MODERN STRATEGIC ANALYSIS Theme 2 Process of strategic

MODERN STRATEGIC ANALYSIS Theme 2. Process of strategic management, internal analysis , strategy choice Dr. Prof. Aleksandr Kozlov 18/10/2016

2 Process of strategic management AVK SPb. PU Mission Strategic goals SWOT-analysis Alternative strategies Strategy choice Strategy implementation 2

3 Internal analysis • Production • Finance • Purchasing • Marketing • Sales • HRM • Management • Innovations AVK SPb. PU

4 AVK SPb. PU Internal analysis criteria • Comparison with the past • Comparison with competitors • External evaluation (experts) • Official recognition • Public recognition

5 Strengths • Advantages of proposition? • Capabilities? • Competitive advantages? • USP's (unique selling points)? • Resources, Assets, People? • Experience, knowledge, data? • Financial reserves, likely returns? • Marketing - reach, distribution, awareness? AVK SPb. PU • Cultural, attitudinal, behavioural? • Location and geographical? • Price, value, quality? • Accreditations, qualifications, certifications? • Processes, systems, IT, communications? • Innovative aspects?

6 Weaknesses AVK SPb. PU • Effects on core activities, • Disadvantages of proposition? distraction? • Gaps in capabilities? • Reliability of data, plan • Lack of competitive strength? predictability? • Reputation, presence and • Morale, commitment, reach? leadership? • Financials? • Accreditations, etc? • Own known vulnerabilities? • Processes and systems, • Timescales, deadlines and etc? pressures? • Continuity, supply chain • Cashflow, start-up cash-drain? robustness?

7 AVK SPb. PU Profile of competitive advantages Management functions Production Purchasing Finance Marketing HRM Sales Management Strengths +1 Weaknesses Rather positive Rather negative ● ● ● ● Main competitor -1

8 AVK SPb. PU Modern tools of strategic analysis. Value chain • Value chain analysis ▫ a process where a firm identifies its priorities and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation. • Value chain represents the internal activities a firm engages in when transforming inputs into outputs. ”

9 AVK SPb. PU Modern tools of strategic analysis. Value chain

10 AVK SPb. PU Business Strategy Choice • Choice about business positioning relative to competitors, creating strategic capabilities and competitive advantage

11 AVK SPb. PU Competitive advantage principles VRIN • Value, • Rarity, • Inimitability and • Non-substitutability From: Jay Barney: ‘Firm resources and sustained competitive advantage’, Journal of Management, vol. 17 (1991), no. 1, pp. 99– 120.

12 AVK SPb. PU VRIN: Value Strategic capabilities are of value when they: • take advantage of opportunities and neutralise threats, • provide value to customers • provide potential competitive advantage at a cost that allows an organisation to realise acceptable levels of return

13 VRIN: Rarity AVK SPb. PU • Rare capabilities are those possessed uniquely by one organisation or by a few others only. (E. g. a company may have patented products, have supremely talented people or a powerful brand. ) • Rarity could be temporary. (Eg: Patents expire, key individuals can leave or brands can be de-valued by adverse publicity. )

14 VRIN: Inimitability AVK SPb. PU Inimitable capabilities are those that competitors find difficult to imitate or obtain. • Competitive advantage can be built on unique resources (a key individual or IT system) but these may not be sustainable (key people leave or others acquire the same systems). • Sustainable advantage is more often found in competences (the way resources are managed, developed and deployed) and the way competences are linked together and integrated

15 AVK SPb. PU VRIN: Non-substitutability Competitive advantage may not be sustainable if there is a threat of substitution. • Product or service substitution from a different industry/market. For example, postal services partly substituted by e-mail. • Competence substitution. For example, a skill substituted by expert systems or IT solutions

16 Alternative strategies • Growth • Diversification ▫ Conglomerated ▫ Concentric • Focus • Integration ▫ Vertical ▫ Horizontal • Withdrawal AVK SPb. PU

17 Strategy selection matrix AVK SPb. PU Internal analysis Withdrawal Integration Focus Growth Integration External analysis Diversification