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I'd actually like to introduce our first tool out of our toolkit.
And it relates directly to what we're talking about here with the strategist
challenge. And that's the idea of a SWOT analysis.
Swot is an acronym that stands for strengths, weaknesses, opportunities and
threats. This in many ways the granddaddy of, of
strategy, and strategic analysis. It goes back, roots about 50 years or so.
What I like about SWOT analysis is that despite its simplicity is that it
highlights these two elements that I was just discussing.
The internal firm capabilities and the external competitive environment.
Once again, it is the interplay between those Will ultimately decide whether a
strategy is successful or not. So a SWOT analysis often is just portrayed
as a two by two, as you see on the screen, and you see bullet points that, that you
can put between each of these to kind of illustrate the various strengths,
weaknesses, opportunities and threats. Where we're going for the an umber of the
other lectures. Is to basically fill in these blocks.
We'll think a little more rigorously of how we think about opportunites and
threats and strengths and weaknesses. But SWOT analysis, once again, is a nice
overarching framework for organizing our thoughts about the competitive situation
that a firm find themselves in. Let me add two more tools to our toolkit.
These are classic tools, really foundational tools in any strategist's
toolkit. The first is the idea of very simply a
competitor analysis. We haven't talked about this in the past.
This is the idea of simply going out and collecting competitive intelligence on
your competitors and deriving a number of things about them.
One, just simply performance metrics. How are they doing profitability, what are
their revenues, what's their market share and the like to the extent you can collect
such data. What are their capabilities, back to our
capabilities analysis idea. It's important to know that for yourself
in this little chart the focal firm, but you want to know that about your
competitors as well. Are they able to do what you do or do they
do things in a slightly different way? This question about values, what's your
objection function, what's your values here as a firm?
How do they differ and how does that influence ultimately your strategic
position? And that gets us to our fourth column
here, your strategy for each of these competitors.
Now, competitor analysis is deceptively simple clearly one of the greatest
challenges in doing a competitive analysis is simply identifying who are our relevant
competitors. Even defining what our industry is can
sometime be very, very challenging. How do we define this?
I encourage yo to all think about strategic groups.
As you look out over a landscape a competitive landscape you can often
identify. Groups of farms that seem to be more
relevant to you than others. And then by grouping them in that way.
You can then prioritize which ones you should think about first .
So imagine if you are, you're Porsche. How useful or important is it for you to
Porsche to do benchmarking and understanding what Kia is doing.
Though you're both in the auto industry you clearly are at very different places
within that industry. And it's probably less important for you
to put emphasis on KIA, compared to perhaps BMW or other small manufacturers
like Maserati or Lamborghini and the like. So once again, figure out what's your
industry segment, who your competitors are, but first start with this idea of
strategic groups. The second tool, I'd like to briefly
introduce here is this idea of an Environmental analysis.
Environmental analysis is sometimes referred to as an environmental scan.
It can take many forms, the basic idea is to fire in your brain a set of topics that
you need to think through for the industry.
So here, I present six topics that I think are useful and cover a wide space that
you'd want to consider. Demographics Trends, whats happening in
the market, whats happening in terms of your customer base over time here and hows
that going to influence. The industry.
Socio-cultural influences. Is this an industry let's take the, the
beer industry in which there are socio-cultural trends that are against
binge drinking, or drinking too much in certain circumstances.
That's going to lower demand. What are those influences, and how is it
impacting your industry? Clearly for many industries technological
developments. How are these technologies evolved and we
talked quite a bit about that in terms of competitive dynamics in our last session.
Macro economic impacts, Is this an industry that is susceptible to the
business cycle? What happens if we're in a recession?
What happens if we're in a growth period to this industry?
Political legal pressures. Lots of ways in which the broader
political legal system will influence the behavior and the opportunity set within an
industry. What are those potential constraints and
opportunities? And then finally global trade issues.
Is this a global market? Do we see competition here going across
boundaries? What are some of the issues in global
trade that might impact the industry? So let me end here with a series of, of
bullets highlighting some of the lessons I hope you take away from this first
introductory short lecture here. First, we can represent a business's
strategy in it's mission plan and actions. When were trying to characterize it.
Think of those three elements in trying to characterize what the firm does and how
they are positioning themselves strategically.
Introduce this idea of strategic analysis and particularly position it as a useful
way of assessing the viability of a business strategy, whether it is a good
strategy or not. Highlight the idea that strategic analysis
is not just the purview of the CEO. In fact, that strategic analysis is useful
to any number of different individuals, including financial analysts, management
consultants, entrepreneurs, even those who wish to influence the business in other
directions from outside. Of that firm and then finally most
important today I want you to remember that the strategists challenge is to
balance between values, opportunities and capabilities and alternatively we're
trying to do is identify desirable competitive positions that create and
sustain value. Thank you very much.