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Chapter 17
Identifying Suitable Strategic Options
Answer to End of Chapter Exercises

SIEGMUND LTD

Q 17.1 SWOT analysis

Strengths
S1 Brand name - Loyalty of customers
S2 A number of products are market leaders
S3 Highly skilled workforce

Weaknesses
W1 - Competitor products more reliable
W2 - Major investment programme required to update manufacturing facilities
W3 - Poor on-time delivery record.
W4 - Research and development resources are declining
W5 - Product development falling behind competitors
W6 - Skill shortages in the factory following staff leaving to join other organisations.
W7 lack of finance available.

Threats
T1 Removal of trade barriers allowing many new competitors into the market
T2 Consumer demand expected to fall over the next two years as inflation is
increasing and interest rates are expected to rise.
T3 better process technologies used by competitors.
T4 - A number of traditionally based Ruritanian competitors, but now a large number
of overseas competitors who have achieved scale economies.
T5 -Low switching costs for the buyer
T6 - Increasingly buying power is being concentrated in the hands of overseas
wholesales and super and hype markets.

Opportunity
O1 The economy has been growing at a substantial rate and with increased
affluence consumers are able to afford new types of products (e.g. ice cream makers).
O2 Increasing 3rd world prosperity.
O3 Population (particularly older customers) still have brand loyalty
O4 Growing home demand for modern and more complex equipment.
increasingly expect higher quality.
O5 Increased sales through use of internet

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TOWS matrix

Strengths Weaknesses
S1 W1
S2 W2
S3 W3
W4
W5
W6
W7

Opportunities
O1 S1 + S3 + O3+O4 W3+O4
O2 Build on brand loyalty Invest in research and
O3 and develop new products development to again
O4 for growing home develop new product
O5 demand ranges

S1 + T4 + T6 W5 + W6 + T5
Threats
T1 Consider selling direct to Consider some form of
T2 customers, increased use agreement with overseas
T3 of internet selling. company that will enable
T4 Promotion as a Ruritanian Siegmund to focus on key
T5 company products and sell other
T6 products under licence?

Q 17.2
Existing products
Existing markets Upgrade existing products
and aim for market
penetration within the
existing market
New markets
Consider exports
New products
Consider new product
development new
models within existing
product groups or new
product groups
Broaden the portfolio to
include other kitchen
equipment, fitted kitchens?

Q 17.3
Siegmund Ltd has a number of strenghs, in particular a strong brand name.
It could undertake a number of these options through internal development.
However it has not invested in recent years, has limited funds for reinvestment and at
present seems to be in danger of declining.
It may wish to form some sort of alliance with another company with funds and
complementary strengths. A merger is likely to occur with an overseas company with
funds acquiring Siegmund Ltd.

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In order to retain some form of independence it might be best to consider some form
of alliance or joint development. If Siegmund does not have the resources to develop
all products in a desired product range it might consider manufacturing some products
under licence. Technical knowledge on improving its production processes might also
mean benefit for its other products.

ASSEMBLY DIVISION OF McLOED Ltd

Q 17.1 SWOT analysis and options

Strengths
S1 A number of talented engineers
S2 Some well engineered new products folding bicycles, electric bicycles

Weaknesses
W1 Old machinery and increasing maintenance costs
W2 Declining sales of main products mountain bicycles and racing bicycles.

Opportunities
O1 National cycling strategy expansion of national cycle network
O2 - Congestion charging for cars in London and potentially other cities.
O3 Increasing proportion using bicycles 10% in last 4 years compared to 2% in
1980.
O4 - Ageing population which is becoming increasingly health conscious and taking
up cycling. Also wanting greater comfort
O5 - Development of electric bicycles awaiting further development of battery
technology.

Threats
T1 Removal of trade barriers e.g. anti-dumping duty.
T2 Oversupply of bicycles on the world market
T3 Prices of supplies are being affected by shortages of raw materials.
T4 low barriers to entry although in the low cost high volume market a number of
companies have invested in automation to reduce costs.
T5 Increasingly buying power is being concentrated in the hands of a few multiples
e.g. Hafords, supermarkets etc.

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TOWS matrix
For futher explanation of the strengths,weaknesses, opportunities and threats see
above

Strengths Weaknesses
S1 W1
S2 W2
S3

Opportunities Cell A- S1 talented engineers) +S2 W1 (old plant and

O1 (well engineered products) + O2 equipment in factory) +
O2 (congestion charging for cars) O5 (fall in interest
O3 Strategy suggested develop the rates).
O4 new product line and expand Strategy suggested - to
O5 production line of folding bicycle borrow funds to
for commuters. purchase new machinery
for chosen product lines.

W2 (declining sales of
Threats S 1 + S 3 + T5 ( increasing buying racing bicycles) + T2 +
T1 power of multiples) T4)
T2 Focus on niche markets selling Withdraw from
T3 through specialist bicycle retailers assembly of low cost
T4 and through internet. racing bicycles.
T5

Evaluating the suitability of different options

Consideration of product life cycle:

Before progressing with this option, it would be worthwhile considering the life cycle
stage of the road bicycles produced by the company. Although it is often difficult to
identify the exact stage of the life cycle, if this bicycle range was at the mature stage,
with many competing products, then an expensive promotional exercise may not
provide the returns that might be hoped for if the bicycle range was at the growth
stage of the life cycle.

A second option was to develop a new product range, such as a city bicycle for
commuters. Market information provided in the notes The bicycle industry,
indicates that sales of city bicycles are on the increase. Although development,
production and marketing of an appropriate bicycle might be expensive, it seems
likely that this type of bicycle is at the early stage of the life cycle and therefore may
have a relatively long term future.

BCG matrix
Depending on how they might measure market share, the mountain bicycle range
appears to be a cash cow, but with possible declining sales, appears to be on a
downward trend. Unless a significant change occurs in the market, from the
perspective of portfolio theory, it would seem that the option to launch a new product,

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such as comfort bicycles or expand the hybrid or folding bicycle ranges would be
worthy of further consideration. Although the company is likely to have a small
market share initially, the market is growing rapidly and could become the star of the
future for the company.

Q 17.2
Existing products
Existing markets Consolidation
New markets Consider exporting
speciality bikes e.g.
folding bicycle.
New products
Expansion of production
facilities for new folding
bicycles and electric
bicycles
Related products e.g. roller
blades

Q 17.3) Discuss the relative merits for the company to achieve growth through
1) Internal development.
2) Merger or Acquisition,
3) Some form of joint development e.g. joint venture or licensing.

If sufficient funds are available and it has the skill base to manufacture the new
product lines such as folding bicycles then internal development may be the best
route. If it lacks the production capabilities then some form of licencing arrangement
might be appropriate

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COOPER LEISURE RESORTS

Q 17.1 SWOT analysis

Strengths
S1 - Location

Weaknesses
W1 Ageing facilities needing reinvestment.
W2 Limited facilities for families.
W3 Marketing of the site has been limited

Opportunity
O1 Increasing number of holidays taken by families
O2 See threat 2!

Threats
T1 - Cost of other holidays other hotels offering off-peak breaks.
T 2 Unemployment is rising and interest rates are expected to rise. This may mean
that families have less money to spend on holidays. However, note that this might also
be considered an opportunity! Families are likely to still wish to take a holiday, but
may need to trade down to a cheaper holiday centre.
T3 New facilties offered by other resorts
T4 Rising expectations of families.
T5 Sunshine Sites is based in the Green belt and this may limit the opportunity for
expansion/new buildings.

Opportunities
O1 S1 + O1 W2+O2
O2 Promote Sunshine sites Invest in additional
to families wishing to facilities for families e.g.
take advantage of the childrens paddling pool,
Dorset location play park, additional
sports facilities for
children.

Threats
T1 S2 + T1 W1+ T3 + T4
T2 Invest in new facilities in
T3 Offer discounts for off- order to compete with
T4 peak breaks competition.

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Q 17.2
Existing products
Existing markets Upgrade existing facilities
and aim for market
penetration within the
existing market
New markets Promotion of existing
products to attract new
groups e.g. caravan week-
end.
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New products
Consider new product
development new
entertainment offerings
e.g. sports facilities for
families (e.g. archery,
horse riding, football)
Consider offering special
events to attract youth
market e.g. pop festival
over one week.