 Strategic analysis refers to the analysis of

internal and external environment of a firm to

determine alternative courses of action, which
could best enable the firm to achieve strategic
competitiveness
 It provides the framework to study, forecast,
anticipate and prepare the business
organizations to face the challenges occur due
to change in environmental factors.
Scanning the environment
 involves the study of the general environment
 helps identify the early signals of potential changes in
the environment
 it reveals ambiguous, incomplete and unconnected data
 many organisations use special software and internet
for environmental scanning
 Scanning is an opportunity for the organization to
detect weak signals in the general environment before
these have merged into a noticeable pattern which
might affect its competitive environment
 Change in macro-environment, changes in market,
nature of competition, customer needs, product
offerings
 It involves observation of environmental changes to see
the trend
 At the time of monitoring environment organizations
may traces weak signals that may lead to greater impact
in future
 A careful monitoring of signals is needed to track them
in time before they grow into more visible pattern
 Monitoring allows an organization to see how does
general environment trends impact on its competitive
environment
 Scanning and monitoring are particularly important
when a firm competes in a highly volatile environment
 It helps to formulate strategy to gain competitive
advantage
 involved developing feasible projections of what might
happen and how quickly
 it is done in the basis of changes and trends, it is a
challenging work
 Identification of key forces (PEST) at work in
environment
 Understanding of the nature of key influences and
drivers of change
 Projection of future alternative paths available
 Scenario is a consistent view of what the future is
likely to be. It constructs pictures of possible futures
 Use scenario planning when traditional forecasting
techniques fail to predict rapid and unstable changes
in external environment
 Use when there is limited information to analyse the
situation
 If environmental elements are certain there is little
chance of using scenario planning
 When future environmental elements are rapidly
changing it is difficult to make a long-term forecast
 Oil producing company, automobile manufacturing,
energy producing and information technology
development companies will engage in formal
scenario planning
 In scenario planning process CEOs summarize the
alternative future trends, they may take the help of
experts or line executives to examine the possible
future trend of scenario
 For developing a new business worldview,
summarizing future alternatives and future trends, to
find contradictory situations, building new set of
scenarios etc. activities are conducted in scenario
planning
1. Developing a new business worldview
2. Summarizing future alternatives and future
trends
3. To find contradictory situations
4. Helping managers to create their own views
5. Building new set of scenarios
 1. Political environment: political influences come
from government institutions including rules,
regulations and policies, priorities of political parties
etc. Government stability, taxation policy, foreign
trade regulations, social welfare policies are political
environment forces
 2. Economic environment: includes nature and
direction of the economic system of a country, they
are business cycle, investment trends, monetary
policy, money supply, inflation, economic growth,
employment and unemployment situations etc.
 3. Socio-cultural environment: includes values,
beliefs, lifestyles, family systems, opinions and
assumptions. Population demographics, income
distribution, social mobility, lifestyle changes,
attitudes to work, levels of education are socio-
cultural environment
 4. Technological environment: technology is a
powerful tool to change its work process, products
and services. Government spending on research, new
development, speed of technology transfer are the
technological environment
1. Threat of New Entry

Barriers to entry
➢ Economies of scale: obstacles in distribution, sales
forces utilization, financing
➢ Product differentiation by the customers: product
and brand loyalty
➢ Capital requirements: huge capital to invest
➢ Switching costs: fear of rising switching costs
➢ Cost disadvantage: access to the suppliers,
product design, favorable locations,
government subsidies and learning experience
➢ Access to distribution channel: increase in
distribution costs
➢ Government policy: regulate product quality,
health and government enforcement
➢ Expected retaliation (revenge) from existing
competitors: long history of establishment,
adequate access to resources and channels of
distribution, adequate production capacity
2. Substitute Products
➢ Relative price

➢ Switching costs
➢ Buyer’s propensity to substitute

3. Competitive Challenge
➢ Presence of equally balanced competitors

➢ Slow industry growth

➢ Existence of global customers

➢ High fixed or storage costs

➢ Lack of differentiation or switching costs
4. Bargaining Power of Buyer
➢ Purchase large volume of product

➢ Undifferentiated product
➢ Low cost for switching the product

➢ Buyers earn low profit

➢ Buyers pose threats

➢ Buyer has full information

5. Bargaining Power of Suppliers
➢ Concentration of buyers in any supplier

➢ Product is unique and switching cost is high

➢ Supplier also produces the substitute

products
➢ Suppliers’ product is an important input
 Business is a game where you are sometimes
competing and sometimes cooperating with
other players in industry.
 Cooperation leads to an expansion of the
business pie and competition to a slicing up
of the pie.
 Both cooperation and competition are
necessary and desirable aspects of a
business.
 A co-opetition mindset actively looks for
ways to change and expand the business.
 The value net is a way of looking at a
business situation that recognizes that the
company operates in an environment having
four main groups that influence the course of
any business.
 These four groups are: suppliers, customers
competitors and complements
 Customers

Competitors Company Complements

Suppliers
 The Value Net is a graphic map designed to represent
all the players in the game and the interdependencies
among them.
 Interactions take place along two dimensions. Along
the vertical dimension are the company's customers
and suppliers.
 Along the horizontal dimension are the players with
whom the company interacts but does not transact.
 Competitors are alternative players from whom
customers may purchase products. Or to whom
suppliers may sell their resources.
 Complements are players from whom customers buy
complementary products. Or to whom suppliers sell
complementary resources.
 Strategic Groups refers to a group of companies
who follow the same strategy within a particular
industry.
 A company which operates in an industry can
have different business segments supplying to
different markets.
 For each of these segments, there will be a
unique market characteristic, operating
environment, threats and opportunities.
 So companies that operate under this segment
will all have same strategies and therefore are
called strategic groups.
 Current era has seen a great rise in
competition, businesses now days function in
a hyper-competitive environment.
 Business is intensely, strongly, bitterly,
savagely competitive.
 Business has entered a new era of hyper-
competition, shifting dramatically from slow-
moving stable oligopolies to an environment
characterized by a quick- strike mentality .
 Maintaining a sustainable advantage is no
more possible in the current market.
 Term was used by D’ Aveni in 1994.
 Market stability is threatened by short
product life cycles, short product design
cycles, new technologies, frequent entry by
unexpected outsiders, repositioning by
incumbents and tactical redefinitions of
market boundaries.
 They are willing to replace their own popular
products before competitors do so. This is
done to sustain their competitive advantages.
 It becomes difficult to sustain a competitive
advantage for very long
 A company or business unit must constantly
work to improve its competitive advantage
 Besides being the lowest-cost competitor,
firms should continuously improve programs
 Requires organisations to acknowledge that
advantages will be temporary
 Longer-term competitive advantage is gained
through a sequence of short-lived moves
 Cost and quality: Competition focuses on the
price and value proposition mix to be presented
to the customer.
 Know-how: Competition focuses on
competencies and creating the skills that are
required to create future value for the customer.
 Strongholds and barriers to entry:
Competition focuses on creating advantages that
block competitors from entering the market.
 Deep pockets: Competition focuses on the use of
financial resources to fund and carry on the
competitive war.
 Internal environment analysis refers to the
analysis of the internal resource and
capabilities of an organisation.
 Resources and capabilities are the source of
strength and weakness, which reside in
different functional units such as marketing,
production, human resource, finance and
accounting, research and development.
 Internal strength and weakness together with
opportunity/threat and a clear mission
statement provide base for objective and
strategy formulation.
1. Production and operation resources
Components that are analyzed
 Production capacity and utilization
 Economies of scale
 Plant location and layout
 Copyright and patent right
 Position of suppliers and relationship
 Inventory management system
 Total quality management
 Maintenance system
 Marketing mix
 Product line
 Innovative products
 Market segmentation
 Market share
 Product life cycle
 Pricing policy
 Distribution system
 Promotion system and capability
 Relationship marketing
• Availability of sources of finance
• Capital structure
• Capital budgeting
• Financial control system
• Cost control ability
• Profit planning
• Ability to use alternative financial strategies
• Effectiveness of auditing
• International standard in accounting
 Corporate image of the employees
 Working environment of the organisation
 Effectiveness of human resources
management
 Knowledge and skill of the employees
 Training and development of employees
 Employees turnover, absenteeism and
indiscipline
 Research and development intensity
 Technological competence
 Technologies transfer
 A business may be seen as a chain of activities
that transforms inputs into outputs that create
customer value.
 The value chain shows how a product moves
from the raw-material stage to the final
customer.
 Value chain analysis attempts to understand how
a business creates customer value by examining
the contribution of different activities within the
business to that value.
 The firm can earn return only if it creates greater
value than the costs incurred to create that value.
 Value chain analysis allows the firm to
understand the parts of its operations that
create value and those that do not.
 Understanding these issues is important
because the firm can earn return only if it
creates greater value than the costs incurred
to create that value.
A. Primary activities: related to
manufacturing and marketing of the
product. These activities are mentioned
below:
1. Inbound logistics: include activities such
as materials handling, warehousing and
inventory control. They are used to
receive, store and disseminate inputs to a
product.
2. Operations: Include activities necessary
to convert the inputs provided by inbound
logistics into final product form. They are
machining, packaging, assembly and
equipment maintenance.
3. Outbound logistics: Include activities related
to collecting, storing and physical distribution
of the final product to customers. They are
finished-goods warehousing, materials
handling and order processing.
4. Marketing and sales: Include activities that
provide means through which customers can
purchase products and to persuade them to do
so. They are developing advertising and
promotional campaigns, select appropriate
distribution channels, and select, develop, and
support their sales force.
5. Service: Include activities designed to enhance
or maintain a product’s value. They are
installation, training and adjustment.
B. Supporting Activities: They are the activities
which are carried out to support the primary
activities. They provide infrastructure to the
primary activities. The supporting activities include
the following:
1. Procurement: Includes activities related to
purchase of inputs needed to produce products.
They include items like raw materials and
suppliers, machinery, laboratory equipment,
office equipment and buildings.
2. Technological development: Includes activities
related to improve a firm’s product and the
manufacturing processes. It takes the forms of
process equipment, basic research and product
design and servicing procedures.
3. Human resource management: Includes
activities related to recruiting, hiring, training,
developing and compensating the employees.
4. Firm infrastructure: Includes activities such as
general management, planning, finance,
accounting, legal support and governmental
relations. They are required to support the work
of the entire value chain. Through infrastructure,
a firm can identify external opportunities and
threats, resources and capabilities, support core
competencies.
Value chain analysis involves analysis of
business activities from procurement or raw
material to after sales service. It has a specific
process which is mentioned below:
 1. Identify activities

 2. Allocate costs

 3. Identify the activities that differentiate the

firm
 4. Evaluation of value chain
1. Cost efficiency analysis: utilization of
organisational resource in such a way that
the overall costs are minimized without
compromising in the quality.
 Economies of scale
 Supply cost
 Product process and design
 Experience
2. Effectiveness analysis: enhance product
effectiveness by matching customer
requirement and product features
 Customer requirement: product attributes,
expected service and price sensitivity
 Value added by organisation: product
features, service performance and
communication
 Degree of matching: matching between
product features and value added by the
organisation
3. Comparative analysis: involves the
comparison of capability of an organisation
with the competitors.
 Historical analysis
 Industry standard

 Benchmarking
Strengths, Weaknesses, Opportunities, Threats
(SWOT) analysis is done to understand the
external and internal environments of an
organisation. The forces in the external
environment provide opportunities and
threats. The forces in the internal
environment provide strengths and
weaknesses. SWOT analysis provides a good
overview of whether a firm’s business
position is fundamentally healthy or
unhealthy.
 Strengths: Strengths represent internal
resources, competencies and capabilities to
exploit the external opportunities. Strengths
are good for the company to take competitive
advantages from the market. Strengths are
important to provide extra energy to compete
in the market in relation to the competitors.
Strong strategy, sound financial condition,
strong brand image, market leadership,
sophisticated technology, skill manpower,
high product promotion, powerful
distribution channel, production efficiency
etc. are the strong conditions.
 Weaknesses: They represent limitations to
compete in the market. Such weaknesses
arise due to a lack of important skills and
expertise manpower, lack of physical and
intangible assets, unclear goal, weak
competitive capabilities in key areas, lack of
strong strategy, weak financial condition,
inferior product, weak promotion, obsolete
technology etc.
 Opportunities: An opportunity is a situation
where a company will gain something by
planning and exploiting its resources
strategically. It arises with the changes in
technology, demographic situation, economic
development, improvement in the clientele
relations (customers, creditors). Every firm
has to use its internal resources strategically
to get the opportunity from the external
environment. Product development, market
expansion, entry into new business, new
technology, strong economy, social
development etc. provide the opportunities
condition.
 Threats: Threats represent an unfavourable
situation for a company restraining to compete
and make profits. Such a situation arises when
there is an increasing number of firms in the
industry, enactment of new regulation which is
more favourable for the competing firms, slow
pace of market growth, increasing bargaining
power of the suppliers or customers, entry of
new firm, insufficient resources, low worker
commitment, change need and preference of
customers, unfavourable law and politics etc.
 Resources represent the internal strength of a
company
 If resources properly allocated among different
activities, it makes the company able to raise
work efficiency, add more and more value in the
product and efficiency will be increased in
relation to the competitors
 There are mainly two types of resources-
tangible and intangible
 Tangible resources: financial, organizational,
physical, technical resources etc.
 Intangible resources: human, information,
knowledge, innovational, reputational resources
etc.
1. Identify the firm’s resources
2. Combining strengths with capabilities
3. Appraise the profit
4. Select the best strategy
5. Identify resource gap
1. Available resources
 Physical resources
 Human resources
 Financial resources
 Intellectual resources: patent right, brand
loyalty, business system
2. Threshold resources: fundamental resources,
they are essential to exist and compete
successfully in the market, development of
these resources over a long period of time is
very essential for sustainability of a business.
Technology, IT infrastructures, large scale
operations and capital are threshold resources.
3. Unique resources: the resources that are
critical for gaining competitive advantage are
called unique resources, develop over a long
period of time. Valuable, non-substitutable,
costly to imitate, rare are characteristics of
unique resources
 A core competence is the result of a specific
unique set of skills or production techniques
that deliver value to the customer. Such
competences give an organisation access to a
wide variety of markets.
 Core competencies create and sustain ability
to meet the critical success factors of
particular customer groups better than other
provide ways that are difficult to imitate.
 Expertise in integrating multiple technologies
to create a new product
 In cost efficient supply chain management
 Expertise in after sales service
 Skills in manufacturing high quality products
at low cost
 Activity or process highlights the value in the
product or services
 Levels of performance is significantly better
than competitors
 Difficult to imitate for the competitors
When core competency is superior to those of the
competitors, it is called distinctive competency. It
indicates a greater proficiency than a core
competency. A distinctive competence is a
competitively an important resource strength for
three reasons.
 It gives company competitively valuable
capability that is unmatched with competitors.
 It has the potential of being the cornerstone of
the company’s strategy.
 It can produce the competitive edge in the
marketplace since it represents a level of
proficiency that is superior to rivals.
 Competitive advantage refers to advantage over the
competitors.
 Competitive advantage is securing and widening
market share compare to a firm’s competitors.
 It is the process of positioning a firm in the market to
do better than competitors in profitability.
 Competitive advantages are measured in relative
criteria such as higher profitability compared to the
competitors.
 Competitive advantage occurs when an organisation
is implementing a value creating strategy that is not
being implemented by current or potential
competitors and when these competitors are unable
to duplicate the benefits of this strategy.
 The competitive advantage is thought to be stronger
when it lasts for a longer period of time. Those
companies who are able to maintain a competitive
advantage for many years are thought to have a
sustainable competitive advantage.
1. Valuable resources
2. Rare resources
3. Costly to imitate: unique location, path
dependency, social complexity
4. Non-substitutability
By creating simple yet tech-forward products consumers didn’t even
know they needed. But it has many competitors eager to entice
consumers away. So, how does Apple keep its edge? By consistently
producing innovative, high-quality products, the company has
fostered a deep sense of brand loyalty from its core customer base.
This has resulted in a huge pool of customers eager to buy the next
product, regardless of its specific selling point — bigger screen,
lighter product, new headphones. One of Apple’s main competitive
advantages is that they hook you with one product and then make it
difficult to leave because of its highly integrated product range. Once
set up on Apple’s platform, customers are essentially locked in with
little choice over standard software, which comes with the hardware,
and they often stay within the Apple ecosystem as it’s easier for their
devices to speak to each other. Consumers continue buying Apple
products not just because of their sleek form, but also for fear of
losing their media or app data should they switch brands. Apple is a
great example of why small business owners should consider the
costs of switching when evaluating their products or services — how
easy is it for your customers to switch to your competitors?
E-commerce giant Amazon offers a vast range of products,
from electronics and household goods to gourmet food
(following their acquisition of Whole Foods in August 2017).
Amazon also has a massive active customer base — in the
U.S., there are an estimated 80 million Amazon Prime
subscribers. Its website is increasingly a resource for
consumers who want to comparison shop and do product
research, allowing shoppers to look at top sellers and read
past reviews, even if they don’t end up purchasing the
product from Amazon; although more often than not,
Amazon also offers the most competitive prices. Logistically,
Amazon prioritizes fast and cheap shipping and has
developed a global delivery network, including its own
infrastructure (even drones), to avoid using third-party
companies.
 Amazon’s primary competitive advantages —
its sprawling distribution network and
competitive pricing — can’t be replicated
overnight. But, there is something every
business can take away from Amazon’s
success: listen to the voice of your customer,
and grow in a direction that addresses their
needs.
Another great example of a company excelling at
highlighting their competitive advantage is Canadian startup
Wealthsimple, a robo-advisor that helps people invest their
money, using a proprietary algorithm, saving users money
on traditional investment management fees. Their
competitive advantage is a simple online platform that takes
what is traditionally done in-person with investment
advisors in a very non-transparent way, and makes it simple
for someone with zero investment knowledge to manage
their own portfolio and track their progress. By keeping
overhead low, the company is able to provide access to
high-quality, low-cost products and scale their operations
to service more clients than traditional financial institutions.
Wealthsimple stepped into an industry that was
unapproachable for individuals unable to afford high advisor
fees and who weren’t very financial literate, and made it
affordable and accessible to everyone.
1. Establish Brand Loyalty
2. Patent Your Product
3. Continually Innovate
4. Hire ‘Connected’ Team Members Use
5. Long Term Contracts and Incentives
1. Assumption that a firm can be profitable in a
highly competitive market as long as it can
exploit advantageous resources, but this
may not necessarily be the case.
2. Purchasable assets cannot be sources of
sustained competitive advantage.
3. The concept of scarcity is obsolete
4. No sustainable business can attain
5. The resources based view explains very
little about how resources are developed
and changed over the time
6. It has a limited ability to make reliable
predictions of future resource requirement.
7. It also does not address the dynamic role
played by an individual within the
organisation.
8. It lacks detail roadmap. Hence, it is difficult
to implement.
9. It does not recognize the role played by
emergent strategies.
10. It only focuses on the internal elements of
a firm and it does not consider the external
factors like the demand side of the market.
 Knowledge management is the process of
capturing, distributing and effectively using
knowledge.
 Knowledge management is a discipline that
promotes an integrated approach to
identifying, capturing, evaluating, retrieving,
and sharing all of an enterprise’s information
assets.
 These assets may include databases,
documents, policies, procedures, and
previously un-captured expertise and
experience in individual workers.
 Perhaps the most central power in KM is to
capture and make available, so it can be used
by others in the organization, the information
and knowledge that is in people's heads as it
were, and that has never been explicitly set
down.
 Another way to view and define KM is to
describe KM as the movement to replicate the
information environment known to be
conducive to successful R&D-rich, deep, and
open communication and information access
and deploy it broadly across the firm.
1. Creating knowledge
2. Capturing knowledge
3. Refining knowledge
4. Storing knowledge
5. Managing knowledge
6. Disseminating knowledge
1. Competitive advantage
2. Improved performance
3. Mutual trust
4. Enhanced human capabilities
5. Image building