Download - Strategic marketing
INTERNAL ANALYSIS
Group – 4Junaid A SiddiquiShivani SharmaDattsen Mishra
Manan BediKunal Shukla
Ashish GadbailRohit Singh
Akif GhaffarMohit Lala
Topics to be coveredIntroduction to Internal Analysis
Performance Measurement
Determinant of Strategic Options
From Analysis to Strategy
Business Portfolio Analysis
Case study – Hindustan Motors
External Analysis Vs Internal Analysis
Importance of Internal Analysis
External Analysis Internal Analysis
Study of the various external factors, which are affecting the growth of the company. Eg:• Customer Analysis, competitor analysis, Environment analysis & market and sub market analysis
Study of the key internal features of an organization. Eg:Profitability, product quality, brand association, relative cost, new product, shareholder value
Customer Analysis Segmentation Preference & taste Unmet needs
Profitability Sales Cost
Competitor Analysis Major Competitors Strategies used Target segment
Product Quality Value Addition
Environmental Analysis Technological Legal Cultural
Relative cost
Importance of Internal Analysis
Long – term strategy formulation
Evaluation of SWOT analysis
Supports the decision making process for the company
Introduction to Internal Analysis
Performance Measurement
Determinant of Strategic Options
From Analysis to Strategy
Business Portfolio Analysis
Case study – Hindustan Motors
Performance Beyond Profit
Financial Performance
Sales & Market Share
Profitability
Shareholder’s Value
Financial Performance
Financial
Sales &Market Share
ProfitabilityShareholder’s
Value
Customer BaseCustomer satisfactionLoyal customers
SalesCost
Shareholder’s value enhancement
Internet Analysis Performance measurement Financial performance
• Increase sales means increase customer base, which is directly proportional to market share
Sales & market share
• Necessary for the survival of the firm.• Profitability can be reflected by• Margins
• Cost• ROA
Profitability
• Give priority to shareholder value over other goals
• Reduce the cost of capital by increasing the debt to equity ratio
Shareholder’sValue
Financial Performance (ctd…)
Introduction to Internal Analysis
Performance Measurement
Determinant of Strategic Options
From Analysis to Strategy
Business Portfolio Analysis
Case study – Hindustan Motors
Financial Performance
Performance Beyond Profit
Product Service Quality
Brand Loyalty
Brand Association
Relative cost
New product Activity
Employee Capability
Product / Service QualityThe collection of features and characteristics of a product that contribute to its ability to meet given requirements.
Coca Cola Company :- Consistency and reliability are critical to our product
quality and to meeting global regulatory requirements and Company standards.
The Coca-Cola Management System (TCCMS). TCCMS is the integrated quality management program, which holds all of their operations system wide to the same standards for production and distribution of our beverages
Internal Analysis Performance Measurement Performance Beyond Profit
Product quality plays a major role in brand loyalty and brand association
Global Product Quality Index rating was 94.5 which was highest
Brand Loyalty / Customer Satisfaction
It measures parameters such as quick service, ensuring quality products, continuous improvement, wide distribution network, etc.
Internal Analysis Performance Measurement Performance Beyond Profit
• Relative possibility of customer shifting to another brand in case there is a change in product’s features, price or quality.
• Brand loyal consumers are the foundation of an organization• Brand loyalty is always developed post purchase.• Example of brand loyalty can be seen in US where true Apple
customers have the brand's logo tattooed onto their bodies.
Brand Association
Internal Analysis Performance Measurement Performance Beyond Profit
• It is anything which is deep seated in customer’s mind about the brand.
• Associations are not “reasons-to-buy” but provide acquaintance and differentiation that’s not replicable
• Examples :-Hyatt Hotels :- LuxuryMercedes Benz :- Sophistication, superior engineering.Bill Gates and Microsoft etc.
• Brand should be associated with something positive so that the customers relate your brand to being positive
Relative Cost Vs Relative performance
Our Component
is
More Expensive
Superior
Less Expensive
Inferior
Change•Design•Manufacturing SystemEg. Sony Ericson Camera
Value Analysis•Raise Prices•Promote COST REDUCTIONEg. Apple i-phone, i-pad
Value Analysis•Emphasize/ Promote•Leave it aloneEg. Nokia N 73 Speakers, Camera
Value Analysis•De-emphasize•UpgradeEg. Micromax Mobiles
Internal Analysis Performance Measurement Performance Beyond Profit
New Product Activity
Does the R&D operation generate a new product concept?
.
Is there a track record of successful new products?
.
Is new product developed requires any other features or Modification?
Internal Analysis Performance Measurement Performance Beyond Profit
Employee Capability and Performance
HR in place to support current and future strategies
New people, added to organization Match its needs OR are there any gaps?
Motivated, Challenged, Fulfilled and Growing in their profession Eg. GoogleFacbook
Evaluation Method: Surveys and GD
Internal Analysis Performance Measurement Performance Beyond Profit
Introduction to Internal Analysis
Performance Measurement
Determinant of Strategic Options
From Analysis to Strategy
Business Portfolio Analysis
Case study – Hindustan Motors
Past and Current Strategies
Strategic Problems
Organizational Capabilities
Financial Capabilities /Constraints
Strengths / Weaknesses
Determinants of Strategic Options
Past and Current Strategies
Strategic Problems
Organizational Capabilities
Financial Capabilities /Constraints
Strengths / Weaknesses
STRATEGIC CHOICES
PAST AND CURRENT STRATEGIES
To understand the bases of past performance, it is important to be able to make an accurate profit of past and current strategies.
Past and Current Strategies
Strategic Problems
Organizational Capabilities
Financial Capabilities /Constraints
Strengths / Weaknesses
STRATEGIC CHOICES
Determinants of Strategic Options
STRATEGIC PROBLEMS• Differs from a weakness or liability.• Absence of an asset ( such as good location) or
competence (eg new product introduction skills).For Example – An Automobile brand that finds it has a fit and finish deficit w.r.t. competitors requires strategic moves involving product design and production
Past and Current Strategies
Strategic Problems
Organizational Capabilities
Financial Capabilities /Constraints
Strengths / Weaknesses
STRATEGIC CHOICES
Determinants of Strategic Options
ORGANIZATIONAL CAPABILITIES
• Important source of both strengths and weaknesses are:o Structure – E.g.. The flexible structure of 3M is a
key to its growtho System – E.g.. McDonald’so People o Culture
Past and Current Strategies
Strategic Problems
Organizational Capabilities
Financial Capabilities /Constraints
Strengths / Weaknesses
STRATEGIC CHOICES
Determinants of Strategic Options
CONSTRAINTS• Questions to be answered?????
o Whether or not to invest in a business or withdraw cash from it???
o Should a firm increases its net investment or decrease it by holding liquid assets or returning cash to debt holders?
E.G. – Enam Securities Pvt Ltd was acquired by Axis bank because they were not making enough profit from past some time.
Past and Current Strategies
Strategic Problems
Organizational Capabilities
Financial Capabilities /Constraints
Strengths / Weaknesses
STRATEGIC CHOICES
Determinants of Strategic Options
ORGANIZATION STRENGTH AND WEAKNESSES
Based on its assets and competencies
Introduction to Internal Analysis
Performance Measurement
Determinant of Strategic Options
From Analysis to Strategy
Business Portfolio Analysis
Case study – Hindustan Motors
Where to compete
The Customer Value Proposition
Assets and Competencies
Functional Strategies and programs
Where to competeAlso the Product – Market Investment Strategy
What segments & products to avoid sometimes the most important decision
Allocation of scarce resources where it is possible to compete successfully
Many big organizations have well defined business scope
Services
Kitchen & Home products
Computer related products
One stop shopping destination
Economies of scale
What products markets will ne entered or exited in the coming years?
Which will be dialed up or down?
Which business sectors will receive investment resources because of their increased importance in future?
Some leading Examples
Some important questions to be asked are:Invest to grow(or enter the product
(market)
Invest only to maintain the
existing position
Milk the business by minimizing investment
Recover as many of the assets as possible by
liquidating or divesting the business
Future Direction of the firm dependent on the following investment
choices
Internal Analysis From Analysis to Strategy
Customer Value Propositions
Definition: “It is the perceived functional, emotional, social, or self expressive benefit that is provided by the organization’s offerings”.
Value propositions need to be relevant and should be reflected in products & offerings.
Propositions should be sustainable over time and differ from competitors.
A good value(Wal Mart)
Excellent on service or product attribute(for Tide, getting clothes clean)
The best overall quality(Lexus)
Product line breadth(Amazon)
Innovative offerings(3M)
A shared passion for an activity or a product(Harley- Davidson)
Global connections & prestige(Citigroup)
Can involve elements such as providing:
Internal Analysis From Analysis to Strategy
Assets & Competencies
Underlying the strategy provide SCA
A Strategic competency is what a business unit does exceptionally well.
A strategic asset is a resource that is strong relative to that of the competitors.
Strategy formulation must consider the cost and feasibility of generating assets and competencies.
The questions to be asked here are:
To what extent are the assets & Competencies strong and in place?
To what extent are they ownable because of a trademark or a long standing investment in a capability?
To what extent are they based on synergy within the organization that others cannot duplicate?
Internal Analysis From Analysis to Strategy
Functional Strategies & Programs
Manufacturing strategyDistribution strategyBrand building strategyCommunication strategyIT strategyGlobal strategySegmentation strategyQuality programCustomer Relationship program
Business strategy driven by a supportive set of Functional Strategies & Programs
The need for functional strategies and programs can be determined by asking a few questions:
What must happen for the firm to be able to deliver on the value proposition?
Are the assets and competencies needed in place?
Do they need to be created, strengthened, or supported? How?
Internal Analysis From Analysis to Strategy
Strategic Decision
Strategic InvestmentValue Proposition
Assets & CompFunctl Strategies &
Programs
Market needs,
attractiveness & key success
factors
Organizational Strength & Weaknesses
Competitor strength & weakness
Internal Analysis From Analysis to Strategy
Introduction to Internal Analysis
Performance Measurement
Determinant of Strategic Options
From analysis to Strategy
Business Portfolio Analysis
Case study – Hindustan Motors
Definition and need of Portfolio Analysis
BCG Matrix
GE Matrix
Few strategic implications
To know the current standing of the various businesses
To understand the requirement of the business
Proper allocation of cash/investment
Helps in shaping the strategy of the company
“A company's portfolio is the sum of its business, assets and products. A perfect portfolio analysis is shaped to meet and suit the company's potency and also enable it to exploit the best opportunities available to it.”
Analysis of a portfolio involves deciding on the relative importance of available business and investment opportunities.
The best portfolio analysis takes into account the locations of the different Strategic Business Units (SBU) present in the portfolio.
Need of Business Portfolio Analysis
Definition of Portfolio Analysis
Internal Analysis Business Portfolio Analysis
BCG MatrixStars – high share & high growth
Cash cows – high share & low growth
Dogs – low share & low growth
Question mark – low share & high growth
Two dimension used:
Market share
Market growth rate
Four classification (thus four strategies)
Relative market shareHigh Low
Market
Growth
rates
High
Low
Internal Analysis Business Portfolio Analysis
GE/Mc Kinsey Matrix
1 – Invest and grow strong business units in attractive industries, average business units in attractive industries, and strong business units in average industries.
2 – Selective investment or hold average businesses in average industries, strong businesses in weak industries, and weak business in attractive industries.
3 – Harvest and divest weak business units in unattractive industries, average business units in unattractive industries, and weak business units in average industries.
The GE matrix however, attempts to improve upon the BCG matrix by generalizing the axes as "Industry Attractiveness" and "Business Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit.
There are nine Quadrants which are numbered and accordingly Strategic implications are like–
While the GE business screen represents an improvement over the more simple BCG growth-share matrix, it still presents a somewhat limited view by not considering interactions among the business units and by neglecting to address the core competencies leading to value creation.
Internal Analysis Business Portfolio Analysis
1 1 2
1 2 3
2 3 3
High Medium Low
High
Medium
Low
Industry Attractiveness
Busi
ness
uni
t St
reng
th
GE/ Mc Kinsey MatrixEvaluating Business Unit Strength• Organization • Growth • Share by segment• Customer loyalty• Margins• Distribution• Technology skills• Planets • Marketing • Flexibility
Evaluate Industry Attractiveness1) Size 2) Growth 3) Customer satisfaction levels4) Competition 5) Price level 6) Profitability7) Technology 8) Government regulation 9) Sensitivity to economic trends
Internal Analysis Business Portfolio Analysis
Few strategies Invest to hold
Invest to penetrate
Invest to rebuild
Selective investment
Low investment
Divestiture
Internal Analysis Business Portfolio Analysis
ThankYou