· web viewten strategic management tools with their respective input variables are herewith...

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Ten strategic management tools with their respective input variables are

herewith listed:

Internal Factor Evaluation (IFE): strengths & weaknesses of the enterprise;

External Factor Evaluation (EFE): opportunities & threats in the market;

Competitive Profile Matrix (CPM): critical success factors without which the enterprise would not

survive;

Internal-External Matrix (IE): strengths; weaknesses; opportunities; threats;

Matching strategies (SWOT matching): strengths; weaknesses; opportunities; threats;

Boston Consulting Group Matrix (BCG): relative market share position; industry growth rate

percentage;

Strategic Position and Action Evaluation Matrix (SPACE): financial strengths; environmental

stability; competitive advantage; industry strengths;

Grand strategy Matrix (GSM): rapid market growth versus slow market growth & strong competitive

position versus weak competitive position;

Quantitative Strategic Planning Matrix (QSPM): strengths; weaknesses; opportunities; threats;

Earnings Per Share/Earnings Before Interest Tax (EPS/EBIT): Revenues/turnover/income; share

price; interest rate; tax rate; number of shares outstanding; amount of capital required for

investment(s) in specified project(s).

Compiled by Dr. Chris van Zyl

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IFE: INTERNAL FACTOR EVALUATIONKPI's IR PR WS

1234512345

CWS

STRENGTHS

WEAKNESSES

KPI's = Key Performance IndicatorsIR = Importance Rating

PR = Performance RatingWS = Weighted Score

CWS = Cummulative Weighted Score

IFE procedure:

Formulate applicable strengths and weaknesses which should describe the key

performance indicators of the enterprise.

Allocate an importance rating (a value between 0 and 1) to each of the formulated

strengths and weaknesses (the KPI’s) and justify your choice of importance rating.

A KPI with a higher importance rating (closer to one) than other KPI’s, is regarded to be

more important for the performance of the enterprise than the other KPI’s

The sum of all the allocated importance ratings should be equal to one (1).

Allocate a performance rating (4 = best performance; 3 = good performance; 2 = poor

performance and 1 = worst or absence of performance) to each of the formulated

strengths and weaknesses (KPI’s) and justify your choice in each case.

Multiply the allocated importance rating (IR) with the allocated performance rating (PR)

for each of the formulated strengths and weaknesses (KPI’s) in order to calculate a

weighted score (WS) for each of the formulated KPI’s.

Add up all the weighted scores (WS) in order to calculate the cumulative weighted score

(CWS) for the internal environment (the enterprise).


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EFE: EXTERNAL FACTOR EVALUATION IR PR WSKPI's

1234512345

CWSKPI's = Key Performance Indicators

IR = Importance RatingPR = Performance Rating

WS = Weighted ScoreCWS = Cummulative Weighted Score

OPPORTUNITIES

THREATS

EFE procedure:

Formulate applicable opportunities and threats which should describe the key

performance indicators of the enterprise’s external environment (the market).

Allocate an importance rating (a value between 0 and 1) to each of the formulated

opportunities and threats (the KPI’s) and justify your choice of importance rating.

A KPI with a higher importance rating (closer to one) than other KPI’s, is regarded to be

more important for the performance of the enterprise than the other KPI’s



performance and 1 = worst or absence of performance) to each of the formulated

opportunities and threats (KPI’s) and justify your choice in each case.

Multiply the allocated importance rating (IR) with the allocated performance rating (PR)

for each of the formulated opportunities and threats (KPI’s) in order to calculate a

weighted score (WS) for each of the formulated KPI’s.

Add up all the weighted scores (WS) in order to calculate the cumulative weighted score

(CWS) for the external environment (the market).


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Internal-External Matrix IE MATRIX

4 3 2 1

3

2

1

IFE Cumulative Weighted Scores

EFE CWS

= Grow & Build: Backward-, forward-, horizontal integration; market penetration; market development; product development.

= Hold & Maintain: Market penetration; product development.

= Harvest & Divest: Retrenchment; divestiture.

IE Matrix procedure:

Draw a matrix as seen above (IE Matrix) with IFE cumulative weighted score (CWS)

values (1 to 4) on the horizontal axis and EFE cumulative weighted score values (1 to 4)

on the vertical axis.

There are three distinct regions on the IE Matrix: The dark region; grey region and the

white region. Each of these regions are associated with some strategies as seen below

the IE Matrix above.

Plot the IFE cumulative weighted score that you have calculated in the IFE Matrix on the

horizontal axis (x-axis) and likewise the EFE cumulative weighted score that you have

calculated in the EFE Matrix, on the vertical axis (y-axis) of the IE matrix as seen above.

These two sets of values or coordinates (IFE CWS and EFE CWS) intersect on the IE

Matrix in a particular region (dark; grey or white). The suggested strategies associated

with the particular region should then be recommended for implementation by the

enterprise.


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CPM: COMPETITIVE PROFILE MATRIXCSF's IR PR WS PR WS PR WS

12345678910

CWS

CSF's = Critical Success Factors

CPY 1 CPY 2 CPY 3

CPM procedure:

Formulate a set of critical success factors (CSF’s) for the enterprises that you would like

to compare - these CSF’s are aspects without which the enterprises could not

sustainably perform or exist.

Allocate an importance rating (a value between 0 and 1) to each of the formulated CSF’s

and justify your choice of importance rating. Do not allocate a different set of

importance ratings for each respective enterprise. All CSF’s should therefore only have

one importance rating that would apply for all enterprises that are being compared with

one another.

A CSF with a higher importance rating (closer to one) than another CSF, is regarded to be

more important for the performance of the enterprises than the other CSF’s



performance and 1 = worst or absence of performance) to each of the formulated CSF’s

and justify your choice in each case. The performance rating that you select for

enterprise 1, for instance, cannot be repeated for enterprise 2, or enterprise 3, etcetera.

In other words, each enterprise should be allocated a different performance rating (this

is actually a ranking of performances of the respective enterprises at stake).

Multiply the allocated importance ratings (IR’s) with the allocated performance ratings

(PR’s) for each of the formulated CSF’s (for each enterprise respectively) in order to

calculate a weighted score (WS) for each of the CSF’s of each respective enterprise that

you are comparing with one another.


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Add up all the weighted scores (WS) for each enterprise in order to calculate the

cumulative weighted score (CWS) for the respective enterprises. The enterprise with the

highest CWS is the most competitive enterprise.

STRENGTHS WEAKNESSESOPPORTUNITIES SO-strategies WO-strategies

THREATS ST-strategies WT-strategies

SWOT matching strategies procedure:

Consider the previously formulated strengths, weaknesses, opportunities and threats to

formulated matching strategies.

The strengths and opportunities (SO-strategies) & strengths and threats (ST-strategies)

should be matched in order to formulate matching strategies.

The weaknesses and opportunities (WO-strategies) & weaknesses and threats (WT-

strategies) should be matched in order to formulate matching strategies.

The matching strategies should be actions in other words it should contain action verbs that

would describe exactly what to do when the two components (S & O; S & T; W & O and W &

T) are combined to form a strategy or strategies.

High Medium Low

1 0.75 0.5 0.25 0High 20

Medium

Low -20

RMSP

ISGR%

TT

GT

FT

XT

TT

GT

FT

XT

TT

GT

FT

XT

TT

GT

FT

XT


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RMSP ISGR%GT 0.67 7FT 0.17 -5TT 1 0XT 0.07 -15

STARS QUESTION MARKSBackward/Forward/Horizontal Integration Market penetrationMarket penetration Market developmentMarket development Product developmentProduct development Divestiture

CASH COWS DOGSProduct development RetrenchmentDiversification DivestitureRetrenchment LiquidationDivestiture

BCG procedure:

The relative market share position (RMSP) needs to be calculated for each of the competitor

enterprises. Information/data such as turnover; sales; number of customers, etcetera should

be used for this calculation.

Divide each enterprise’s figure by the largest enterprise figure as could be seen in the

example table above. The largest figure divided by itself would therefore be equal to one (1)

and all the others would be fractions of one.

The growth rate (ISGR%) or industry sales growth rate; sales growth rate; etcetera, needs to

be calculated for each enterprise. In some cases the growth rate (in a percentage) is

provided. In other cases the growth rate needs to be calculated by applying the following

formula: Growth rate % = [(sales previous year divided by the sales this year) – 1] X 100.

Draw a matrix as seen above with RMSP on the x-axis and ISGR% on the y-axis.

The units for RMSP should be between zero (0) and one (1) with the zero on the top right of

the scale ranging to one on the top left of the scale.

The units for ISGR% should vary between zero and plus (+) 20% as well as zero and minus (-)

20% starting with zero in the middle of the scale towards the +20% at the top and -20% at

the bottom.

Plot the RSMP and ISGR% coordinates that were calculated onto the matrix as in the

example above.


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The position of each enterprise on the matrix could either be in the “stars”; “question

marks”; “cash cows” or “dogs” quadrants. Depending on where an enterprise is positioned

on the matrix, the suggested strategies (as in the table provided above) should be applied to

improve the enterprise performance.

INDUSTRY: IR AS TAS AS TAS

No STRENGTHS12345

No WEAKNESSES12345

No OPPORTUNITIES12345

No THREATS12345

TOTALS (STAS)

Strategy option 1 Strategy option 2Strategic AlternativesQSPM

QSPM procedure:

Formulate a set of strengths (S); weaknesses (W); opportunities (O) and threats (T) as in the

SWOT analysis.

Identify the alternative strategies that could be implemented by the enterprise.

Assign an importance rating (IR) to each of these SWOT variables. The importance rating is

an indication of how important each variable is relative to each other when determining the

potential impact on the alternative strategies that are considered for implementation. Each


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of these IR’s should be a fraction of one. If all the variable IR’s are summated it should be

equal to one (1).

Assign an attractiveness score (AS) to each of the formulated variables. The AS of each

variable indicates the level of support it provides to a specific alternative strategy. The

attractiveness scores could vary between 4 (highest support); 3 (good support); 2 (poor

support) and 1 (no or very little support).

The assigned AS to each variable should not be the same. In other words, if an AS of 4 was

assigned to a variable, the other alternative strategy cannot be assigned with the same level

of AS (therefore a 3, 2 or 1 should be considered as alternative AS’s).

Multiply the IR of each variable with the AS of the same variable to calculate the total

attractiveness score (TAS) for each variable for each alternative strategy.

Add all the TAS’s for each alternative strategy in order to calculate the sum total

attractiveness scores (STAS) for each alternative strategy.

The alternative strategy with the highest STAS would indicate the best strategic option to

implement.

FS654321

CA 0 IS-6 -5 -4 -3 -2 -1 -1 1 2 3 4 5 6

-2-3-4-5-6ES

SPACE Matrix


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FS

1. Market penetration 1. Backward/Forward/Horizontal

2. Market development2. Market penetration

3. Product development3. Market development

4. Related divers ifi cation4. Product development

5. Divers ifi cation (related/unrelated)

CA IS

1. Retrenchment 1. Backward/Forward/Horizontal

2. Divestiture 2. Market penetration

3. Liquidation 3. Market development

4. Product development

ES

Conservative Aggressive

Defensive Competitive

SPACE procedure:

From the SWOT analysis that was performed, select variables that could define or describe

the financial strength (FS) of the enterprise; the competitive advantage (CA) of the

enterprise; the environmental stability (ES) in the market and the strength of the particular

industry (IS) within which the enterprise operates.

Assign a value to each of the identified FS and IS variables where a +6 indicates a very strong

position and a +1 a very weak position (of enterprise or industry performance respectively).

Likewise, assign a value to each of the identified CA and ES variables where a -1 indicates a

very strong position and a -6 a very weak position (of enterprise or market performance

respectively).

Determine the average score for each category of variables (FS; CA; IS & ES respectively).

Add the two average scores for FS and ES together to find the y-axis coordinate.

Add the two average scores for CA and IS together to find the x-axis coordinate.

Plot the x-axis and y-axis coordinates onto the SPACE Matrix as seen in the example above.

Draw a directional vector from the origin of the SPACE Matrix, that means from the (0; 0)

coordinates in the centre of the graph, connecting with the calculated x-axis and y-axis

coordinates that were calculated above (see example above).

The directional vector in the example above was drawn in the top right quadrant of the

matrix. The top right quadrant of the SPACE Matrix is associated with aggressive strategies.

This suggests that any or a combination of the listed aggressive strategies should be pursued

by the enterprise in order to improve on its performance.


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Should the directional vector be drawn in any one of the other three quadrants on the

SPACE Matrix, the respective competitive; conservative or defensive strategies could be

followed depending on the quadrant position of the vector on the SPACE Matrix.

6543210

-6 -5 -4 -3 -2 -1 -1 1 2 3 4 5 6-2-3-4-5-6 St

rong

Com

petiti

ve P

ositi

on (S

CP)

Rapid Market Growth (RMG)

Wea

k Co

mpe

titive

Pos

ition

(WCP

)

Slow Market Growth (SMG)

Grand Strategy Matrix

1. Market penetration 1. Backward/Forward/Horizontal integration

2. Market development 2. Market penetration

3. Product development 3. Market development

4. Related divers ifi cation 4. Product development

5. Horizontal integration 5. Divers ifi cation (related/unrelated)

6. Divestiture 7. Liquidation

1. Retrenchment 1. Divers ifi cation (related/unrelated)

2. Divestiture 2. Joint ventures

3. Liquidation

4. Divers ifi cation (related/unrelated)

Stro

ng C

ompe

titive

Pos

ition

(SCP

)

Quadrant I

Quadrant III Quadrant IV

Wea

k Co

mpe

titive

Pos

ition

(WCP

)

Quadrant II

Slow Market Growth (SMG)

Rapid Market Growth (RMG)


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GSM procedure:

From the SWOT analysis that was performed, select variables that could define or describe

the rapid market growth (RMG); slow market growth (SMG); strong competitive position

(SCP) or weak competitive position (WCP) of the enterprise.

Assign a value to each of the identified RMG and SCP variables where a +6 indicates a very

strong position and a +1 a very weak position (of industry or enterprise performance

respectively).

Likewise, assign a value to each of the identified WCP and SMG variables where a -1

indicates a very strong position and a -6 a very weak position (of enterprise or market

performance respectively).

Determine the average score for each category of variables (RMG; SCP; WCP & SMG

respectively).

Add the two average scores for RMG and SMG together to find the y-axis coordinate.

Add the two average scores for SCP and WCP together to find the x-axis coordinate.

Plot the x-axis and y-axis coordinates onto the GSM Matrix as seen in the example above.

Draw a directional vector from the origin of the GSM Matrix, that means from the (0; 0)

coordinates in the centre of the graph, connecting with the calculated x-axis and y-axis

coordinates that were calculated above (see example above).

The directional vector in the example above was drawn in quadrant I which is the top right

quadrant of the GSM Matrix. This suggests that any or a combination of the listed strategies

in quadrant I should be pursued by the enterprise in order to improve on its performance.

Should the directional vector be drawn in any one of the other three quadrants on the GSM

Matrix, the respective listed strategies is in the table above could be followed depending on

the quadrant position of the vector on the GSM Matrix.

EPS/EBIT procedures:

EBIT (gross income for these purposes); Interest rate for paying back the loan from the Bank (prime rate); Tax rate (company tax rate); Share price; Number of shares outstanding (NOSO) and the Capital requirement (the amount of capital required to finance an identified project).

Consider the following two scenarios as examples in order to illustrate how the EPS’s could be calculated and interpreted in both scenarios:

Scenario 1:


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EBIT: N$ 150 million

Share price: N$ 50

Existing NOSO: 2.5 million shares outstanding

Capital amount required: N$ 2.5 million

Interest rate (Bank prime rate): 10.75%

Tax rate (Corporate tax rate): 35%

Based on scenario 1 conditions, which financing option would be the best option if you consider between the following four options: 100% debt financing; 100% shares finance; 85% shares & 15% debt combination financing as well as 25% shares & 75% debt combination financing?

Scenario 2:

EBIT: N$ 2.5 million

Share price: N$ 50

Existing NOSO: 2.5 million shares outstanding

Capital amount required: N$ 2.5 million

Interest rate (Bank prime rate): 10.75%

Tax rate (Corporate tax rate): 35%

Based on scenario 2 conditions, which financing option would be the best option if you consider between the following four options: 100% debt financing; 100% shares finance; 85% shares & 15% debt combination financing as well as 25% shares & 75% debt combination financing?

EPS/EBIT PROCEDURE FOR COMBINATION FINANCING

1. Record EBIT (earnings before interest and tax) or gross income.2. Calculate the interest amount (I) on that portion of the capital requirement that you want to

finance through debt financing (loan from the Bank).3. Deduct the interest amount (I) that you have calculated in (2) above from EBIT in order to

derive at (EBT) earnings before tax (EBIT – I = EBT).4. Calculate the amount of tax (T) payable on EBT.5. Deduct the amount of tax (T) calculated in (4) above from EBT to derive at (EAT) earnings after

tax (EBT – T = EAT).6. Calculate the number of shares that you need to sell in order to find that portion of the

required capital that you want to finance through the selling of shares by dividing the amount required by the share price.

7. Add number that you have calculated in (6) above to the existing number of shares outstanding (NOSO) to derive at the new (final) NOSO.

8. Calculate the earnings per share (EPS) by dividing EAT by the final NOSO.9. Interpretation: the highest EPS indicates the best financing option to acquire the capital.

Scenario 1:


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85% Share/Debt 15% 25% Share/Debt 75%EBIT 150.00 150.00Interest 0.04031 0.20156EBT 149.95969 149.79844Taxes 52.48589 52.42945EAT 97.47380 97.36898No Shares 2.54250 2.51250EPS 38.33778 38.75382

The analyses outputs display 5-decimal results because the rounding off to two decimal outputs sometimes fails to distinguish properly between the different EPS values.

In scenario 1 the capital requirements for the 85% share / 15% debt combination financing option was calculated as follows: 85% of the N$2.5 mil. Total capital requirement = N$2.125 mil., and 15% of the N$2.5 mil. Total capital requirement = N$375 500. Interest on the N$375000 was calculated as N$40312, 50. Calculating the extra number of shares to be sold in order to raise the N$2.125 mil. was done by dividing the N$2.125 mil. by the share price (N$50) = 42500 number of extra shares to be sold. The 42500 was added to the existing NOSO (2.5 mil. shares) to get the final NOSO = 2.5425 mil. shares. EPS was calculated by dividing EAT by the final NOSO to get 38.33778.

A similar procedure was repeated on the 25% share / 75% debt combination financing option. EPS was found to be 38.75382. EPS for the 25% share / 75% debt option (38.75382) was higher than the EPS of the 85% share / 15% debt option (38.33778) therefore the first option was found to be the better financing option between these two options of scenario 1.

Scenario 2:

85% Share/Debt 15% 25% Share/Debt 75%EBIT 2.50 2.50Interest 0.04031 0.20156EBT 2.45969 2.29844Taxes 0.86089 0.80445EAT 1.59880 1.49398No Shares 2.54250 2.51250EPS 0.62883 0.59462

In scenario 2 the capital requirements for the 85% share / 15% debt combination financing option was calculated as follows: 85% of the N$2.5 mil. Total capital requirement = N$2.125 mil. and 15% of the N$2.5 mil. Total capital requirement = N$375000. Interest on the N$375000 was calculated as N$403125, 50. Calculating the extra number of shares to be sold in order to raise N$2.125 mil. was done by dividing the N$2.125 mil. by the share price (N$50) = 42500 number of extra shares to be sold. The 42500 was added to the existing NOSO (2.5 mil. shares) to get the final NOSO = 2 542 500. EPS was calculated by dividing EAT by the final NOSO to get 0.62883.

A similar procedure was repeated on the 25% share / 75% debt combination financing option. EPS was found to be 0.59462. EPS for the 25% share / 75% debt option (0.59462) was lower than the EPS of the 85% share / 15% debt option (0.62883) therefore the second option was found to be the better financing option between these two options of scenario 2.

In scenario 1 EBIT was N$150 mil., and in scenario 2 EBIT was N$2.5 mil. with all the other conditions exactly the same. The resulting differences in the EPS values between the two scenarios (and


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consequently also on the best financing options) were therefore mainly due to the differences in their respective EBIT values.

EPS/EBIT PROCEDURE FOR SHARES ONLY FINANCING

1. Record EBIT (earnings before interest and tax) or gross income.2. There is no interest payable if the financing is done only through the selling of shares.3. Calculate the amount of tax (T) payable on EBT.4. Deduct the amount of tax (T) calculated in (3) above from EBT to derive at (EAT) earnings after

tax (EBT – T = EAT).5. Calculate the number of shares that you need to sell in order to find that portion of the

required capital that you want to finance through the selling of shares by dividing the amount required by the share price.

6. Add number that you have calculated in (6) above to the existing number of shares outstanding (NOSO) to derive at the new (final) NOSO.

7. Calculate the earnings per share (EPS) by dividing EAT by the final NOSO.8. Interpretation: the highest EPS indicates the best financing option to acquire the capital.

Scenario 1:

EBIT 150.00Interest 0.00000EBT 150.00000Taxes 52.50000EAT 97.50000No Shares 2.55000EPS 38.23529

Shares only financing

In shares only financing there is no interest payable, because there is no debt component involved. The number of shares that need to be sold to raise the capital requirement of N$ 2.5 mil. in this example is calculated by dividing the capital requirement by the share price. In this example the additional number of shares that need to be sold is therefore (2 500 000/50 = 50000) fifty thousand. This number of shares is added to the existing NOSO of 2.5 mil. to get the final NOSO of 2.55 mil. In order to calculate EPS, EAT is divided by the final NOSO (97 500 000/2 550 000 = 38.23529) to get 38.23529.

Scenario 2:

EBIT 2.50Interest 0.00000EBT 2.50000Taxes 0.87500EAT 1.62500No Shares 2.55000EPS 0.63725

Shares only financing

In shares only financing there is no interest payable, because there is no debt component involved. The number of shares that need to be sold to raise the capital requirement of N$ 2.5 mil. in this example is calculated by dividing the capital requirement by the share price. In this example the


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additional number of shares that need to be sold is therefore (2 500 000/50 = 50000) fifty thousand. This number of shares is added to the existing NOSO of 2.5 mil. to get the final NOSO of 2.55 mil. In order to calculate EPS, EAT is divided by the final NOSO (1 625 000/2 550 000 = 0.63725) to get 0.63725.

EPS/EBIT PROCEDURE FOR DEBT ONLY FINANCING

1. Record EBIT (earnings before interest and tax) or gross income.2. Calculate the interest amount (I) on that portion of the capital requirement that you want to

finance through debt financing (loan from the Bank).3. Deduct the interest amount (I) that you have calculated in (2) above from EBIT in order to

derive at (EBT) earnings before tax (EBIT – I = EBT).4. Calculate the amount of tax (T) payable on EBT.5. Deduct the amount of tax (T) calculated in (4) above from EBT to derive at (EAT) earnings after

tax (EBT – T = EAT).6. No additional shares need to be sold since the financing is done by debt financing only. NOSO

therefore remains unchanged.7. Calculate the earnings per share (EPS) by dividing EAT by the NOSO.8. Interpretation: the highest EPS indicates the best financing option to acquire the capital.

Scenario 1:

150.000.26875

149.7312552.4059497.325312.50000

38.93013

Debt only financing

In debt only financing there is no additional shares that need to be calculated to find a new (final) NOSO. Therefore the existing or given NOSO remains the same. In debt only financing the interest amount on the capital requirement needs to be calculated. 10.75% of the full capital requirement is therefore N$268750 (N$2.5 mil. multiplied by 10.75%).

In order to calculate EPS for scenario 1, the procedure as explained above needs to be followed. An EPS of 38.93013 was found.

2.500.268752.231250.780941.450312.500000.58013

Debt only financing

In debt only financing there is no additional shares that need to be calculated to find a new (final) NOSO. Therefore the existing or given NOSO remains the same. In debt only financing the interest


17

amount on the capital requirement needs to be calculated. 10.75% of the full capital requirement is therefore N$268750 (N$2.5 mil. multiplied by 10.75%).

In order to calculate EPS for scenario 1, the procedure as explained above needs to be followed. An EPS of 0.58013 was found.

Final interpretations:

The respective EPS values that were calculated for the different options of scenario 1 are summarised as follows:

1. 85% shares / 15% debt financing option 38.337782. 25% shares / 75% debt financing option 38.753823. Shares only financing option 38.235294. Debt only financing option 38.93013

The debt only financing option has the highest EPS, therefore between the four options that were considered for scenario 1, debt only financing was found to be the best financing option.

The respective EPS values that were calculated for the different options of scenario 2 are summarised as follows:

1. 85% shares / 15% debt financing option 0.628832. 25% shares / 75% debt financing option 0.594623. Shares only financing option 0.637254. Debt only financing option 0.58013

The shares only financing option has the highest EPS, therefore between the four options that were considered for scenario 2, shares only financing was found to be the best financing option.

Key issues to be considered when looking to formulate the strengths & weaknesses of an enterprise

and the opportunities & threats in the market.

Potential strengths & competitive assets Potential weaknesses & competitive deficiencies

Competencies that are well matched to industry key success factors

Competencies that are not well matched to key industry success factors

Strong financial condition; ample financial resources to grow the business

In the wrong strategic group………..

Strong brand name image/reputation Losing market share because…………Attractive customer base Lack of attention to customer needsProprietary technology/superior technological skills/important patents

Weak balance sheet, short financial resources to grow firm; too much debt

Superior intellectual capital Higher overall unit costs relative to those of key competitors

Skills in advertising and promotion Weak or unproven product innovation capabilities

Strong bargaining power over suppliers or buyers

A product/service with so-so attributes or features that are inferior to those of rivals

Proven capabilities in improving production processes

Too narrow product line relative to rivalsWeak brand image or reputation

Good supply chain management capabilities Weaker dealer network than key rivals or lack of global distribution capabilities


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Good customer service capabilities Behind on product quality, R&D and/or technological know-how

Superior product quality Lack of management deptWide geographic coverage/Strong global distribution capabilities

Inferior intellectual capital relative to rivals

Alliances/Joint ventures that provide access to valuable technology, competencies, attractive geographic markets

Plagued with internal operating problems or obsolete facilities

A product that is strongly differentiated from those of rivals

Too much underutilized plant capacity

Cost advantages over rivals No well-developed or proven core competencies

Core competencies in…………. No distinctive competencies or competitive superiority

A distinctive competence in …………. Resources that are readily copied or for which substitute are plenty

Resources that are hard to copy and for which there are no good substitutes

No clear strategic direction

Potential market opportunities Potential external threats to future profitability

Openings to win market share from rivals Increasing intensity of competition among industry rivals – squeezing profit margins

Sharply rising buyer demand for products/services

Slowdowns in market growth

Unserviced customer groups or market segments

Likely entry of potent new competitors

Demand in geographic markets Loss of sales to substitute productsA broader range of customer needs than currently

Growing bargaining power of customers or suppliers

Online sales via internet Vulnerability to industry driving forcesIntegrating forward or backward Shift in buyer’s needs and tastes away from

the industry’s product/servicesFalling trade barriers in attractive foreign markets

Adverse demographic changes that threaten to curtail demand for the industry’s products/services

Rival firms are open for acquisition with attractive technological expertise or capabilities

Adverse economic conditions that threaten critical suppliers or distributors

Potential Alliance or Joint venture partners to expand the firm’s market coverage or boost its competitive capability

Changes in technology – particularly disruptive technology that can undermine the firm’s distinctive competencies

Openings to exploit emerging new technologies

Restrictive foreign trade policiesCostly new regulatory requirementsTight credit conditionsRising prices on energy or key inputs


· web viewten strategic management tools with their respective input variables are herewith...

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