Business Analysis (BA)

Chapter 1: The Nature of Strategic Business Analysis

The Strategic Planning Process

Levels of Strategic Planning

Johnson, Scholes and Whittington

Johnson and Scholes Lenses

Business Analysis

Chapter 2: The Environment and Competitive Forces

PESTEL Analysis
This model examines the growth prospects for the industry as a whole. This is achieved by examining 6 factors that are outside the control of the companies in the industry:

Political factors Economic factors Social factors Technological factors Environmental factors Legal factors

Porters Diamond

Convergence in Industries

Porters 5 Forces Model

The Product Life Cycle

Sales

The four stages of a products life

Time

Introduction

Growth

Maturity

Decline

Strategic Groups
These are organisations with: same industry similar strategic characteristics following similar strategies/ competing on a similar basis can have similar assets and skills

Strategic Group Positioning

Chapter 3: Marketing and the value of goods and services

Customers and Markets

There are 3 strategic questions that are used to analyse customers:
segmentation motivation

unmet needs

Market Segmentation

Marketing styles
There are three ways to market a product in order to account for the fact that different segments have different needs:
undifferentiated marketing
differentiated marketing

niche/target marketing

Marketing Mix Strategies

Critical Success Factors performance requirements that are fundamental to an organisation's success. In this context CSFs should thus be viewed as those product features that are particularly valued by customers. This is where the organisation must outperform competition.

Value Chain Analysis

Benchmarking
to provide a target for action in order to improve competitive position. They can take many forms:

strategic
historical industry best-in-class international

Chapter 4: Internal resources and competencies

Capabilities
Same as Competitor Easy to Copy Different and Difficult to Copy

Resources

Basic

Unique

Competencies

Threshold

Core

Resource Audit (Ms model)

An organisations resources can be organised into the following categories:
Men Money Markets Materials Management Make-up Manufacturing/Machinery

Sustaining Competitive Advantage The capabilities needed to sustain competitive advantage are:
Value of strategic capabilities Rarity of strategic capabilities Robustness of strategic capabilities

Other ways to gain competitive advantage innovation

by the time the competition catch up, the innovator has built up brand loyalty and a defendable position

knowledge management
this encourages innovation and sharing, and it reduces complexity. It also ensures continuity as staff turnover

SWOT Analysis

Chapter 5: Stakeholders, ethics and culture

The need for corporate governance

The gap between ultimate beneficiaries and those making day-today decisions can be large and agents might not know what the beneficiaries want. Self-interest can cause agents to work for their own benefit at the expense of their principals (remuneration packages, share options, budget padding, short-termism to make current results look good at the expense of long-term performance).

Typical features
boards should have non-executive directors to advise and warn the executive directors. Executive and nonexecutive directors (NEDs) should be in balance so that neither group dominates there should be a separation of the roles of chairman and chief executive executive remuneration should be decided by a remuneration committee, consisting of non-executive directors an audit committee, comprising non-executive directors should look after the appointment of supervision of auditors.

Impact of Corporate Governance

Greater shareholder power Greater pressure

Greater scrutiny
Greater need for risk assessments

Stakeholder Mapping
Low

Minimal Effort (A)

Power

Keep Informed (B)

Keep Satisfied (C)

High Low

Key Players (D)

High

Level of Interest

Ethics
Ethical issues arise at three levels:
Macro level Corporate level Individual level

Ethical Stances
The extent to which an organisation will exceed its minimum obligations to stakeholders.

Corporate Social Responsibility

The following are common areas where businesses get involved in CSR issues:
work creation and training programmes

sponsorship of the arts and sport employee welfare programmes community welfare programmes support for educational institutions and links with business contributions to overseas aid environmental programmes.

Organisational culture
The concept of the cultural web is a useful device for mapping out change but its real worth is in the fact that we can identify which elements of culture need to change.

Mission Statements
A mission statement should contain the following:

purpose strategy policies and Standards of Behaviour values.

Also: mission statements should be short typically half a page note that mission statements can have a valuable role in setting ethical standards and organisational culture.

Chapter 6:

Strategic Choice

Corporate Parenting
The issue for corporate parents whether they: add value to the organisation and give business units advantages that they would not otherwise have

add cost and so destroy the value that the business units have created.

Rationales for adding value

A well-managed corporate parent should be able to add value. Johnson, Scholes and Whittington identify three corporate rationales or roles adopted by parents in order to do this:

portfolio managers
synergy managers parental developers.

Boston Consulting Group Matrix

>10% % rate market growth <10%

+1

Relative Market Share

-1

Chapter 7:
Strategic Choice II

TOWS Analysis
Internal Factors Strengths (S) Opportunities (O) Examine strategies that use strengths to make use of opportunities (SO). Weaknesses (W) Examine strategies that take advantage of opportunities by overcoming or avoiding weaknesses (WO). Examine strategies that minimise the effect of weaknesses and avoid or overcome threats (WT).

External Factors
Threats (T)

Examine strategies that use strengths to overcome or avoid threats (ST).

Directions for Growth - Ansoff

Products
Existing New

Markets

Existing

Market penetration

Product development

New

Market development

Diversification

Diversification
FORWARD VERTICAL INTEGRATION

HORIZONTAL

CORE ACTIVITY

DIVERSIFICATION

UNRELATED DIVERSIFICATION BACKWARD VERTICAL INTEGRATION

Implementing growth
Organic Growth

Internal development

Easier to control?
Can be risky if not enough skills or experience

Implementing growth
Mergers & Acquisitions Assess by synergy

Transfer of Skills

Sharing activities

Implementing growth
Joint Venture Strategic Alliance

Joint Development

Licence
Franchise

Agency

Strategies for Competitive Advantage

There are three generic strategies through which an organisation could achieve competitive advantage: Cost leadership, where there is great emphasis on keeping costs down. This opens up the profit margin by lowering costs, ideally more than any competitor can. Differentiation, where a better product or service is sold. This opens up the profit margin by raising selling prices.

Additionally an organisation can choose a focus strategy, where the organisation concentrated on a small segment of the market. Within the focus strategy, the organisation must choose whether or not to become a cost leader or a differentiator.

The Strategy Clock

Strategies for hyper-competition

Reposition on the strategic clock Competing successfully Fight and overcome competitors strategies Overcome previous barriers to entry

Strategy Evaluation

Key words

Suitability Acceptability

Feasibility

Chapter 8: Organisational Structure

Organisational structure
Entrepreneurial structure The boss Everyone else

Organisational structure
Functional Structure Board Production Sales R&D Finance HR

Organisational structure
Divisional Structure Board
Central functions eg finance, HR

Division 1

Division 2

Division 3

Production

Sales

R&D

Organisational structure
Matrix Structure
Production Manager Manager Purchasing Manager

Customer A
Manager

Customer B

Virtual Organisations
An example:

Chapter 9: Business Process Change

Business Processes
Every business has unique characteristics embedded in its core processes that help it achieve its goals and create competitive advantage. Strategic business processes, such as new product design or high sensitivity customer care, provide unique and durable business advantages to organisations. Looking at the business in terms of activities and processes opens up scope for challenging the ways in which things are done, and coming up with improvements, or sometimes more radical changes.

Harmons process-strategy matrix According to Harmon, BPR should be focused on those activities which are:
of high strategic importance likely to be complex and dynamic

These are normally the processes that provide competitive advantage and overall company success.

Business Process Redesign

Software Solutions
BPR will often mean there is a need for new software in order for the change to work effectively and efficiently.

The key decision here is whether to buy in a ready made/generic software package or to pay for a bespoke system

Chapter 10: Information Technology

Strategic Context
IT can form an important part in the entire strategic planning process. For example it can help provide new technological developments which open up growth opportunities It can help a business cope with its competitive environment and market position Strategic choice can be made easier through the use of IT IT can help in strategy implementation IT can help review performance and monitor controls

McFarlans Grid

E-business
The stages of e-business: 1. 2. 3. 4. Web presence E-commerce Integrated e-commerce E-business

Supply Chain Management

The transformation of product from node to node includes activities such as:

production planning purchasing materials management distribution customer service forecasting

Push vs Pull SCM

Push = supplier-led. Pull = customer/ market led. Consumers have a direct voice in the functioning of the supply chain. This is what e-commerce facilitates and this was very rare prior to the development of e-commerce. Many businesses have developed this further into upstream SCM

Impact of successful downstream SCM

Customers become more reluctant to switch Disintermediation Continual updates Cheaper communication Consumer/ user groups Better information on consumers Customers can start to customise products

E-marketing

E-marketing: the 7Ps

E-marketing involves extending the original 4Ps of marketing (product, price, promotion and place) to incorporate the following:

people/participants processes physical evidence

6Is: Benefits over Traditional Marketing Methods

Customer Relationship Management (CRM)

There are 4 stages in the customer life cycle:

Selection Acquisition Retention Extension IT can play a pivotal role in improving all aspects of CRM

Chapter 11: Quality

Benefits of Improving Quality

It is a differentiator Reduced internal failure costs Reduced external failure costs Potentially requires less capital investment

However there may be an increase in:

Prevention costs Appraisal costs

Quality Control vs Quality Management

Quality control = reactive (old way to do things)

Quality management = proactive (the modern way to improve quality)

Total Quality Management

Everyones involved Customer focused Internal and external buyer/supplier relationships established Try to get it right first time Use a kaizen system

The V-model

Capability Maturity Model Integration (CMMI)

The Six Sigma Approach

This is an extension of the TQM approach. It is a data-driven approach it uses a wide range of statistical calculations and techniques to examine and analyse quality problems It aims to reduce the variation in process output so that there are no more than 3.4 defects per million opportunities

DMAIC

Define Measure Analyse Improve Control

Chapter 12: Project Management

Project Management

Project features and constraints

Project Risk Management

Project Planning

Managing and Leading Projects

Project Initiation

The Project Plan

Project Completion

Project Constraints
Cost Time Scope

Project Risk Management

Risk management comprises: risk assessment (identifying and analysing risk) assessing the loss probability and magnitude for each item risk control (taking steps to reduce risk, provide contingency and monitor improvements).

How to manage risk

Ignore it

Insure against it
Transfer it Mitigate it

Contents of a project plan

Assessing Project Quality

Define Measure Analyse Design Verify

Chapter 13: Finance & Strategy

Different Organisational Types

Listed Companies Non-listed businesses Not for Profit organisations

Funding Sources

What to consider
Cost Gearing Control Security Cash flow Availability Exit routes

Funding of NFPs

Strategic funding Self-generated income Developmental funding Cost minimisation Project returns

Working Capital Management

Investment Appraisal Ratios

Chapter 14: Strategy and People

Objectives of HRM
Identifying the kinds of talent needed Recruiting an adequate supply Developing peoples potential by training, development and education. Retaining as high a proportion as possible Motivating the talented personnel Improving the performance and productivity of the most talented. Creating an organisational culture in which talent is nurtured and can flourish

Leadership
An effective leader will need Vision Communication Passion and motivation Flexibility

Appraisal Systems
A good appraisal system should have: Relevance Fairness Serious intent Cooperation Efficiency

Facilitating change
Project and strategic change need staff support. In order for these changes to be effective they may need:

new output measures new skills and competences required changes to roles and job descriptions changes to responsibilities

Reward Systems
When designing a reward system we should consider: Organisational objectives CSFs and KPIs Desired behaviour Competitor systems Legislation Constraints

Human Resources and Strategy

HRM is becoming increasingly important to businesses:

people are seen as a major source of competitive advantage, training and development is seen as an investment, not a cost learning is seen as essential employees expect to learn and change and retrain as necessary as strategy demands Staff development is seen as a key management role changes outside the organisation are reflected in changes to training and development needs human resource implications are considered as part of strategic planning.

Chapter 15: Managing Change

Reasons for Strategic Change

There are many ways in which a business strategy might change. But these fall into two general categories: planned/intended strategic changes emergent strategic changes In either case, the change process will have to be managed and led well by senior management.

Types of Strategic Change

Extent of Change
Incr. Transformation Realignment

Speed of Change

Evolution

Adaptation

Revolution
Big Bang

Reconstruction

Barriers to Change

The Change Process

Lewin suggested that successful change is achieved in three stages: Unfreezing existing behaviour Making the change Refreezing the new behaviour

Contextual Features

Leadership Styles