Unit 2:

Environmental
Analysis
Topic 6: Strategic Advantage
Profile, Mckinsey 7S Model and
SWOT analysis
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 Strategic Advantage Profile

• SAP is a summary statement which provide an

overview of the advantages and disadvantages
in key areas likely to affect future operations.
• SAP Shows the strength and weakness of an
Organization.

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 Functional Areas

There are generally five functional areas inmost of

the organizations. These areas are:
• Production or Operation
• Finance or Accounting
• Marketing or Distribution
• Human Resource & Corporate Planning
• Research & Development

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 Strategic Advantage Factors: Marketing and
Distribution

1. Competitive structure and market share: To what extent

has the firm established a strong mark share in the total
market or its key sub markets?
2. Efficient and effective market research system.
3. The product-service mix: quality of products and services.
4. Product-service line: completeness of product-service line
and product-service mix; phase of life-cycle the main
products and services are in.
5. Strong new-product and new- service leadership.
6. Patent protection (or equivalent legal protection for
services).
7. Positive feelings about the firm and its products and
services on the part of the ultimate consumer.
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 Strategic Advantage
Factors: R&D and Engineering
1. Basic research capabilities within the firm
2. Development capability for product.
3. Excellence in product design.
4. Excellence in process design and improvements.
5. Superior packaging developments being created.
6. Improvements in the use of old or new materials.
7. Ability to meet design goals and
customer requirements.
8. Well-equipped laboratories and testing facilities.
9. Trained and experienced technicians and scientists.
10. Work environment suited to creativity and innovation
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 SWOT Analysis

• SWOT is an acronym used to describe the particular Strengths,

Weaknesses, Opportunities, and Threats that are strategic factors for a
specific company. A SWOT should represent an organization’s core
competencies while also identifying opportunities it cannot currently
use to its advantage due to a gap in resources.

• The SWOT analysis framework has gained widespread acceptance

because of its simplicity and power in developing strategy. Just like any
planning tool, a SWOT analysis is only as good as the information that
makes it up. Research and accurate data is vital to identify key issues in
an organization’s environment.

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 SWOT Steps(1/2)
Assess your market:
• What is happening externally and internally that will affect our company?
• Who are our customers?
• What are the strengths and weaknesses of each competitor?
• What are the driving forces behind sales trends?
• What are important and potentially important markets?
• What is happening in the world that might affect our company?
• What does it take to be successful in this market? (List the strengths all companies
need to compete successfully in this market.)
Assess your company:
• What do we do best?
• What are our company resources – assets, intellectual property, and people?
• What are our company capabilities (functions)?

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 SWOT Steps(2/2)

Assess your competition:

• How are we different from the competition?
• What are the general market conditions of our business?
• What needs are there for our products and services?
• What are the customer-market-technology opportunities?
• What are the customer’s problems and complaints with the current
products and services in the industry?
• What “If only….” statements does a customer make?

Opportunity is an area of “need” in which a company can perform profitably.

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 SWOT Analysis example
UPer Crust Pies, a specialty
meat and fruit pie cafe in
Michigan’s Upper
Peninsula. They sell hot,
ready-to-go pies and
frozen take-home options,
as well as an assortment of
fresh salads and beverages.
The company is planning to
open its first location in
downtown Yubetchatown
and is very focused on
developing a business
model that will make it
easy to expand quickly and
that opens up the
possibility of franchising.
Here’s what their SWOT
analysis might look like:
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 UPer Crust Pies — Potential strategies for
growth

Based on their SWOT analysis, here are a few potential strategies for growth:

• Investigate investors- UPer Crust Pies might investigate its options for
obtaining capital.
• Create a marketing plan- Because UPer Crust Pies wants to execute a specific
marketing strategy—targeting working families by emphasizing that their
dinner option is both healthy and convenient—the company should develop a
marketing plan.
• Plan a grand opening- A key piece of that marketing plan will be the store’s
grand opening, and the promotional strategies necessary to get UPer Crust
Pies’ target market in the door.

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 SWOT Matrix
• The relationships in a SWOT analysis are generally represented by a 2 x 2 matrix. The ‘strengths’
and ‘opportunities’ are both positive considerations. The ‘weaknesses’ and ‘threats’ at, both
negative considerations. The SWOT matrix is an important matching tool that helps managers in
generating four types of strategies i.e. SO, WO, ST and WT
• SWOT matrix is a conceptual framework for a systematic analysis for matching opportunities and
threats that are external with strengths and weaknesses which are internal for the organization.
When these four attributes combine, they result in four sets of different strategic alternatives.

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 Mckinsey 7S Framework

• McKinsey 7s
model is a tool
that analyzes
firm’s
organizational
design by looking
at 7 key internal
elements in order
to identify if they
are effectively
aligned and allow
organization to
achieve its
objectives.

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 Importance of the Tool
1. The model can be applied to many situations and is a valuable tool when
organizational design is at question. The most common uses of the
framework are:
• To facilitate organizational change.
• To help implement new strategy.
• To identify how each area may change in a future.
• To facilitate the merger of organizations.

2. In McKinsey model, the seven areas of

organization are divided into the ‘soft’ and
‘hard’ areas. Strategy, structure and systems
are hard elements that are much easier to
identify and manage when compared to soft
elements.

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 Description of 7S(1/2)
1. Strategy is a plan developed by a firm to achieve sustained competitive advantage
and successfully compete in the market. What does a well-aligned strategy mean
in 7s McKinsey model? In general, a sound strategy is the one that’s clearly
articulated, is long-term, helps to achieve competitive advantage and is reinforced
by strong vision, mission and values.

2. Structure represents the way business divisions and units are organized and
includes the information of who is accountable to whom. In other words, structure
is the organizational chart of the firm.

3. Skills are the abilities that firm’s employees perform very well. They also include
capabilities and competences.

4. Staff element is concerned with what type and how many employees an
organization will need and how they will be recruited, trained, motivated and
rewarded.

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 Description of 7S(2/2)
5. Systems are the processes and procedures of the company, which reveal business’
daily activities and how decisions are made. Systems are the area of the firm that
determines how business is done and it should be the main focus for managers during
organizational change.

6. Style represents the way the company is managed by top-level managers, how they
interact, what actions do they take and their symbolic value. In other words, it is the
management style of company’s leaders.

7. Shared Values are at the core of McKinsey 7s model. They are the norms and
standards that guide employee behavior and company actions and thus, are the
foundation of every organization.

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 Steps to Apply(1/2)
Step 1. Identify the areas that are not effectively aligned
During the first step, your aim is to look at the 7S elements and identify if they are
effectively aligned with each other.

Step 2. Determine the optimal organization design

With the help from top management, your second step is to find out what effective
organizational design you want to achieve. By knowing the desired alignment you can
set your goals and make the action plans much easier.

Step 3. Decide where and what changes should be made

This is basically your action plan, which will detail the areas you want to realign and
how would you like to do that. If you find that your firm’s structure and management
style are not aligned with company’s values, you should decide how to reorganize the
reporting relationships and which top managers should the company let go or how to
influence them to change their management style so the company could work more
effectively.

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 Steps to Apply(2/2)
Step 4. Make the necessary changes
The implementation is the most important stage in any process, change or analysis
and only the well-implemented changes have positive effects. Therefore, you should
find the people in your company or hire consultants that are the best suited to
implement the changes.

Step 5. Continuously review the 7s

The seven elements: strategy, structure, systems, skills, staff, style and values are
dynamic and change constantly. A change in one element always has effects on the
other elements and requires implementing new organizational design. Thus,
continuous review of each area is very important.

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 Example- Current Position #1
The company’s main strategy is to
grow its share in the market. The
company is new, so its structure is
simple and made of a very few
managers and bottom level
workers, who undertake specific
tasks. There are a very few formal
systems, mainly because the
company doesn’t need many at this
time.

Alignment
So far the 7 factors are aligned
properly. The company is small and
there’s no need for complex matrix
structure and comprehensive
business systems, which are very
expensive to develop.

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 Example- Current Position #2
The startup has grown to become large business
with 500+ employees and now maintains 50%
market share in a domestic market. Its structure has
changed and is now a well-oiled bureaucratic
machine. The business expanded its staff,
introduced new motivation, reward and control
systems. Shared values evolved and now the
company values enthusiasm and excellence. Trust
and teamwork has disappeared due to so many new
employees.

Alignment
The company expanded and a few problems came
with it. First, the company’s strategy is no longer
viable. The business has a large market share in its
domestic market, so the best way for it to grow is
either to start introducing new products to the
market or to expand to other geographical markets.
Therefore, its strategy is not aligned with the rest of
company or its goals. The company should have
seen this but it lacks strategic planning systems and
analytical skills.

Business management style is still chaotic and it is a

problem of top managers lacking management skills.
The top management is mainly comprised of
founders, who don’t have the appropriate skills.
New skills should be introduced to the company.

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 Example- Current Position #3
The company realizes that it needs to expand to other regions, so
it changes its strategy from market penetration to market
development. The company opens new offices in Asia, North and
South Americas. Company introduced new strategic planning
systems hired new management, which brought new analytical,
strategic planning and most importantly managerial skills.
Organization’s structure and shared values haven’t changed.

Alignment
Strategy, systems, skills and style have changed and are now
properly aligned with the rest of the company. Other elements
like shared values, staff and organizational structure are
misaligned. First, company’s structure should have changed from
well-oiled bureaucratic machine to division structure. The division
structure is designed to facilitate the operations in new
geographic regions. This hasn’t been done and the company will
struggle to work effectively. Second, new shared values should
evolve or be introduced in an organization, because many people
from new cultures come to the company and they all bring their
own values, often, very different than the current ones. This may
hinder teamwork performance and communication between
different regions. Motivation and reward systems also have to be
adapted to cultural differences.

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THANK YOU

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