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  2. 2. STRATEGIC MANAGEMENT PROCESS Corporate Performance Evaluation S OExternal InternalEnvironment Environmental Scanning Environment T Vision W Mission Goals Objectives STRATEGIE Corporate S Business Functional Policies Programs Budgets Procedures Evaluation
  3. 3. Strategic Management ProcessEnvironmental Strategy Strategy Evaluation Scanning Formulation Implementation &Control
  4. 4. Strategic Management Process Strategy Formulation Strengths WeaknessesEnvironmental Scanning Opportunities S-O strategies W-O strategies Threats S-T strategies W-T strategies
  5. 5. UNIT 3 ENVIRONMENTAL SCANNING AND INDUSTRY ANALYSISThe environmental scan includes the following components:• Analysis of the (external) Macro-environment (Societal Environment)• Analysis of the firms (external) Task Environment ( Industry Environment)• Analysis of the firm’s Internal Environment (Organizational Environment)The societal environment is composed of political-legal, economic, socio-cultural and technological forces ( known as PEST factors)The task environment (industry) contains stakeholder groups that have animpact or are heavily impacted by the organization. These are governments,local communities, suppliers, creditors, employees/labor unions, specialinterest groups, and trade associations.Within the industry environment, Strategic Groups are important because afirm does not compete against everyone in an industry but only against thosewith similar strategies using similar resources. .
  6. 6. Environmental AnalysisAnalyse EXTERNAL Environment Conditions SOCIETAL ENVIRONMENT o TASK ENVIRONMENT T Identify Select the Strategic Best Options Strategy Analyse INTERNAL Company Situation for the for the Company Company S Competencies, Capabilities, Resource strengths and weaknesses, Competitiveness W
  7. 7. Environmental Variables
  8. 8. The Components of a Company’s Macro-Environment MACROENVIRONMENT Legislation and Regulation Suppliers Substitutes COMPANY Rival Buyers Firms New Entrants  IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT
  9. 9. The Components of a Company’s Macro-Environment MACROENVIRONMENT Legislation and Regulation Suppliers Substitutes COMPANY Rival Buyers Firms New Entrants  IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT
  10. 10. The Components of a Company’s Macro-Environment MACROENVIRONMENT Legislation and Regulation Suppliers Substitutes Strat. Group Strat. Strat. 2 Group Group 3 Buyers 1 New Entrants  IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT
  11. 11. Strategic Groups Firms in same strategic group have two or more competitive characteristics in common (eg. Nokia, Motorola, Ericsson)  Sell in same price/quality range  Cover same geographic areas  Be vertically integrated to same degree  Have comparable product line breadth  Emphasize same types of distribution channels  Offer buyers similar services  Use identical technological approaches
  12. 12. PEST AnalysisA scan of the external macro (societal) environment in which thefirm operates reveals the business opportunities lying ahead and thethreats the organization will have to face in future.Developments or trends in a corporations societal environmenttypically do not affect the corporation directly but indirectly throughtheir impact on one or more stakeholder groups in the corporationstask environment. This can be expressed in terms of the followingfactors:Political/LegalEconomicSocialTechnologicalThe acronym PEST (sometimes also labeled as “SLEPT") is used todescribe a framework for the analysis of these macro-environmentalfactors.
  13. 13. PEST Factors ( Detailed)
  14. 14. A PEST analysis fits into an overall environmental scan as shown in the following Political factors diagram: Economic factors include government regulations and legal issues and affect the purchasing power of potential customers anddefine both formal and informal rules under which the the firms cost of capital. The following are examples of firm must operate. Some examples include factors in the macro-economy tax policy economic growth employment laws interest rates environmental regulations exchange rates trade restrictions and tariffs inflation rate political stability PEST : Social factors FACTORS Technologicalinclude the demographic and cultural aspects of the external macro-environment. These factors affect factorsneeds and the size of potential markets. Some social can lower barriers to entry, reduce minimum efficient factors include: production levels, and influence outsourcing decisions. population growth rate Some technological factors include: age distribution R&D activity career attitudes automation health consciousness technology incentives rate of technological change
  15. 15. How to identify the strategic factors in the External Environment?List the major trends or developments emerging in each of the fourforces of a firms societal environment.Then estimate the likely impact of these general trends upon the primarystakeholders, e.g., communities, creditors, competitors, etc. These dataform a series of strategic inputs - those trends and developments that arevery likely to determine the future environment.Plot these strategic issues on an issues priority matrix .Those issues judged to have a high probability of occurring and a highprobable impact on the corporation are strategic factors.Categorize these factors as opportunities or threats. (Keep in mind thatsome strategic factors may be both opportunities and threats dependingupon how one views them.)Example: The trend toward dual-career couples is a development in the societalenvironment of any company operating in the U.S or Canada. Socio-cultural forceslinked to the changing role of women plus the trend toward single family householdscombined with the economic forces of high interest rates and inflation in the 1970s tosend both men and women searching for full-time jobs in addition to their being parents.This development in the societal environment affected companies through its impact onemployee/union groups (who asked for parental leave and/or company-sponsored daycare centers), customers (employed parents who increasingly shop for conveniencegoods because of time constraints), and special interest groups and even governments(who asked business firms to help support local schools and deal with community social
  16. 16. Issues Priority Matrix(External Strategic Factors of a firm are those that fall under High or Medium priority) Prentice Hall, Inc. © 2008 4-16
  17. 17. Forecasting Techniques - Trend Extrapolation Vs Scenario WritingExtrapolation is simply the extension of present trends into the future. Itrelies on the assumption that the environment is reasonably consistent andchanges slowly in the short run. As a result, extrapolation is fairly easy todo - as witnessed by its being the most widely used form of forecasting.Nevertheless, extrapolation is like driving a car without using a mirror ortwisting ones head to look around and backward. Everything will be fineuntil a sudden new formation occurs! Like driving a car in thisway, extrapolation is fine if the time frame to be predicted is short and one islucky.Scenario-writing, in contrast, is based upon a series of historical data plusinformed hunches from key people in the company who have access toenvironmental information or from a Delphi panel of outside experts. Likeextrapolation, scenario-writing is a very popular forecasting technique, butunlike extrapolation, it can get very complicated and time consuming. It hasat least one clear-cut advantage over extrapolation: It encouragesforecasters to make their assumptions explicit. One is thus more likely torecognize the dangerousness of moving forward without information.Scenario writing, if done conscientiously, could thus be seen as an attemptto construct a mirror to use in hazardous driving!
  18. 18. Why is environmental uncertainty animportant concept in strategic management?It can be argued that without environmental uncertainty,there would be no need for strategic management. TheArab oil embargo of 1973 is said to be the single mostinfluential event causing the formation of planningdepartments in most U.S. corporations. The embargoshowed managers just how vulnerable their companieswere to environmental change.A key part of strategic management, environmentalscanning is a tool used to help avoid strategic surprise andcope with an uncertain environment. If the environmentwas certain and predictable, environmental scanning wouldbe a rather easy chore. Simple extrapolation would be theonly type of forecasting needed. In a complex andchanging world, however, those corporations which engagein environmental scanning and strategic planning tend todeal better with environmental uncertainty and to be more
  19. 19. What can a corporation do to ensure that information aboutstrategic environmental factors gets to the attention ofstrategy makers? This is a very real problem in most large corporations given the usual obstacles to good communication. The very people who are in the best positions to gather this data are often the ones who either fail to pass it on because its too much of a chore or they fail to notice it because no one told them how important certain developments are to top management. Since proper information dissemination is an important part of environmental scanning, corporations attempt to schedule a series of analytical reports for top managements information. The purchasing department, for example, might be tasked with the job of compiling a quarterly analysis of the availability and reliability of present and future suppliers. The market research department might prepare analyses of present and future customers for certain products and services with special attention to demographic shifts. Each report would need to conclude with a list of strategic factors to monitor in the coming months or years. Other approaches are, of course, possible to get needed information to the attention of strategy makers.
  20. 20. Industry Analysis: Porter’s Five-Forces ModelThe task (industry) environment contains stakeholder groups that have animpact on or are heavily impacted by the organization. These aregovernments, local communities, suppliers, creditors, employees/laborunions, special interest groups, and trade associations. However, the level of competitive intensity present in an industry is moreclosely felt and determined by the industry structure in which the firmoperates.The model of pure competition implies that risk-adjusted rates of returnshould beconstant across firms and industries. However, numerous economic studieshaveaffirmed that different industries can sustain different levels of profitability;part ofthis difference is explained by industry structure.Michael Porter provided a framework that models an industry as beinginfluenced by five forces. The strategic business manager seeking todevelop a competitive edge over rival firms can use this model to betterunderstand the industry context in which the firm
  21. 21. Diagram of Porters 5 Forces – Determinants of IndustryAttractiveness SUPPLIER POWER Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation THREAT OF Switching costs of firms in the industry Presence of substitute inputs NEW ENTRANTS Threat of forward integration THREAT OF (BARRIERS Cost relative to total purchases in industry SUBSTITUTES TO ENTRY) Absolute cost -Switching advantages Proprietary learning DEGREE OF RIVALRY costs curve -Exit barriers -Buyer Access to inputs -Industry concentration inclination Government policy -Fixed costs/Value added Economies of scale to substitute -Industry growth Capital requirements -Intermittent overcapacity -Price- Brand identity performance Switching costs Access to trade-off of distribution BUYER POWER substitutes Expected retaliation Bargaining leverage Proprietary products Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation
  22. 22. Describe the importance of entry barriers in an industry.Entry barriers are a key variable determining the threat of newentrants into an industry. To the extent that entry barriers arelow, it will be relatively easy for a new company to enter theindustry and raise the level of competitive intensity.Some of these barriers are: Economies of scale, productdifferentiation, capital requirements, switching costs,access to distribution channels, cost disadvantagesindependent of size, and government policy.These six forces are not just constraints, but are, in effect,variables that can be partially controlled by industry participants
  23. 23. Porter’s Model : ExampleAccording to Porters discussion of industry analysis, is Pepsi Cola asubstitute for Coca Cola?According to Porter, substitute products are those products thatappear to be different but can satisfy the same need as anotherproduct. The identification of possible substitute products or servicesmeans searching for products or services that can perform the samefunction, even though they may not appear to be easily substitutable.Pepsi and Coke are, therefore, not substitutes for each other. They aremerely different brands of the same cola product. The real questionhere is: what is the product? If the product is colas, then a lemon-limedrink like Seven Up could be a substitute product. If the product iscarbonated soft drinks, then other beverages which might perform thesame function could be identified, such as coffee, tea, beer, or wine.
  24. 24. According to Miles and Snow, competing firms within asingle industry can be classified as four basic strategic types.Within each strategic group in which a company operates are keycompetitors. Many of these can be characterized as a strategictype: defender, prospector, analyzer, or reactor. Each of thesetypes has its own combination of structure, culture, and processesto complement its dominant strategic orientation. If one cancategorize a firm into one of these four types, then it will be easierto predict their likely reaction to future environmental changes.Defenders are companies with a limited product line that focuson improving the efficiency of existing operations. (Toyota,Microsoft)Prospectors are companies with fairly broad product lines thatfocus on product innovation and market opportunities (HP, SONY).Analyzers are companies that operate in at least two differentproduct-markets, one stable and one variable, and are able toadjust their orientation based on the industry they are in(Panasonic).Reactors are companies that lack a consistent strategy-structure-culture relationship and seem to switch strategies on a
  25. 25. EFAS –Table: External Factors Analysis Summary External Weight Rating Weighted Comments Factors (Impact) (Response) Score (Societal/ Industry) 0.0 -1.00 1–5 (Strategic Efficiency Level)OpportunitiesO1O2O3O4O5ThreatsT1T2T3T4
  26. 26. Maytag: EFAS –Table: External Factors Analysis Summary External Weig Rating Weigh Comments Factors ht (Mgmt. ted Response) ScoreOpportunitiesEconomic integration of European .20 4 .80 Acquisition of HooverCommunity (O1)Demographics favor quality .10 5 .50 Maytag qualityappliances(O2)Economic Development of Asia(O3) .05 1 .05 Low Maytag presenceEmergence of Eastern Europe(O4) .05 2 .10 New markets (Will take time)Trend to “Super Stores” (O5) .10 2 .20 Maytag weak in this channelThreatsIncreasing Govt. regulations (T1) .10 4 .40 Well positionedStrong US competition(T2) .10 4 .40 Well positionedWhirlpool and Electrolux strong 15 3 .45 Hoover weak globallyglobally(T3)New product advances(T4) .05 1 .05 Questionable
  27. 27. STRATEGIC MANAGEMENT PROCESS Corporate Performance Evaluation S OExternal InternalEnvironment Environmental Scanning Environment T Vision W Mission Goals Objectives STRATEGIE Corporate S Business Functional Policies Programs Budgets Procedures Evaluation
  28. 28. UNIT 4 INTERNAL SCANNING: ORGANIZATIONAL ANALYSIS•The analysis of a corporations internal environment reveals the strengthsand weaknesses of the firm. It includes an assessment of a firmsstructure and culture, and its functional areas (such as marketing, finance,research & development, operations, human resources, and informationsystems )Quite a number of techniques and concepts are available to analyze theinternal environment of the organization.According to the resource-based view of the firm, a companys sustainedcompetitive advantage is primarily determined by its resource endowmentsthat are often revealed through the competencies the firm possesses.( Dell,Toyota, Sony, Apple)The internal competencies of a firm is best explained by Prahlad andHammel’s concept of Core Competencies. Core competencies are thecollective learning and coordination skills behind the firms product lines.Core competencies are the source of competitive advantage and enablethe firm to introduce an array of new products and services.
  29. 29. Resource-Based Approach to Organizational Analysis Internal Strategic Factors (Resources, Capabilities & Competencies)•Resources-Assets that are the building blocks of an organization. These include: -Physical assets (plant, equipment, location, etc.) -Human assets (employees and their skills) -Organizational assets (structure, culture and reputation)•Capabilities- A corporation’s ability to exploit the above resources: These comprise business processesand routines that manage the interaction among resources to turn inputs into outputs. E.g..Marketing capability, R&D capability, production capability.•Competency-It is the cross-functional integration and coordination of capabilities. Each division mayhave its own competencies. E.g.. One division may have competency in “New productdevelopment” while another division may have competency in recruiting human resources•Core competency- Collection of competencies that crosses divisional boundaries, is widespread within thecorporation, and something that the corporation can do exceedingly well. E.g. Fedexcompetency in its application of information technology to all its operations.•Distinctive competency- When a core competency is superior to that of the competition it is called distinctivecompetency. E.g. General Electric’s distinctive competency in management development 5- Prentice Hall, Inc. © 2008 29
  30. 30. Core competencies lead to the development of coreproducts. Core products are not directly sold to end users; rather,they are used to build a larger number of end-user products by thevarious business units of the firm. For example, motors are a coreproduct that can be used in wide array of end products. Thebusiness units of the corporation each tap into the relatively fewcore products to develop a larger number of end user productsbased on the core product technology. Some classic examplesinclude Philips expertise in optical media and Sonys ability tominiaturize electronicsThe intersection of market opportunities with core competenciesforms the basis for launching new businesses. By combining a setof core competencies in different ways and matching them tomarket opportunities, a corporation can launch a vast array ofbusinesses.
  31. 31. There are three tests useful for identifying a core competence. Acore competence should:1. provide access to a wide variety of markets, and2. contribute significantly to the end-product benefits, and3. be difficult for competitors to imitateWithout core competencies, a large corporation is just a collectionof discrete businesses. Core competencies serve as the glue thatbonds the business units together into a coherent portfolio.Core competencies tend to be rooted in the ability to integrate andcoordinate various groups in the organization.A firm’s distinctive competencies can also be identified using theVRIO framework in terms of a company’s value, rareness, imitability,and organization .The two basic characteristics of a companysresources and capabilities that determine the sustainability of itsdistinctive competencies are durability and imitability
  32. 32. What is the relevance of the resource-based view of the firmto strategic management in a global environment?The resource-based view of the firm is an attempt to bring attention to the importance ofa corporations resources in strategic management. For much of the 1980s, Portersconcepts of industry analysis and competitive strategy dominated the field of strategicmanagement to such an extent that many felt that industry structure alone seemed todetermine a firms profit potential.Unfortunately, this emphasis on the industry tended to ignore a firms core skills andcompetencies. What good is the knowledge that a niche in the market exists that can bereached through a focused differentiation competitive strategy if a corporation doesnthave the resources to implement such a strategy? Experts on the resource-based viewsuggest that differences in performance among companies may be explained best, notthrough differences in industry structure identified by industry analysis, but throughdifferences in corporate assets and resources and their application.The resource-based view of the firm is compatible with the traditional concepts ofS.W.O.T. and distinctive competence popular in the field since the 1960s.The only danger with the resource-based approach is that people may go overboardagain and tend to put too much emphasis on internal factors and not enough on externalfactors.Nevertheless, the idea that the durability and imitability of corporate resourcesdetermine competitive advance is a very useful one.The movement toward a more global environment simply accentuates the need toassess and to build a firm’s competencies so that it can successfully compete world-wide. A competency may be distinctive in one’s home country, but only be a core
  33. 33. The Experience Curve Advantage (Bruce Henderson – BCG)Based on the assumption underlying the BCG growth-share portfoliomatrix, Henderson argues that the key to profits lies in market share. Resultsfrom PIMS research supports this notion. If a corporation is able to sell a verylarge number of new products by offering them at a very low price (actuallybelow unit cost unless vast quantities are sold), it will gain a dominant marketshare and pre-empt competition by keeping the price too low for potentialcompetitors to earn profits. This forms a formidable entry barrier.The corporation successfully using the experience curve will earn largeprofits either as a star or when it eventually becomes a cash cow. Model-TFords and Bic ball point pens are just two examples. The experience curve thusis a basis for using financial and operating leverage to achieve a low costbusiness-level strategyThe experience curve concept does have its limitations, however. For onething, it does not consider that a corporation can be very profitable with verylow leverage by occupying a dependable niche in the marketplace based uponsome differentiating strategy such as quality or snob appeal. Rolls Royceautomobiles and Maytag washers are just two examples of firms ignoring theexperience curve by pricing at a cost above the market price and still achievingsolid profits. Differentiation and focus strategies can be very successful
  34. 34. The Value ChainTo analyze the specific internal activities through which firms can createa competitive advantage, it is useful to model the firm as a chain of value-creating activities. Michael Porter labels this as the value-chain of thefirm.A value chain is a linked set of value-creating activities beginning withbasic raw materials coming from suppliers, to a series of value-addedactivities involved in producing and marketing a product or service, andending with distributors getting the final goods into the hands of theultimate consumer. Industry value-chain analysis can identify which firmsare strongest (and weakest) in each stage of the industry’s value chain.Assuming the firm under consideration operates at various stages of theindustry value chain, a comparison with other firms at each stage canhelp identify a firm’s strengths and weaknesses. The systematicexamination of an individual firm’s value activities in corporate value-chain analysis can lead to a better understanding of a corporation’sstrengths and weaknesses - thus identifying any core or distinctivecompetencies. According to Porter, “Differences among competitor valuechains are a key source of competitive advantage.”
  35. 35. Corporation’s Value Chain
  36. 36. Porter classifies value-chain into Primary Value Chain Activities and Support Activities Primary Value Chain Activities:Inbound Logistics > Operations > Outbound Logistics > Marketing & Sales >ServiceThe goal of these activities is to create value that exceeds the cost ofproviding the product or service, thus generating a profit marginInbound logistics include the receiving, warehousing, andinventory control of input materials.Operations are the value-creating activities that transform theinputs into the final product. (Contd.)
  37. 37. Outbound logistics are the activities required to get thefinished product to the customer, including warehousing,order fulfillment, etc.Marketing & Sales are those activities associated withgetting buyers to purchase the product, including channelselection, advertising, pricing, etc.Service activities are those that maintain and enhance theproducts value including customer support, repairservices, etc.
  38. 38. Support ActivitiesThe primary value chain activities described above are facilitated bysupportactivities. Porter identified four generic categories of supportactivities, the details of which are industry-specific.Procurement - the function of purchasing the raw materials andother inputsused in the value-creating activities.Technology Development - includes research anddevelopment, processautomation, and other technology development used to support thevalue-chain activities.Human Resource Management - the activities associated withrecruiting,development, and compensation of employees.Firm Infrastructure - includes activities such asfinance, legal, qualitymanagement, etc.Support activities often are viewed as "overhead", but some firms
  39. 39. Industry Vs Corporate Value ChainThe focus of value-chain analysis is to examine the corporation in thecontext of the overall chain of value-creating activities, of which the firmmay only be a small part. In industry value-chain analysis, the valuechain is split into two segments, upstream and downstream parts withthe corporation under examination being the focal point. In analyzingthe complete value chain of a product, note that even if a firm operatesup and down the entire industry chain, it usually has a center of gravity- an area of primary expertise where its primary activities (and corecompetencies) lie. One goal of industry value-chain analysis is toidentify where on the chain is the activity providing the greatest returnon investment. This might be an activity which a corporation mightwant to expand when doing strategic planning.In corporate value-chain analysis, each corporation has its owninternal value chain of activities. Each of a company’s product lines hasits own distinctive value chain. Because most corporations makeseveral different products or services, an internal analysis of the firminvolves analyzing a series of different value chains. The systematicexamination of individual value activities can lead to a better
  40. 40. The Value SystemThe firms value chain links to the value chains ofupstream suppliers and downstream buyers. The result is alarger stream of activities known as the value system. Thedevelopment of a competitive advantage depends not onlyon the firm-specific value chain, but also on the valuesystem of which the firm is a partValue chain analysis can be used at both the industry leveland at the corporate level to assess a corporationsstrengths (competencies) and weaknesses
  41. 41. Organizational StructureThe specific ways in which the value-chain is organized andmanaged result in a specific organizational structure. Thebasic organizational structures are simple, functional,divisional, SBU, and conglomerateIf a corporations structure is compatible with present andpotential strategies, it can be viewed as an internal corporatestrength. If, however, the structure is not compatible witheither present or potential strategies, it is a definite weaknessand will act to constrain strategy formulation. For example, ifa corporation is structured on the basis of function, this maybe a weakness if the firm wishes to grow by acquiring otherprofitable corporations. In order to implement such a strategy,the strategy formulators may have to reorganize on adivisional basis.To the extent that top and middle managers have noexperience with such a structure, a lot of unforeseen problems
  42. 42. Organizational Structures 5- Prentice Hall, Inc. © 2008 42
  43. 43. Organizational CultureCorporate culture is the collection of beliefs, expectations, andvalues learned and shared by a corporations members andtransmitted from one generation of employees to anotherCorporate culture, a collection of beliefs, expectations, andvalues shared by a corporations members, acts to shape thebehavior of people in a corporation. Since corporate culture has apowerful influence on the behavior of managers as well as otheremployees, it may strongly affect a corporations ability to shift itsstrategic direction.Acting in a manner similar to structure, to the extent that acorporations culture is compatible with present and potentialstrategies, it can be viewed as an internal corporate strength. Tothe extent that it is not compatible, it may spell disaster for astrategic change in the implementation stage. A strategy whichcontradicts an entrenched culture may find itself being quietly (ornot so quietly) sabotaged by the corporations most loyal andcompetent employees.
  44. 44. Maytag IFAS –Table: Internal Factors Analysis Summary Internal Weight Rating Weighted Comments Factors ScoreStrengthsQuality Maytag culture (S1) .15 5 .75 Quality key to successExperienced top management(S2) .05 4 .20 Know appliancesVertical integration(S3) .10 4 .40 Dedicated factoriesEmployee relations(S4) .05 3 .15 Good, but deterioratingHoover’s international .15 3 .45 Hoover name in cleanersorientation(S5)WeaknessesResearch & Development (W1) .05 2 .10 Slow on new productsDistribution channels(W2) .05 2 .10 Superstores replacing small dealersFinancial position(W3) .15 2 .30 High debt loadGlobal positioning(W4) .20 2 .40 Hoover weak outside UK and AustraliaManufacturing facilities(W5) .05 4 .20 Investing now
  45. 45. How to create the SFAS Matrix? (Strategic Factors Analysis Summary Matrix)IFAS TABLE SFAS MATRIXEFAS TABLE
  46. 46. Maytag IFAS –Table: Internal Factors Analysis Summary Internal Weight Rating Weighted Comments Factors ScoreStrengthsQuality Maytag culture (S1) .15 5 .75 Quality key to successExperienced top .05 4 .20 Know appliancesmanagement(S2)Vertical integration(S3) .10 4 .40 Dedicated factoriesEmployee relations(S4) .05 3 .15 Good, but deterioratingHoover’s international .15 3 .45 Hoover name in cleanersorientation(S5)WeaknessesResearch & Development (W1) .05 2 .10 Slow on new productsDistribution channels(W2) .05 2 .10 Superstores replacing small dealersFinancial position(W3) .15 2 .30 High debt loadGlobal positioning(W4) .20 2 .40 Hoover weak outside UK and Australia
  47. 47. Maytag EFAS –Table: External Factors Analysis Summary External Weight Rating Weighted Comments Factors ScoreOpportunitiesEconomic integration of European .20 4 .80 Acquisition of HooverCommunity (O1)Demographics favor quality .10 5 .50 Maytag qualityappliances(O2)Economic Development of .05 1 .05 Low Maytag presenceAsia(O3)Emergence of Eastern Europe(O4) .05 2 .10 New marketsTrend to “Super Stores” (O5) .10 2 .20 Maytag weak in this channelThreatsIncreasing Govt. regulations (T1) .10 4 .40 Well positionedStrong US competition(T2) .10 4 .40 Well positionedWhirlpool and Electrolux strong 15 3 .45 Hoover weak globallyglobally(T3)
  48. 48. Maytag SFAS –Matrix: Strategic Factors Analysis Summary Key Strategic Wei Rati Weigh Short Interm Long Comments Factors ght ng ted Durati ediate Durati Score on Dration onQuality Maytag culture .10 5 .50 Quality key to(S1) X successHoover’s international .10 3 .30 X Hoover name inorientation(S5) cleanersFinancial position(W3) .10 2 .20 X High debt loadGlobal positioning(W4) .15 2 .30 X Hoover weak outside UK and AustraliaEconomic integration .10 4 .40 X Acquisition ofof European HooverCommunity (O1)Demographics favor .10 5 .50 X Maytag qualityquality appliances(O2)Trend to “Super Stores” .10 2 .20 X Maytag weak in(O5) this channelWhirlpool and 15 3 .45 X Hoover weakElectrolux strong globally