad band and its impact on marketing and other strategies
  • Renewable energies and the cost of these compared to fossil fuels
  • Speed of technological obsolescence
  • new product inventions and the importance of these to consumers
  • Changes in IT speed and range of applications
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15
Q

Evaluation or PEST

A

Needs constantly updated and reviewed, especially in a rapidly changing wider environment.

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16
Q

Business vision/ mission statements and strategic analysis

A

+ Mission statement: a statement of the business’s core purpose and focus, phrased in a way to motivate employees and to stimulate interest by outside groups
+ Vision statement: a statement of what the organisation would like to achieve or accomplish in the long term
- Give sense of purpose to an organisation
- Need to be applicable to the business, understood by employees and convertible into genuine strategic actions

17
Q

Boston matrix

A

a METHOD of analysing the PRODUCT PORTFOLIO of a business in terms of Market Share and Market Growth

  • analysis of an existing product portfolio
  • future strategies the firm could take next.
  • size of the circle represents the total revenue earned by each product.
  • Cash Cow, Star, Problem Child, Dog
18
Q

Cash Cow

A
  • LOW market growth, HIGH market share
  • well-established product in a mature market
  • high positive cash flow, profitable
  • high consumer awareness
  • low promotional costs
  • cash from this INJECTED (milked) into some of the other products in the portfolio.
19
Q

Star

A
  • HIGH market growth, HIGH market share

- high promotion costs to differentiate the product and reinforce brand image

20
Q

Problem Child

A
  • HIGH market growth, LOW market share
  • newly launched -> need heavy promotion costs to help become established
  • sales do not improve -> revised design, relaunch, withdrawal from the market
21
Q

Dog

A
  • LOW market growth, LOW market share

- withdraw

22
Q

Boston Matrix and strategic analysis

A

Support and corrective action
+ Building
- supporting Problem Child products with additional advertising or further distribution outlets
+ Holding
- continue support Star so maintain good market position
+ Milking
- taking the positive cash flow from established products and investing in other products in the portfolio
+ Divesting
- identify Dog and stop the production and supply.
- impact on the workforce
- whether the spare capacity freed up by stopping production can be used profitably for another product.

23
Q

Evaluation of the Boston Matrix

A
  • analysing the performance and current position of existing products
  • planning action to be taken with existing products
  • planning the introduction of new products
  • No guarantee business success
    -> depend on the ACCURACY of the analysis by the marketing managers and the SKILLS they possess in employing appropriate marketing strategies.
    Disadvantages:
  • Little use in predicting future success or failure
  • Cannot tell a manager what will happen next with any product.
    -> Detailed and continuous market research will help.
    -> Conscious of the potential dramatic effects of competitors’ decisions, technological changes and the fluctuating economic environment
  • Planning tool
  • Assumption is made that higher rates of profit are directly related to high market shares
24
Q

Porter’s Five Force Analysis

A
  • Framework for business strategy, analysis of the competitive situation in an industry
  • Understand the industry context
  • External environmental audit
  • Focuses on single or stand-alone business units rather than a single product or a range of products
    1. Barriers to entry
    2. The power of buyers
    3. The power of suppliers
    4. The threat of substitutes
    5. Competitive rivalry
25
Q
  1. Barriers to entry
A

The ease with which other firms can join the industry and compete with existing businesses
- This threat of entry is greatest when:
+ Economies of scale are low in the industry
+ Technology needed to enter the industry is relatively cheap
+ Distribution channels are easy to access
+ No legal or patent restrictions on entry
+ Importance of product differentiation is low, so extensive advertising may not be required to get established

26
Q
  1. The power of buyers
A
  • Power that customers have on the producing industry.
    Increased when:
  • there are many undifferentiated small supplying firms
  • The cost of switching suppliers is low
  • Buyers can realistically and easily buy from other suppliers
27
Q
  1. The power of suppliers
A

Suppliers more powerful than buyers

  • Cost of switching is high
  • When the brand being sold is very powerful and well known
  • Suppliers could realistically threaten to open their own FORWARD-INTEGRATION operations
  • Customers have little bargaining power as they are small firms and fragmented.
28
Q
  1. The threat of substitutes
A
  • Substitute products in other industries
    Exist when:
  • New technology makes other option available
  • Price competition forces customers to consider alternatives
  • Any significant new product leads to consumer spending that results in les being spent on other goods
29
Q
  1. Competitive rivalry
A

Determine the level of competition or rivalry in an industry
- Centre of Five Forces Diagram
High when:
- It’s cheap and easy for new firms to enter an industry
- There’s a threat from substitute products
- Suppliers have much power
- Buyers have much power
Great rivalry between competing firms in an industry:
- Large number of firms with similar market share
- High fixed costs -> firms try to obtain economies of scale
- Slow market growth -> firms take a share from rivals if they wish to increase sales.

30
Q

Porter’s Five Forces and strategic decisions

A
  1. Analysing new markets
    -> Helps firms decide whether to enter or not
    -> Provides an insight into the potential profitability of markets
  2. Analysing the existing markets a business operates in. DECISIONS about
    -> Stay in the future if they are becoming more competitive
    -> How to reduce the level of competitive rivalry in these markets and thus increase potential profitability
  3. Knowledge gained and power of competitive forces, business
    -> Develop strategies improve competitive position
    + Product differentiation
    + Buying out some competitors
    + Focus on different segments that might be less competitive
    + Communicate and collude with rivals to reduce competition
31
Q

Evaluate the Five Forces model

A
  • Advantages:
    + Good starting point for further analysis
  • Disadvantages:
    + Static analysis: analyses an industry at just one moment in time. -> many industries are changing very rapidly
    + Model can become very complex when trying to use it to analyse many modern industries with joint ventures
    -> Multiple product groups and different market segments within the same industry
32
Q

Core competence

A

an important business capability that gives a firm competitive advantage

33
Q

Core product

A

product based on a business’s core competences, but not necessarily for final consumer or ‘end’ user

34
Q

Prahalad and Hamel’s Core Competencies analysis

A
  • framework for business strategy

- Core competences lead to the development of core products

35
Q

Developing core competences

A
  • Business particularly good at a certain activity which is not easy to copy
  • Depends on Integrating Multiple Technologies and different product Skills
  • Coordinate designers, production specialists, IT experts into a team to develop a new and different competences
    E.g. Philips: optical media, Sony: ability to miniaturise electronic components -> core products
36
Q

Core competences and strategy

A

Core competence established -> opens up strategic opportunities for developing core products -> end products -> new market

Business Studies A2 (16 decks)

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