1. Company Situation Analysis
Matching the company’s strategy to external market
circumstances and to internal resources and
competitive capabilities.
1. How well is the present strategy working?
2. What are the company’s resource strengths
/weaknesses and external opportunities and threats?
3. Are the company’s costs and prices competitive?
4. How strong is the company relative to rivals?
5. What strategic issues does the company face?

2. 1. How well is the current strategy
working?
• What is the current strategy?
• Is it achieving financial/strategic objectives?
• Is market share increasing/decreasing?
• Trends in profit margin, net profit, ROI, stock
price, sales?

3. 2. SWOT Analysis
Identifying:
Company STRENGTHS & competitive
capabilities; Company WEAKNESSES &
resource deficiencies; Company market
OPPORTUNITIES; THREATS to a company’s
future profitability…..

4. SWOT - Strengths & Weaknesses
Sources of Strength or Weakness
• Skill or expertise (or lack of)
• Physical assets - plant, equipment, location (or lack of)
• Human assets / expertise (or lack of)
• Organisation assets - quality control system, patents
• Valuable intangible assets - brandname, loyalty, culture
• Competitive capabilities - shorter development times,
customising capability, supplier relations.
Strategic Balance Sheet - Competitive Assets & Liabilities

5. Core & Distinctive Competencies
Core competence is something a company does well
relative to other internal activities.
Distinctive competence is something a company does
well relative to competitors.
Whether a core competence represents a distinctive
competence depends on how good the competence
is relative to what competitors are capable of.

6. SWOT Analysis - Opportunities/Threats
Not every industry opportunity/threat is a
company opportunity/threat - need to analyse
and compare:
• Impact on growth & profit potential
• Impact on existing / potential sources of
competitive advantage
• Match with company resource capabilities

7. Drawing Conclusions from SWOT Analysis
• How best to deploy resources in view of the
company’s internal/external situation
• Does the resource base need to be adjusted
to respond to emerging issues?
• Are there resource gaps that need to be
filled?
• In what ways does the company need to
strengthen its (future) resource base?

8. 3. Are company prices/costs competitive?
Cost disparities can stem from:
•Difference in raw materials prices
•Difference in technology used
•Difference in age of plant/equipment
•Difference in production costs
•Difference in marketing, sales, promotion &
advertising costs
•Difference in exposure to inflation/taxes etc.

9. Strategic Cost Analysis - Benchmarking
Benchmark the costs of key activities to
understand the best practices involved in
performing an activity and to see if costs are
in line with other companies.
Use info. from published reports, trade groups,
industry analysts, customers, suppliers....
Used to identify areas of cost
advantage/disadvantage.

10. Strategic Cost Analysis
Business as a collection of activities with costs
= cost structure
Compare a company’s costs activity by
activity against those of rivals.
Learn which internal activities are a source of
cost advantage or disadvantage.

11. Cost Analysis - Company Value Chain
• Primary analytical tool of strategic cost
analysis
• Identifies the separate activities, functions
and processes used in designing,
producing, marketing, delivering and
supporting a product or service.
• Identifies the primary activities that create
value for customers and the related support
activities.

12. Cost Analysis - Company Value Chain
Purchasing Operations Distribution Sales &
Marketing
Service Profit
Primary
Activities
& Costs
Support
Activities
& Costs
R & D; Technology; HRM; Administration

13. Cost Analysis - Company Value Chain
Value chains of rival companies differ.
Company value chain is embedded in larger
Value Chain System - part of and affected
by value chains of upstream suppliers and
downstream customers.

14. Processing ingredients
Syrup manufacture
Bottling/Can Filling
Wholesale distribution
Retailing Programming
Disk Loading
Marketing
Distribution
Human Resource
Management
Customer Service
SOFT DRINKS
SOFTWARE
ACCOUNTANCY
Value Chain Composition
Differs by Industry & by
Company

15. Activities,
Costs, and
Margins of
Suppliers
Internally
Performed
Activities, Costs
and Margins
Activities,
Costs, Margins
of Forward
Channels
Upstream Company Downstream
Value Chains Value Chain Value Chains
END
USER
THE VALUE CHAIN SYSTEM
Adapted from Michael Porter, Competitive Advantage, 1985.

16. Strategic Options for Achieving Cost
Competitiveness
Options to combat upstream disadvantage:
•Negotiate more favourable prices with suppliers
•Work with suppliers to help reduce costs
•Integrate backwards
•Source cheaper substitutes
•Manage linkage between supplier & co. Eg JIT

17. Strategic Options for Achieving Cost
Competitiveness
Options to combat downstream disadvantage:
•Push distributors/forward channels to markups
•Look for win-win opportunities to costs
•Change to more economical distribution strategy
•Forward integrate

18. Strategic Options for Achieving Cost
Competitiveness
Options to combat internal disadvantage:
•Streamline high cost activities
•Reengineer business processes / work practices
•Re-vamp value chain to eliminate some activities
•Outsource activities if more economical
•Invest in cost-saving technology
•Simplify product design

19. 4. How strong is the company’s competitive
position?
• Whether mkt position will improve/deteriorate
if present strategy continued?
• How the firm ranks relative to key rivals on
each industry success factor and each relevant
measure of competitive strength
• Whether the firm has a competitive
advantage / disadvantage v.a.v rivals
• Firm’s ability to defend mkt position in light
of industry driving forces

20. Competitive Strength Assessment
•Identify industry’s KSFs/determinants of
competitive advantage/disadvantage (usually 6 - 10
measures)
•Rate firm and key rivals on each indicator (scale 1-
10)
•Sum individual ratings = competitive strength
Note which companies are strongest and areas of
relative strength & weakness

21. Competitive Strength Assessment
KEY INDICATORS CO.A CO.B CO.C
PRODUCT QUALITY 8 6 3
BRAND IMAGE 9 6 3
CUSTOMER SERVICE 7 8 5
OPERATING COSTS 4 7 8
EXPERTISE 8 8 6
R & D 9 7 1
EXAMPLE
45 42 29Overall Strength Rating

22. Weighted CSA
Key indicators Weighting co.A co.B co.C
Product quality .2 8/1.6 6/1.2 3/.6
Brand image .05 9/.45 6/.3 3/.15
Customer service .2 7/1.4 8/1.6 5/1.0
Operating costs .3 4/1.2 7/2.1 8/2.4
Expertise .1 8/.8 8/.8 6/.6
R & d .15 9/1.35 7/1.05 1/.15
Sum of weights 1.0
Weighted overall strength rating 6.8 7.05 4.9

23. Strategic Group Mapping
•Identify characteristics that differentiate firms in the
industry
•Identify and group firms with similar competitive
approaches
•Plot firms on a two variable map using pairs of these
differentiating characteristics
•Draw circles around each group proportionate to size
of groups’ respective share of total industry sales
revenue

24. Strategic Group Mapping
•Distinguishing characteristics: price/quality
range; geog scope; vertical integration; pdt line
breadth; distribution channels; service; pdt
attributes; technology
•Number of groups - spread of groups
•A number of maps can be useful
•Whether some groups affected more by certain
ind. forces
•Movement between groups

25. Strategic Mapping - Jewellery Industry
PRODUCT LINE BREADTH
PRICE
QUALITY
IMAGE
High
Low
Med
Specialty Full line craft
Diamonds/ jewellers
Watches etc
Ltd category
merchandise
retailers
Broad
category
retailers

26. 5. What strategic issues does the
company face?
• Does the company have a competitive advantage?
• Does it capitalise on resource strengths?
• Which opportunities should be prioritised?
• What corrective measures need to be taken?
• How does the cost position compare to that of
rivals?
• Does the present strategy defend against the 5
forces?
• Is it closely matched to the industry’s KSFs?
• Should it be adjusted to better respond to driving