ANALYTICAL TOOLS

1. INDUSTRY LIFE CYCLE

Identify current location of your company and industry based on any of the 5 stages :
a. Embryonic or Introduction stage new product or service being offered to the
market. Example : Movieoke in Japan
b. Growth stage period of rapid market acceptance and increasing profits.
Examples : Smart and Globe cellular phones
c. Shakeout stage survival of the fittest with the inefficient companies folding
and dropping out of business. Examples : Andoks and Baliwags
d. Maturity stage period of slowdown in sales where industry growth rate hits a
plateau. Example : San Miguel beer
e. Decline stage falling sales, lower production volume resulting to decreasing
profitability. Examples : Regal or Viva films / Movie industry
2. SWOT ANALYSIS
a. Strengths internal to the firm
Examples : i. Strong nationwide distribution network
ii. Excellent credit standing
iii. Commanding market share
b. Weaknesses internal to the firm
Examples : i. Lack regional advertising campaign
ii. Poor research and development (R&D) department
c. Opportunities external to the firm
Examples : i. Untapped global markets
ii. Favorable and predictable weather conditions (Fruit Plantations in
Mindanao)
d. Threats external to the firm
Examples : i. Economic crisis / Decrease in spending budget
ii. Legislations (Smoking ban or clean air act)
iii. Fluctuations in dollar-peso exchange rate
3. DEMAND AND SUPPLY ANALYSIS Analyze the relationship between the demand
and supply situation taking into consideration the following : population growth,
countrys economy, consumption expenditures, consumer profile, buying decisions,
number of suppliers, prices, etc.
Demand - the quantity that consumers are willing and able to buy at a specific price and time
period

Supply the quantity of a product that producers are willing to make available to the market
at a given price and time period
4. PORTERS 5 FORCES OF COMPETITION Analyze company and industry based
on the 5 forces and give rating (high, medium or low)
-

Harvard Universitys Professor Michael Porter developed the 5 Forces Model of

competitive analysis to develop strategies in many industries.
The nature of competitiveness in a given industry can be viewed as a composite of 5
forces:

Bargaining power of
suppliers

Potential development of
substitute products
Rivalry among competing
firms
Potential entry of new
competitors

Bargaining power of
consumers

Potential development of substitute products Intensity of competition is high for firms

that produce substitute products in other industries.
Examples :
i. Plastic container producers compete with glass, paperboard or aluminum
can companies.
ii. Instant noodles can be a meal substitute over sardines.
Bargaining power of suppliers Intensity of competition is affected in an industry when
there is a big or small number of suppliers of raw materials.
Examples :
i.
ii.

Crude oil is imported by only 3 big players namely : Petron, Shell and
Caltex.
Abundant fish catch brings down prices for canneries.

Rivalry among competing firms Intensity of competition increases as the number of

players in the market increases or when competitors become equal in size and capability yet
demand for products declines.
Example :
i.

Intense competition between Jack n Jill vs. Oishi snacks and Nestle vs.
Selecta ice creams

Bargaining power of consumers Intensity of competition is higher when products being

offered are standard or homogeneous thus consumers have the power to select which
company offers the best bargain.
Examples :
i.
ii.

Soft drinks (Coke, Pepsi & Pop) are all cola flavored beverages that
consumers can easily choose from.
Consumers can choose between Toyota Altis or Honda Civic.

Potential entry of new competitors Intensity of competition increases or decreases

depending on how easy or hard for a new player to enter the market. Barriers to entry include:
large capital requirements, technology, etc.

Examples :
i.
ii.

Flour or sugar mills needs huge capital outlays or investments for start up operations
thus limiting the number of players in the industry.
Channel ABC 5 now owned by Mr. Tonyboy Cojuangco challenging ABS CBN 2 of
the Lopezs and GMA 7 of the Gozuns.

5. DETERMINATION OF KEY SUCCESS FACTORS Identify and analyze important

factors to determine a companys success or failure.
Examples: Low prices, variety of models, strategic locations, etc.
6. NATURE OF ENTRY AND EXIT BARRIERS Discuss and analyze how easy or
difficult it is for a company to enter or leave the industry.
Examples: Capital requirements, availability of raw materials, technology and equipment
needed, etc.
7. BOSTON CONSULTING GROUP MATRIX
-

Introduced by Bruce Henderson in the mid 1960s.

Uses 2 key success factors (market shares and market growth rates) to plot the
competitive position of companies in their industries and to determine market
attractiveness.
Quadrant matrix characterized by the cash / profit contributions to the company.
Market Share
10%
STAR
(Growth Stage)
CASH
COW

1%
QUESTION
MARK
(Introduction Stage)
DOG

(Maturity Stage)
(Decline Stage)
Market Growth 1%
Stars are known to be Tomorrows Breadwinners since companies will have to re-invest its
profits back to a growing business in order to maintain strong competitive position by increasing
its market shares.
Cash cows referred to as Todays Businesses generates hefty profits to a company because of
their big market share and lower funding requirements due to a mature market situation.
Question marks drains the companys profitability wherein resources are needed in a growing
market but generating low market share.
Dogs are Yesterdays Has Beens with low market shares in a low market growth
environment. No point of reinvesting profits in a business where market share is weak and
potential market growth is low.
8.
FINANCIAL RATIOS - Analyze companys financial health (refer to companys
Balance sheet and Income statement)

a. Current ratio extent to which a firm can meet its short-term obligations. Current assets
include cash, accounts receivables, inventories, etc. Current liabilities consist of accounts
payable, debt, etc.
Formula :

Current assets
______________
Current Liabilities

b. Total Assets Turnover whether a firm is generating sufficient volume of business for the
size of its asset investment.
Formula :

Sales
________
Total assets

c. Return on Assets (ROA) after tax profits per peso of assets, also known as return on
investment (ROI).
Formula :

Net Income
__________
Total assets

d. Return on Stockholders Equity (ROE) after tax profits per peso of stockholders
investment in the firm.
Formula :

Net Income
_____________________
Total stockholders equity

e. Net Profit Margin after tax profits per peso of sales

Formula :

Net Income
___________
Sales

f. Payback Period the time that it takes for an investment to pay for itself. The more
quickly the cost of an investment can be recovered, the more desirable is the investment.
Formula :

Investment required in fixed assets

____________________________
Net annual cash inflow or earnings