FIRST SEMESTER REVIEWER

STRATEGIC BUSINESS ANALYSIS (SBA)

CHAPTER 1
WHERE IS THE ORGANIZATION NOW?

Analytical Process:
 Preliminary Corporate Analysis

o Market segment – group of consumers who can be classified on specific dimensions.

 Consumer markets – the person who uses the product is often the person who pays for the
product.
 Industrial markets – purchases are made by organizations and the people in manufacturing and
purchasing departments are key decision-makers.
 Public sector organizations – the purchaser and the user can be different.

 Individual Business Analysis

o SWOT Analysis – assessment of strengths and weaknesses, opportunities, and threats

o SPACE (Strategic Position and ACtion Evaluation) - analytical technique used in strategic management
and planning.

 Summative Corporate Analysis

o Strategic planning relationship – relationship in which the centre actively participates in strategy
development and implementation. This is appropriate relationship when the portfolio is made up of
related businesses and centre managers have a ‘feel’ for the businesses in the portfolio.
o Financial control relationship – relationship in which the centre’s main concern is setting financial
targets but delegates strategy development to the business unit. This can motivate managers to focus on
short-term performance and quickly identify short-term weaknesses in strategy. It does not, however,
encourage co-operation across units or the development of long-term strategies.
o Strategic control relationships – are considered immediate., lying some between financial control
relationships and strategic control relationships. In these relationships strategies are developed by the
business units and approved (or not) only by the centre.

External opportunities:
o The impact of outside factors on each business.
o The net effect of outside factors on groups of individual business.
o The sum of the effect of outside factors on the corporate whole.
Internal Opportunities:
o The possibility that some internal resource or strong capability may be the source of a market opportunity
not yet obvious from external monitoring.

CHAPTER 2: WHAT OPTIONS ARE OPEN TO THE ORGANIZATION?

Strategic choices at corporate level

 Business closure
 Business disposal
 Business acquisition
 Business re-organization
 Business start-up
 The impact of doing nothing

o Portfolio balance – understanding how the business ‘fit’ together is important because it necessary, for
example, to use money from a cash-rich company to fund a growing and cash-hungry company.
o Strategic fit and parenting – if organizations develop incrementally over time, then situations can arise
where inter-business synergies are lost and the scope for corporate parenting is eroded.

a.) Market maintenance, product maintenance strategies for growth (holding/increasing market share)
  This could be the position in a highly competitive environment and may require a constant improvement
of product and service features because customers’ perceptions of quality (as fitness for purpose) are
changed by rapidly advancing technology and the offerings of competitors.

b.) Market maintenance, product maintenance in situations of adjustment and turnaround

 The analysis of the business may indicate that the organization is in a situation where some adjustments in
strategy content and/or implementation are required as an antidote to decline.

Factors for firm to decline:

o Poor management
o Inadequate financial control
o High cost structure
o Lack of marketing effort
o Competitive weakness
o Big project acquisition
o Financial policy

c.) Product maintenance, market development strategies for growth

 This can occur when a company seeks opportunities in a different geographic area or wishes to reposition
a product to appeal to a wider or different market segment.

d.) Market maintenance, product development strategies

 This is an appropriate option when the strategic analysis suggest that there are opportunities for the
business to develop new products for customers.

e.) Product development, market development strategies (related and unrelated diversification)
 Market-based perspective
o A related diversification will involve moving into new products and markets that have similar
dimensions to the ones currently being served.
 Resource-based perspective
o There is relatedness when the current competences and resources of the organization can be as
market entry facilitators and possibly sources of advantage in new products. The greater the
overlap in primary value chain activities the greater the relatedness.

CHAPTER 3: WHAT IS THE BEST WAY FORWARD FOR THE ORGANIZATION?

FIRM Evaluation Option

 F.I.R.M.
o Will the strategic option FIT with our present activities and lay down the foundations for the
long-term prosperity of the individual business and the corporate whole?
 Remove or reduce or compensate for any weaknesses identified in the corporate portfolio
and in individual businesses. For an organization in a declining situation this may be the
key emphasis. If an organization has a lot of weaknesses a turnaround strategy may be an
urgent requirement before any other actions are appropriate.
 Build on resource strengths. For example, does the new initiative allow for the sharing of
assets or the transferring of skills in such a way that competitive advantage is gained.
 Lead the organization in developing or acquiring skills that not only allow for the
expected advantages but also lay down foundations for long-term strategic development.
 Build on opportunities that allow the organization to exploit its resources vis-à-vis its
competitors.
 Seek to minimize threats that already exist in the organization’s environment or reduce
the organization's exposure to opportunity-taking by competitors.

 F.I.R.M.
o Will the strategic option have an IMPACT on the organization’s performance within agreed time
frames?
 There is no point in pursuing strategies that make little difference to the performance of
the organization in a time scale that is not acceptable to stakeholders. Because of this the
returns from the proposed strategy must be estimated using appropriate techniques. In
‘for profit’ organizations the impact of a strategy is usually measures in financial terms
and techniques for estimating and judging financial performance.
  F.I.R.M.
o Can the RESOURCES required to implement the option be obtained?
 Since there is little point in developing strategies for which resources cannot be obtained,
it is important that realistic judgments be made on the ability of the organization to
acquire such resources. Resources can include capital to fund acquisition of buildings and
equipment, raw materials, labour, skills, management expertise, and sales outlets etc., and
frameworks for assessing resources.

 F.I.R.M.
o What are the features of the change option that is proposed and to what extent can change be
MANAGE?
 If an organization is in a situation where the worldview of key managers and staff s at
odds with its environment, the likelihood is that the organization will become
dysfunctional.

CHAPTER 4: HOW CAN THIS BE ACHIEVED?

 Strategic change at the corporate level

o The role of the centre is to ensure each unit in a corporate portfolio gains the maximum benefit from
being part of the portfolio. Managers should also be aware of the way that units van be clustered within
an overall framework to maximize the opportunities for synergy and parenting.

 Strategic change at the business level

o Is the business model where people become involved. The impact of corporate restructuring has to be
managed within the individual businesses, and the way that change is managed will be context dependent.

 Strategic change in different circumstances

o Managing change when the change is consistent with the present culture.
 In healthy organizations changes will be grounded in present resources, but over time the
organization will learn and grow. It will acquire new assets and skills as current products are
produced in more effective ways and new products and markets are developed.
Factor that effect organizations:
 Demographic changes, such as the increased in spending power of elderly people.
 Government policy and legislation on interest rates and trade, etc.,
 Technical innovation through internet use and generic engineering, etc.,
 Sociological changes such as the redefinition of pornography and the increasing dominance of one parent
families.

Successful teams depend on a number of factors:

 Team members must want to be part of the team.
 There must be a balance of appropriate abilities in the team.
 They must want the team to succeed.

Three key areas of teamwork

 The needs of task
 The needs of team
 The needs of the individual within the team.

o Managing change to accommodate different organization

 There are situations where organizations have to come to terms with operating one way in one
environment and another way in another environment.
Investment in people:
 Commitment – the organization is fully committed to developing people to achieve its aims and
objectives.
  Planning – the organization is clear abouts its aims and objectives and what people need to do to
achieve them.
 Action – the organization develops its people effectively in order to improve its performance.
 Evaluation – the organization understands the impact of their investment in people on its
performance.

o Managing change when the change requires cultural change to maintain a successful position
 when an organization’s culture is not consistent with its long-term success, the organization
requires realigning. Remedial action can be carried out gradually if the organization is in the early
stages of strategic misalignment.

8 Steps in Changing model of Organization

1.) Establishing a Sense of Urgency – the first step in initiating a process for change is to establish the need for
change. Burns called this the trigger for change while Kotter refers to the creation of a sense of urgency.

2.) Forming a Powerful Guiding Coalition – one of the first tasks within many change processes is the formation of
a guiding coalition or project team.

3.) Creating a Vision – having established the need for change, it is important to express that need in a form that can
be understood by all. A clear statement of where the organization is going is essential.

4.) Communicating the Vision – transformation is impossible unless employees can be convinced that it is
achievable. Employees may have to make sacrifices and tolerate job losses amongst colleagues.

5.) Empowering Others to Act in the Vision – the systems and culture of the organization must be aligned to the
vision outlined. The activities of the organization must be compatible with the vision of the future aspired to.

6.) Planning for and creating short-term wins – progress must be measured. This is why the organization needs to
set objectives and performance indicators.

School of change management theorists:

a.) The advocates of planned change
b.) The advocates of emergent change

Balance Scorecard (Kaplan and Norton, 1992,1993,1996)

i.) Financial. Shareholder interests are best accommodated within a financial perspective.
ii.) Customer. To succeed financially a company needs to create value for its customers.
iii.) Internal business process. Customer value can be enhanced by making internal processes more effective and
efficient.
iv.) Learning and Growth. Support for value-creating strategies requires ongoing support.

7.) Consolidating improvements and producing still more change – it is important that improved performance
figures are used to inspire greater efforts, as individuals resisting change can take the early signs of improvement
to claim that the job is already done.

8.) Institutionalizing new approaches – successful system, practices and attitudes are accompanied by the
philosophy that catalyzed those changes. This will improve the probability of them becoming embedded in the
organization culture itself. It is also important that organizations develop cultures that can adapt to change.

o Managing Change in Turnaround Situations (Realigning Organization: Urgently Required and

Retrenchment and Recovery).

Cause of decline Antidote

Poor management New management and restructuring
Inadequate financial control Improved financial control and localized costing
performance and performance measures
High-cost structure Cost reduction, product market reassessment
Poor marketing Improved marketing
Competitive weaknesses Product marketing reassessment, cost reduction, improved
marketing, asset reduction growth of strategic
acquisitions,
Big projects asset reduction
Expensive acquisitions asset reduction
Financial strategy New financial strategy.