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STRATEGIC ANALYSIS WORKBOOK

Materials Prepared by: Dr. Chris Peterson Agricultural Economics Michigan State University

STRATEGIC ANALYSIS WORKBOOK

CONTENTS Page

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Performance Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Internal Analysis Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Strengths Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Weaknesses Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 External Analysis Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Opportunities Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Threats Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Strategic Issues Synthesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

GOAL OF SWOT ANALYSIS SWOT = Strengths, Weaknesses, Opportunities, and Threats To challenge your assumptions and beliefs about the world inside and outside your firm in order to: 1. select reality-based desired accomplishments (vision, mission, and objectives), better develop or alter your business strategies, set priorities for operational change, improve your performance.

2. 3. 4.

PERFORMANCE ASSESSMENT
The strategic analysis process begins with assessing your level of performance in each of the following areas. Performance can be low or high based on the current situation, comparison to goals, trends for the future, or your firms level of satisfaction. Customer Satisfaction ability to attract and maintain customers. Low Performance Evidence: Competitiveness ability to do better than your competition. Low Performance Evidence: Productivity ability to provide products/services efficiently and effectively based on internal management processes.

Low Performance Evidence:

Profitability ability to attract resources based on level of return to key stakeholders.

Low Performance Evidence:

Which performance concerns (if any) warrant strategic analysis and planning? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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High Performance

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High Performance

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High Performance

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High Performance

INTERNAL ANALYSIS CHECKLIST

GOAL: TO DETERMINE A FIRM'S INTERNAL STRENGTHS AND WEAKNESSES For each item below, circle the number on the scale that best corresponds to your honest assessment of your firm's strength or weakness in the indicated area. GREAT WEAKNESS I. MARKETING RESOURCES 1. Customer satisfaction with products/services 2. Ability to gain customers versus the competition 3. Knowledge of the market 4. Product/service line breadth and depth 5. Product/service quality in terms of function, image, place, time, possession, ease of use 6. Advertizing and promotion activities 7. Product/service pricing 8. Facilities and methods used to sell to customers 9. Market share GREAT STRENGTH DIRECTIONS:

1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5

II.

FINANCIAL RESOURCES 1. Strong and recurring operating profits (PM*) 1-------2-------3-------4-------5 2. Efficient asset management (TAT*) 1-------2-------3-------4-------5 3. Strong and recurring return on investment (ROI*) 1-------2-------3-------4-------5 4. Proper balance of debt and equity (EM*) 1-------2-------3-------4-------5 5. Strong and recurring return on equity (ROE*) 1-------2-------3-------4-------5 6. Strong and recurring cash flow 1-------2-------3-------4-------5 7. Ready access to outside/new funds 1-------2-------3-------4-------5 8. Well managed customer credit 1-------2-------3-------4-------5 9. Well managed supplier credit 1-------2-------3-------4-------5 *Key financial ratios used to assess these areas. HUMAN RESOURCES 1. Adequate number of people to do the work 2. Adequate quality of people to do the work 3. Personnel plans 4. Job design and descriptions 5. Performance standards and evaluation procedures 6. Training programs 7. Good morale as evidenced by absenteeism, turnover, tardiness, complaints, bickering, employee growth and development 8. Compensation system that promotes performance and satisfaction 9. Equitable and competitive pay 10. Equitable and competitive fringes 11. Appropriate use of teams 12. Work ethic of individuals and teams

III.

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1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5 1-------2-------3-------4-------5

4 GREAT WEAKNESS IV. OPERATIONS/PRODUCTION RESOURCES 1. Quality of needed facilities to serve customers 2. Capacity of needed facilities to serve customers 3. Up-to-date and appropriate technology (buildings, machinery, etc.) 4. Effective and efficient physical layout 5. Effective and efficient work flow 6. Effective and efficient inventory control 7. Effective and efficient purchasing practices 8. Effective and efficient production practices MANAGEMENT/LEADERSHIP RESOURCES 1. Effective management style 2. Timely decision making 3. Effective delegation 4. Effective participation 5. Effective risk taking 6. Effective leadership ORGANIZATIONAL RESOURCES 1. Appropriate mix of resources (people, money, equipment) available 2. Resources properly placed to do the job 3. Effective interdepartmental communications 4. Effective reporting relationships 5. Firm's public image 6. Strong organizational culture (productivity, honesty, dispute handling, tolerance of change) INFORMATION RESOURCES 1. Appropriate financial and cost accounting systems 2. Planning system appropriate for internal analysis (assessing strengths and weaknesses) 3. Planning system appropriate for external analysis (assessing opportunities and threats) 4. Control system that highlights problems and generates corrective action 5. Information systems that use the best technology available 6. Effective information for strategic decision making 7. Effective information for operational decision making 8. Ability to utilize internet and e-commerce GREAT STRENGTH

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V.

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VI.

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VII.

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STRENGTHS ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT STRENGTHS* USING THE QUESTIONS FROM ABOVE AND YOUR OWN BELIEFS ABOUT YOUR FIRM. In the column marked CA put a check beside those strengths that are COMPETITIVE ADVANTAGES.** In the final column, cite specific evidence that supports your believe that the item is a strength or competitive advantage. STRENGTHS CA? EVIDENCE

* STRENGTH: Something a company does well or a characteristic that gives it an important capability. **COMPETITIVE ADVANTAGE: A strength that clearly places a firm ahead of its competition.

WEAKNESSES ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT WEAKNESSES* USING THE QUESTIONS FROM ABOVE OR YOUR OWN BELIEFS ABOUT YOUR FIRM. In the column marked CD put a check beside those weaknesses that are COMPETITIVE DISADVANTAGES.** In the final column, cite specific evidence that supports your belief that the item is a weakness or competitive disadvantage. WEAKNESSES CD? EVIDENCE

* WEAKNESS: Something a company does poorly or a characteristic that puts it at a disadvantage. **COMPETITIVE DISADVANTAGE: A weakness that clearly places a firm behind its competition.

EXTERNAL ANALYSIS CHECKLIST

GOAL: TO DETERMINE A FIRM'S EXTERNAL OPPORTUNITIES AND THREATS

PORTER'S FIVE COMPETITIVE FORCES DIRECTIONS: For each item below, circle the number on the scale that best corresponds to your honest assessment of the external situation faced by your firm. Numbers to the left on the scales correspond to situations with greater threats while numbers to the right correspond to situations with greater opportunities.

1.

POTENTIAL ENTRY: How difficult is it for new firms to enter your market? How many options exist for discouraging new firms from entering your market? SUPPLIER POWER: How much bargaining power do your suppliers have? How many options exit for lessening supplier power? BUYER POWER: How much bargaining power do your buyers have? How many options exist for lessening buyer power? POTENTIAL SUBSTITUTES: How many alternatives do buyers have for getting the benefits of your products or services in some other way? How many options exist for improving your price-performance tradeoff? How many options exist for finding less substitute-sensitive customers? RIVALRY: What level of intensity exists in the rivalry between you and your direct competitors? How strong are these direct competitors? How many options exist for taking on these competitors head to head? How many options exist for picking areas of the market that are not so competitive?

Easy 1---2---3---4---5 Difficult Few 1---2---3---4---5 Many

2.

Much 1---2---3---4---5 Little Few 1---2---3---4---5 Many

3.

Much 1---2---3---4---5 Little Few 1---2---3---4---5 Many

4.

Many 1---2---3---4---5 Few

Few 1---2---3---4---5 Many Few 1---2---3---4---5 Many

5.

High 1---2---3---4---5 Low Strong 1---2---3---4---5 Weak Few 1---2---3---4---5 Many Few 1---2---3---4---5 Many

8 THE CHANGE FORCES DIRECTIONS: For each item below, circle the number on the scale that best corresponds to your honest assessment of the external situation faced by your firm. Then, in the space provided, list specific key changes influencing your firm. Less change corresponds to less threatening, but probably fewer opportunities. Greater change corresponds to more threatening, but probably more opportunities. Little Change 1---2---3---4---5 Much Change
LIST KEY CHANGES:

1.

Changes in buyer demand, i.e., what buyers want and need. Consider changes in tastes, lifestyles, customer income, preferences for unique products/services, etc. Changes in long-term market growth rate. Consider changes in industry growth, population growth, product/service attractiveness to customers, market saturation, etc. Product and marketing innovation. Consider innovations in product/service features, quality, packaging, promotion, advertising, distribution, etc. Technological change and the speed with which it spreads. Consider changes in equipment, production methods, biotechnology, computers, information systems, and the speed with which industry competitors or customers adopt these changes. Regulatory influences and government policy changes. Consider changes in environmental, business, and land-use laws and regulation. Changes in uncertainty and business risk. Consider changes in business liability, volatility of markets, ability to forecast effectively, etc. Major changes in the economy. Consider changes in the levels of employment, investment, interest rates, etc. Increasing globalization of the industry. Consider changes in imports, exports, global competition, etc.

2.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

3.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

4.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

5.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

6.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

7.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

8.

Little Change 1---2---3---4---5 Much Change

LIST KEY CHANGES:

OPPORTUNITIES ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT OPPORTUNITIES* USING THE COMPETITIVE AND CHANGE FORCES FROM ABOVE AND YOUR OWN BELIEFS ABOUT YOUR FIRM'S EXTERNAL SITUATION. In the column marked evidence, site the primary reason(s) why you believe this is an opportunity. OPPORTUNITIES EVIDENCE

*OPPORTUNITY: Any external factor or situation that offers promise or potential for moving closer more quickly toward the firm's goals.

or

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THREATS ANALYSIS
ASSESS YOUR FIRM'S TEN MOST IMPORTANT THREATS* USING THE COMPETITIVE AND CHANGE FORCES FROM ABOVE AND YOUR OWN BELIEFS ABOUT YOUR FIRM'S EXTERNAL SITUATION. In the column marked evidence, site the primary reason(s) why you believe this is a threat. THREATS EVIDENCE

*THREAT: Any external factor or situation that may limit, restrict, or impede the business in the pursuit of its goals.

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STRATEGIC ISSUES SYNTHESIS

"The final analytical task is to home in on the strategic issues management needs to address in forming an effective strategic action plan. Here, managers need to draw upon all the prior analysis, put the company's overall situation into perspective, and get a lock on exactly where they need to focus their strategic attention." (Thompson and Strickland)

What are the firms core competencies? Key competitive advantages?

Where do the company's strengths and opportunities reinforce each other? Where do the company's weaknesses and threats reinforce each other? To answer these interrelated questions, construct at least three scenarios or stories about the companys future. For each scenario, focus on the key uncertainties about strengths, weaknesses, opportunities and threats. 1. DECLINE. What combination of external threats, unrealized opportunities, internal weaknesses, and decreasing strengths could result in a substantial decline in performance?

2.

SAME BUT BETTER. What combination of external opportunities and threats and internal strengths and weaknesses could result in a gradual extension and enhancement of past performance?

3.

FUNDAMENTAL CHANGE. What combination of realized opportunities, avoided threats, dramatic enhancement of strengths, and correction of weaknesses could result in significant, discontinuous improvement in performance?

12 How much change is needed? In balance, should the firm be on offense or defense? (Locate the companys relative position on the change grid to the left.)

O
Turnaround Offense

Defense

Diversification

T
What are the critical strategic issues that must be addressed to assure a successful future? The critical issues can be thought of as a series of "how will we. . . ?" questions that must be answered by the strategic planning process. The strategic issue questions should be tailored to the company and not stated generically. Try to keep to under 5 in order to assure focus on the truly critical issues. 1.

2.

3.

4.

5.