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Approach to Strategy Development
EXTERNAL ANALYSIS
• Customer Analysis
• Competitor Analysis
• Market Analysis
• Environment Analysis
INTERNAL ANALYSIS
• Performance Analysis
• Determinants of
Strategic Options
OpportunitiesThreatsTrends
Uncertainties
StrengthsWeaknesses
ProblemsConstraints
STRATEGY IDENTIFICATION & SELECTION
Internal Analysis
Financial Performance
• Sales & Market Share
• Profitability
• ROA = profits / assets
• Shareholder Value: ROA > Cost of Capital
Beyond Financials
• Brand Loyalty– 3 out of 6 purchase occasions– Causes for High Loyalty / Low Loyalty– Delight drivers for the loyalists– Exit interview the disloyal customers– Monitor size of loyal customers– Compare it with key competitors
Beyond Financials
• Brand Associations– What do they think about the brand?– Perception: Innovative? Expensive?– Strength of each association– Understanding through projectives in FGDs
Beyond Financials
• Product Quality / Service Quality– Customer Expectation– Competitor Delivery– Key Performance Indicators– Perceived Quality (Product / Service)
Beyond Financials
• New Product Activity– Does R&D deliver on concepts?– Is the process of innovation well managed?– Track record of past launches– Average time-to-market
Beyond Financials
• Employee Capability / Performance– People with required capability– Can the human resources deliver on plans?– Are resources well managed?– What is their attitude?
Beyond Financials• Relative Cost
OUR COMPONENT IS…
INFERIOR SUPERIOR
MORE EXPENSIVE
LESS EXPENSIVEDe-emphasise
Upgrade EmphasiseLeave alone
Raise PriceCost ReductionChange Design
Change Process
Strength-Weakness Analysis
• Profiling the Company in the areas of– Marketing– Finance– Manufacturing– R&D– Human Resources
Ref. Marketing Management by Ramaswamy & Namakumari, 3rd Edn. (page. 130-131, Chart 10.4)
Example: Bajaj Motorcycles
• Strengths– Strong brand presence / growth in sales– Nationwide distribution / service network– Strong financial support of corporate– Strong imagery of Pulsar
• Weaknesses– Product Mix: Overdependence on Pulsar– No presence in fuel efficient / cruiser categories– Weak R&D: Last 4-5 launches a failure
Determinants of Strategic Options
• Past & Current Strategies [YAMAHA]
• Consumer Perception [TATA & INDICA]
• Organisational Capabilities– Marketing [HUL]
– Finance [RELIANCE]
– Human Resources [GOOGLE]
– R&D [INTEL]
– Manufacturing [TATA]
From Analysis to StrategyEXTERNAL ANALYSIS
• Customer Analysis
• Competitor Analysis
• Market Analysis
• Environment Analysis
INTERNAL ANALYSIS
• Performance Analysis
• Determinants of
Strategic Options
OpportunitiesThreatsTrends
Uncertainties
StrengthsWeaknesses
ProblemsConstraints
STRATEGY IDENTIFICATION & SELECTION
MARKET NEEDS /
ATTRACTIVENESS
COMPETITORS
STRENGTHS /
WEAKNESSES
ORGANISATIONAL
STRENGTHS /
WEAKNESSES
1. Strategic Investment
2. Value Proposition
3. Creating the Value Proposition
4. Communicating the Value Proposition
Strategic Investment
For Market Attractiveness
• Size of market • Market rate of growth • Customer Needs / Satisfaction Levels• Competition: Quantity, Position• Profitability• Sensitivity to economic trends• Environmental impact
For Competitive Position
• Market share • Management profile • R & D• Quality of products and services • Customer Loyalty• Margins• Distribution• Marketing • Flexibility