Strategic management is a powerful way to

run businesses. As a result of this

approach’s inherently analytical nature, it’s
important that you use both internal and
external business analysis tools to make
managerial decisions.

  The formulation and implementation of major objectives and projects, by an

organization’s management on behalf of its shareholders (or owners). 
 From this overall assessment, a strategy is then created to achieve the desired
goals. Implementation of the formulated strategy seeks to steer and align the
company with its main objectives.
 is an organizational management activity that is used to set priorities, focus
energy and resources, strengthen operations, ensure that employees and other
stakeholders are working toward common goals, establish agreement around
intended outcomes/results, and assess and adjust the organization's .
 Situational analysis is the process we use to gain understanding and
insight into our present situation.
 When conducting a situational analysis, we are engaged in two major
activities: the marketing audit and SWOT analysis. (A SWOT analysis is a matrix-based tool used
in marketing planning to identify strengths, weaknesses, opportunities and threats related to the
company.

As noted in the figure below, the results of the marketing audit become input to the SWOT
Analysis
SITUATIONAL ANALYSIS

MARKETING AUDIT

SWOT
Internal External Market Competitive
Analysis Analysis Analysis Analysis
Analysis
 What is a Marketing Audit?
 A marketing audit is a structured, complete review of the marketing activities of an
organization

What Does a Marketing Audit Involve?

 1. The Internal Environment
 2. The External Environment
 3. The Competition
 Situation Analysis –
External Environment:
Opportunities, Threats
 External Analysis for Strategic Management

What Is External Analysis?

 external analysis is less about the organization itself, and more about its
business environment (including its competitors).

Why Is External Analysis Important?

 When evaluating your organization’s goals and resources, you absolutely
need to look at the surrounding business environment.
 In a perfect world, it would be enough just to look inside your
organization; in the real world, you need to be conscious of external forces
that might affect your business’ operations and throw you off course.
 Categories of Environmental Factors used in Analyzing External
Factors:

 Political. How are government decisions influencing your organization?

 Economic. How is the local or global economy influencing your organization?
 Sociocultural. How are changes in social and cultural norms influencing your
organization?
 Technological. How is the advancement, presence, or lack of technology
influencing your organization?
 Legal. How are legal issues influencing your organization?
 Environmental. How is the environment influencing your organization?
What is a SWOT analysis and why should you use
one?

A SWOT analysis guides you to identify the

positives and negatives inside your organization
(Strength & Weakness) and outside of it, in the
external environment (Opportunity & Threat).
Developing a full awareness of your situation can
help with both strategic planning and decision
-making.
David gives an example for Campbell Soup Company that stresses financial
goals, but it also illustrates how you can pair the items within a SWOT grid to
develop strategies. (This version of the chart is abbreviated.)
 Criticisms of SWOT analysis
 It is simply the opinions of those filling out the boxes.
 Virtually everything that is a strength is also a
weakness.
 Virtually everything that is an opportunity is also a
threat.
 Adding layers of effort does not improve the validity
of the list.
 Criticisms of SWOT analysis

 It uses a single point in time approach.

 There is no tie to the view from the customer.
 There is no validated evaluation approach.
 In Summary regarding SWOT

A realistic recognition of the weaknesses and threats

that exist for your effort is the first step to countering
them with a robust set of strategies that build upon
strengths and opportunities.
A SWOT analysis identifies your strengths,
weaknesses, opportunities and threats to assist you in
making strategic plans and decisions
 Listing External Factors:
Opportunities and Threats (O, T)
Forces and facts that your group does not control include:
 Future trends in your field or the culture
 The economy - local, national, or international
 Funding sources - foundations, donors, legislatures
 Demographics - changes in the age, race, gender, culture of those you serve or
in your area
 The physical environment (Is your building in a growing part of town? Is the
bus company cutting routes?)
 Legislation (Do new federal requirements make your job harder...or easier?)
 Local, national or international events
 Cost leadership
 ability of a company or a business unit to design, produce and market a
comparable product more efficiently than its competitors
 Differentiation
 ability of a company to provide unique and superior value to the buyer in
terms of product quality, special features or after-sale service

 Focus
 ability of a company to provide unique and superior value to a particular
buyer group, segment of the market line or geographic market

 Porter proposed that a firm’s competitive advantage in an industry is

determined by its competitive scope—that is, the breadth of the
company’s or business unit’s target market.
 Cost leadership
 lower-cost competitive strategy that aims at the broad mass market and requires “aggressive
construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience,
tight cost and overhead control, avoidance of marginal customer accounts, and cost
minimization”

 Provides a defense against rivals

 Provides a barrier to entry
 Generates increased market share
 Differentiation
 involves the creation of a product or service that is perceived throughout
the industry as unique.
 can be associated with design, brand image, technology, features, dealer
network or customer service

 Lowers customers sensitivity to price

 Increases buyer loyalty
 Can generate higher profits
 Cost focus
 low-cost competitive strategy that focuses on a particular buyer
group or geographic market and attempts to serve only this niche to
the exclusion of others

 Differentiation focus
 concentrates on a particular buyer group, product line segment or
geographic market to serve the needs of a narrow strategic market
more effectively than its competitors
 Risks in Competitive Strategies
 A company following a differentiation strategy must ensure that the higher price it
charges for its higher quality is not too far above the price of the competition,
otherwise customers will not see the extra quality as worth the extra cost.

Issues in Competitive Strategies

Stuck in the middle
when a company has no competitive advantage and is doomed to
below-average performance
 Issues in Competitive Strategies
 Successful entrepreneurial ventures follow focus strategies.
 They differentiate their product or service from those of others by focusing
on customer wants in a segment of the market, thereby achieving a
dominant share of that part of the market.

Industry Structure and Competitive Strategy

Fragmented industry
many small- and medium-size companies compete for relatively small shares
of the total market

 Products are typically in early stages of product life cycle

 Focus strategies are used
Industry Structure and Competitive Strategy
Consolidated industry
domination by a few large companies premium on a firm’s ability to
achieve cost leadership
Strategic rollup
developed in the mid-1990s as an efficient way to quickly
consolidate a fragmented industry
1. They involve large numbers of firms.
2. The acquired firms are typically owner operated.
3. The objective is to reinvent an entire industry.
Hyper-Competition and Competitive Advantage
Sustainability
Competitive advantage in a hyper-competitive market is characterized by a
continuous series of multiple short-term initiatives that replace current products
with new products before competitors can do so.

Sustained competitive advantage is increasingly a matter not of a single

advantage maintained over time, but more a matter of sequencing advantages over
time.
Collusion
 the active cooperation of firms within an industry to reduce output and raise
prices to avoid economic law of supply and demand
Reasons to Form an Alliance