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CHAPTER 4, CRITICAL CHAPTER 4, CRITICAL SUCCESS FACTORSSUCCESS FACTORS
I used to be indecisive, but now I am not so sureI used to be indecisive, but now I am not so sure
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Figure 4.1,Figure 4.1, the Planning Model the Planning Model
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Defining Critical Success Defining Critical Success FactorsFactors
Figure 4.3. Matching the profile to the Figure 4.3. Matching the profile to the environment. environment.
Matching the Profile to the Environment
Examining the environment
Doing an independent and honest
review of each aspect
Examining the organizational profile
Determining the level of competence required to operate effectively in this environment
as to:
Determining the level of competence the organization
has as to:
Marketing and salesProduction
Financial ManagementResearch and Development
Human Resource Management
Matching what needs to be doneWith what can be
doneIn all aspects of
the business
Marketing and salesProductionFinancial ManagementResearch and DevelopmentHuman Resource Management
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Analyzing the Environment, Analyzing the Environment, Opportunities and Challenges (threats)Opportunities and Challenges (threats)
The terms definedThe terms defined An opportunity is something that if taken, An opportunity is something that if taken,
willwill result in something positive for the result in something positive for the organization. organization.
A challenge (threat) is quite different. Out A challenge (threat) is quite different. Out of the environment, something with a of the environment, something with a negative consequence to your negative consequence to your organization organization is going to happenis going to happen unless you unless you act in some way. act in some way.
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Remote environment, opportunities Remote environment, opportunities and challenges (threats)and challenges (threats)
Figure 4.4. the remote environment for a Figure 4.4. the remote environment for a ski areaski area
Remote Environment for a Ski Area
Description o/t
EconomicThe amount of disposable income available for recreation, in the hands of customers.
T
SocialThe perception of people regarding health and wellness and the use of recreation to achieve those ends. O
PoliticalGovernment regulations regarding development of park land and the environmental impact of the development of recreation areas.
T
TechnologicalInternet based advertising systems and reservation systems. O
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The Industry Environment, The Industry Environment, Opportunities and Challenges (threats)Opportunities and Challenges (threats)
Figure 4.5, Opportunities And Challenges From Figure 4.5, Opportunities And Challenges From The Five Forces Applied To The Recreation The Five Forces Applied To The Recreation Industry (Ski Area)Industry (Ski Area)
Force Issue o/t
Substitute products
Demand is high for the total industry relative to supply
T
O
Customers are not product sensitive T
New entrants
to the market
Profits are Low O
Large capital investment is required O
Demand exceeds supply in the industry for the product or service
T
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Opportunities And Challenges From The Five Forces Opportunities And Challenges From The Five Forces Applied To The Recreation Industry (Ski Area)Applied To The Recreation Industry (Ski Area)
BuyersBuying groups are formed T
The buyers are brand sensitive O
SuppliersThere are a large number of travel agents O
There are a small number of suppliers of chair lifts and equipment
T
Rivalries Among
Ski Areas
Industry profits are low T
Customer growth rate is high O
Customers are not brand sensitive T
Switching costs are high T
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The Local Environment, Opportunities The Local Environment, Opportunities and Challenges (threats)and Challenges (threats)
Figure 4.6. Characteristics of the local Figure 4.6. Characteristics of the local environment.environment.
Analyzing the local Environment
Issue Questions and answers o/t
Customers Demographic
Do the features of the product match the demographic of the market?
O
Competitive Position
Product Quality
Do customers perceive the product as high value for the price paid?
T
CreditorsFinancial Claims
Are creditors willing to let the loan serve its purpose?
T
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Characteristics of the local environmentCharacteristics of the local environment
Employees AvailabilityCan the organization attract and hold the right people?
O
SuppliersQuantity
Are suppliers able to meet your present and future demand for their products?
T
Ecological issues
ImpactDoes a change in the season or a change in the weather impact your operations?
O
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The Organizational Profile, The Organizational Profile, Strengths and WeaknessesStrengths and Weaknesses
A strength means you are already equipped A strength means you are already equipped to handle the situation and you are using to handle the situation and you are using state of the art procedures.state of the art procedures.
A weakness means you don’t have the tools A weakness means you don’t have the tools to deal with the issue.to deal with the issue.
Put another way:Put another way: A strength is something you have that you A strength is something you have that you
need, need, A weakness is something you don’t have A weakness is something you don’t have
that you need. that you need.
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Figure 4.8,Figure 4.8, Step 3, a partially Step 3, a partially complete organizational profile.complete organizational profile.
Major areas Potential issues S/W Explanation
Strategic planning
Quality of long and short range objectives
SWe hired a college graduate to facilitate the development of goals.
Marketing Market share W
We hold a small market share of a rapidly growing market. We are not growing at the same rate.
Financial and accounting
Profitability SWe earn a rate of return that is significantly higher than the industry average
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Step 3, a partially complete Step 3, a partially complete organizational profile.organizational profile.
Production, operations
and technical
Efficiency of production processes
S
Our unit production costs are lower than industry average because we have state of the art machinery and equipment.
Human resource
management
Union/Management relationship
W
Four of the last five rounds of negotiations were resolved after a work stoppage, two strikes and two lockouts.
Organization and
management
Willingness of management to delegate tasks and authority.
W
Management is willing to hold others responsible and accountable, but they are not willing to delegate authority and control.
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Stages of Industry EvolutionStages of Industry Evolution
Figure 4.9 , Industry life cycleFigure 4.9 , Industry life cycle
Growth Rate Profits
Development
Growth
Maturity Decline
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Figure 4.10,Figure 4.10, Critical Success Factors at Critical Success Factors at Each Stage of Industry EvolutionEach Stage of Industry Evolution
Function Development Growth Maturity Decline
Marketing & Sales
Create wide spread awareness.
Establish brand recognition. Find effective marketing channels.
Hold existing markets and promote to new markets. Introduce successor products to extend maturity.
Focus on the best channels. Replace old products with new ones.
Finance
Finance initial R&D losses.
Finance expansion and net cash outflows.
Reinvest profits and employ cost controls.
Prune the product line and harvest the resources from liquidation.
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Critical Success Factors at Each Stage Critical Success Factors at Each Stage of Industry Evolutionof Industry Evolution
ProductionLimit number of designs, use standards.
Increase capacity while retaining quality.
Improve the product and reduce operating costs.
Re-deploy unused equipment, simplify processes and reduce product variants.
R&D
Ability to make changes and take the bugs out.
Focus on quality and ability to make product variants to satisfy customers.
Improve processes to reduce costs and introduce successor products.
Commit resources to new growth products.
Human Resources
Flexibility in staffing and training.
Motivated and loyal workforce with excellent product knowledge and selling skills.
Reduce workforce and increase efficiency.
Reduce and reallocate personnel.
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Critical Success Factors at Each Stage Critical Success Factors at Each Stage of Industry Evolutionof Industry Evolution
Focus area
Engineering and
marketing
Sales and market share
Production efficiency
and successors
Finance and investment
recovery
Development Growth Maturity Decline
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Defining Organizational Critical FactorsDefining Organizational Critical Factors
Figure 4.11, Figure 4.11, SWOT diagramSWOT diagram
Environmental Threats
Environmental Opportunities
Internal Strength
Internal Weakness
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Figure 4.12,Figure 4.12, SWOT Analysis SWOT Analysis
Environmental threats
Environmental Opportunities
Internal Strength
Internal Weakness
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Figure 4.13,Figure 4.13, the “cells” the “cells” of a SWOT diagramof a SWOT diagram
Environmental threats
Environmental Opportunities
Internal Strength
Internal Weakness
Cell “B”Be aggressive
Cell “A”Redesign practices
Cell “C”Be Defensive
Cell “D”Use your strengths in
new places
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Cell “A” Grand Strategy, Cell “A” Grand Strategy, “Re-design practices”“Re-design practices”
An organization with internal An organization with internal weakness which is facing an industry weakness which is facing an industry with numerous opportunities with numerous opportunities
must focus attention on re-designing must focus attention on re-designing how business is done so that the how business is done so that the opportunities can be effectively opportunities can be effectively captured. captured.
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Other Cell “A” StrategiesOther Cell “A” Strategies
Retrenchment/turn aroundRetrenchment/turn around Joint VentureJoint Venture Strategic AllianceStrategic Alliance
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Cell “B” Grand Strategy, Cell “B” Grand Strategy, “Be aggressive”“Be aggressive”
An organization with internal An organization with internal strengths which is facing an industry strengths which is facing an industry with numerous opportunities with numerous opportunities
expand operations into new markets, expand operations into new markets, invest in growth and reproduce invest in growth and reproduce success in other areas. success in other areas.
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Other Cell “B” StrategiesOther Cell “B” Strategies
Product developmentProduct development Market developmentMarket development Vertical IntegrationVertical Integration
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Cell “C” Grand Strategy, Cell “C” Grand Strategy, “Be Defensive”“Be Defensive”
An organization with internal An organization with internal weakness which is facing an industry weakness which is facing an industry with numerous threats with numerous threats
needs to revaluate whether or not it needs to revaluate whether or not it is advisable to stay in business. is advisable to stay in business.
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Other Cell “C” StrategiesOther Cell “C” Strategies
DivestitureDivestiture LiquidationLiquidation
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Cell “D” Grand Strategy, Cell “D” Grand Strategy, “Use your strengths in new places”“Use your strengths in new places”
An organization with internal An organization with internal strengths which is facing an industry strengths which is facing an industry with numerous threats with numerous threats
evaluate whether or not their evaluate whether or not their expertise could be transferred to a expertise could be transferred to a new, less threatening environment. new, less threatening environment.
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Other Cell “D” StrategiesOther Cell “D” Strategies
Horizontal IntegrationHorizontal Integration Concentric DiversificationConcentric Diversification
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SummarySummary
The objective of chapter 4 was to define The objective of chapter 4 was to define “Critical Success Factors”. The factors relate to “Critical Success Factors”. The factors relate to an industry and an organizational perspective.an industry and an organizational perspective.
The “Stages of Industry Evolution” was The “Stages of Industry Evolution” was introduced as a tool to pinpoint the critical introduced as a tool to pinpoint the critical success factors from an industry point of view. success factors from an industry point of view.
The SWOT diagram was introduced as a tool to The SWOT diagram was introduced as a tool to match the industry critical success factors with match the industry critical success factors with the organizational profile developed in chapter the organizational profile developed in chapter 3. 3.
