A firm operates in an industry
You need to compare your company’s operations with
others especially your best-in-class rivals
Look at the current level of competition, technologies
employed, the influences/forces from other industrial
stakeholders, and Key Success Factors of your chosen
industry among other key issues.
Look at the key sectors in the industry in
Industrial trends in line with your industry’s life cycle
from introduction to decline stage should be looked at
in line your goals and objectives, your strategy, and
your competitors stage in this cycle.
Who are they in terms of characteristics
How manageable are their needs, wants
,expectations, tastes and preferences?
Why do they buy/what they value most?
When/how do they buy?
Where do they buy?, etc
Do all these trends/factors/developments
favor/benefit us (opportunities) or really
scare/are against us (threats)?
Do we have alternative sources of
Can we rely on these suppliers to
provide our needed inputs in the
right quantities ,quality, at the right
time and place?
If the answer is yes , those are
opportunities. While no shows a
What are their costs?
What are their terms of delivery and/or
How powerful are they?
What is their rate of entry and exit?
Which supplier is the best?
Which supplier (s) will give us competitive
advantages (opportunities) or not/scare
How many competitors of our size
and competence are we facing? Fewopportunity, many-threat
What market share do they
hold/how strong are they?
Cost of the available substitutes?
What are their competitive behavior?
Friendly/cooperative- Opportunity, Un
What are the entry and exit barriers for
these competitors? Easy for new rivals to
join but difficult for the current ones to
leave the industry-threat, Difficult to enter
but easy to exit-favorable/opportunity
Before joining an industry, a firm
Industry size, structure,
profitability, long term
attractiveness, life cycle
Competitive situation analysis
Level of technology in the
Competitive position of the
Ease of entry in the industry
Michael Porter’s model
Michael E. Porter of the Harvard Business
School developed this framework which helps
managers with the task of analyzing the
competitive forces in an industry in order to
identify the opportunities and threats
confronting their company (ies).
To him the stronger the 5 competitive forces, the
more serious the threat and vise versa because you
can not increase prices anyhow meaning the profits
are being depressed
However through strategic change you can alter the
strengths of such forces
ContNeed to understand the forces in the
industry, their impact/seriousness, how
and when they benefit or be against
you, and their sources.
Confirm which forces favour your
business success (opportunities) or
scare your business success (threats)
Suggests five competitive forces;
Rivalry within the industry
Threat of new entrants
Threat of substitute products
Bargaining power of buyers
Bargaining power of suppliers
Relevancy and Limitations
Limited availability of the required information i.e
high level of secrecy in government bodies and
some business associations
The available information may not be up-to-date, or
be irrelevant or even inaccurate
The model ignores other trends like changes in
demand, technology used in production, and the
Points to note
External environmental analysis is aimed at
identifying/anticipating opportunities and threats
Opportunities/external friends are favourable
factors( trends/developments/unruly forces) in the external
Threats/external enemies are unfavourable trends/factors in the
You not only end at external environmental analysis because
in order to competitively face such challenges, you should
know your strengths and weaknesses through
The central challenge of using our managerial
competences to create particular/specific competitive
advantage (s)-In terms of financial performance,
individual departmental capabilities, appropriateness of
our organizational structure, goal contract, customer
value adding activities, identifying/anticipating
performance gaps etc
You should examine the competence/incompetence of
your functional areas / departments in relation to your
Identify those critical strengths and weaknesses in each
of these departments (functional analysis)
1)Financial Performance Analysis
Basing on the financial ratios from the trend analysis, has our
financial standing improved or deteriorated over time? What is
the financial health of our business?
Are we financially stronger compared to our rivals in the
industry at this point in time? If so, can we continue
maintaining this position? Key stakeholders need to be sure of
this before deciding to/continuing to deal with.
You have to combine leverage, liquidity, activity, and
profitability ratios in order reasonably establish your firm’s
financial standing and performance
You can not fully rely on financial ratio analysis because;
The analysis is based on past records which rarely consider
the currently situation on ground
Different organizations use/follow different accounting
standards and procedures even when using ISs (in
Bases on quantitive data ignoring qualitative data
The source documents may not be accurate hence giving a
2)Functional Area Analysis
Key activities of the company’s function areas
have to be analyzed to identify those areas
where we are performing well (strengths), and
where we need to improve (weaknesses)
Barriers between departments should be
avoided for synergy
Both resource &competence- related tangible
and intangible factors should be considered
Responsible for identifying, anticipating,& satisfying the
right customer needs and expectations.
Market share (strength & competitiveness in the market),
and size of our loyal customer/corporate account base?
Our marketing information systems’ efficiency
Level of market research and development (in relation to
customers, markets, & competitors)
Product/brand positioning & corporate image?
Branding and packaging (are they unique and preferred
by our target customers?)
Customer service/care and customer
loyalty programs? Doing it wellstrength, Need to improve-weakness
Promotion effectiveness? Giving us
competitive advantages-strengths, a
competitive disadvantage to usweakness
Appropriateness of our pricing
strategies to our customers?
Appropriateness of our distribution
Finance and Accounting
Responsible for ensuring the
Financial strengths and stability
Financial planning capabilities
Finance & A/cing-continues
We avoid some taxes without evading taxes
(strength), dealing mainly in taxable transactions
We can raise additional capital when needed by
appropriately balancing own vs debt sources
(strength), if not (weakness)
Accuracy, Completeness, and Timeliness of
How good are our relationships with our
Human Resource Dept.
Responsible for attracting and maintaining the right/competent
(and compatible) human resources / employees and managers in
the right positions, at the right time, for achieving organizational
Organization structure, climate, and culture give us a competitive
advantage (strengths)-inappropriate to the company’s strategic
We have qualified and experienced/competent staff who are
compatible with our business (strengths),
unqualified/inexperienced/incompatible staff who need training or
to be transferred (weakness
Is the staff morale enough, sense of goal contract, and team work?
Stable workforce/is our labour turn over low?
Our staff are proud of working for our
organization-strength, if not-weakness
Productivity of staff/our record for
achieving objectives compared to our
rivals? Better-OPP, Poor-Weakness
Is there an ‘HR Strategic Fit’ ? ,i.e are
our HR policies and programs
compatible with our human capital?
Core competence-OPP, No fit-Weakness
Production and operations
Responsible for turning the product design/ideas/raw materials into the
Responsible for turning the product design/ideas/raw materials into the
right finished products (services) to be sold to our customers.
Benchmark with WCM practices or even trend set.
Are we producing high quality products/operating at lower overall costs
compared to our rivals?
How efficient and effective are our production processes, systems, and
Can we produce the required capacity to meet our customers’ demand
Strategic location and layout of facilities (the plant, offices, equipment,
raw materials, information, etc)?
Plant and equipment maintenance (including its age)
Inventory control systems/relationship with our
Quality control measures-are they customer
Do we have a high (weakness) or low level
(strengths) of rejects?
Flexibility in operations-do we have alternatives
like generators, a pool of casual staff, compatible
staff, and alternative systems of production?
Are our lead times especially during peak
periods? Delays-weakness, quick service-strength
Analyze the following;
Procurement and supplies dept.
Research and development
Top management’s/CEO’s/General Manager’s
IT/Information systems department
Other units in case of product/customerbased/market/project organizational structures.
Procurement & Supplies Dept
Securing products and services at the right quality,
quantity, price, place, and from the right sources
How high/low are our procurement costs (e.g. cost
per order or overall procurement costs)?
What is / is our relationship with our core suppliers
Are we effectively controlling our supply chain?
Is our procurement documentation accurate enough
for auditing purposes?
How much procurement bypasses the department/is
done out of contract/is there appropriate contract
If we are using e-procurement, how are those ICTs
interoperated/compatible with our other procurement
After placing in a requisition, how long does it take to
receive the goods?
Can the system used provide management with realtime visibility of the procurement activities?
Does the system ensure Corporate governance
(transparency, accountability, disclosure, and trust)?
3)Portfolio Analysis (PA)
A biz portfolio may be any a
PA is usually applied to firms with multiple SBUs (more
than one product/services, customer categories,
markets , divisions)
Helps managers to in taking decisions regarding which
SBUs to allocate more or less resources to at a given
A firm should always strive to not only to
diversify/retrench but to also have a balanced portfolio
(minimize risk and maximize return) of all portfolios
Portfolio Analysis Models:
The B.C.G model (Growth/Share matrix)
The G.E Multi-factoral model (competitive
Contribution Margin Analysis (how much profit
margin does that biz portfolio contribute?)
The BCG(Boston Consulting Group) model
Relative market share
The GE model
Determinants of industry attractiveness
Porter's five forces
Economies of scale
Determinants of competitive strengths
R & D strengths
4)Value Chain Analysis
What do our current and potential customers value
Are our primary and supportive value chain
activities creating customer value?
Primary Value Chain Activities-in bound logistics,
production/operations, out bound logistics,
marketing and sales, after sale service
Supportive Activities-Company infrastructure, HR
management, procurement, value-adding
Some questions to answer
How can we best provide that customer value at reduced cost
and make better profits?
Which activities are now core or non core in relation to
creating better customer value?
Which ones are we known to have competence in/give us a
competitive advantage (core competence)?
How can we strategically manage such activities either by
ourselves or through well controlled out-sourcing to
Strategic Gap Analysis
A futuristic strategic gap in performance
Involves some proactive control/management
If it is there, what new strategies to we need to correct
Adjust the tactics or change the strategy in place?
The analysis is in stages
Consider the past trend and project into the future in
relation to your goal/objective
Why might the future trend be that way?, with
reasons adjust your projection
What assumptions are we basing on , and how do
they affect our projection?
If corrective action is taken, what do we now
Consider other factors besides the initial one
If there is a gap, when is it likely to occur ?
Key Success Factors
Things your company must be good/excel at in
order to succeed in a given industry
Premising/bench marking with those best-inclass rivals helps you to identify them
They differ from one industry to another under
Different from Key Result Areas
Strategic level managers
Strategic planning and policy formulation as
directed by the board of directors
They also provide effective leadership , are strategic
information bearer, advisers to the board among
Issues to analyze may among others include;
Their responsiveness and adaptability
Attitude to risk
Generic skills and experiences ,etc
From the external/environmental analysis, you will
identify all the available opportunities and threats
From the internal/organizational analysis, you will
identify all your internal strengths and weaknesses
Match all those results using through SWOT analysis
remembering that some of those
trends/developments/changes/factors may not be of
significance to you
Is usually required when;
When formulating your strategic direction
Drawing strategic/business/marketing plans
Convincing creditors, investors, and top
management about the firm’s future or
When making your strategic choice/when
modifying the existing strategy or its
tactics/crafting (formulating) a new
Which of these are of important or not,
urgent or not, relevant or not in relation
to your strategic direction, strategy to be
used, resources available (feasibility?),
and values of top management?
A firm needs to:
Respond to / take advantage of those golden
Cope with and encounter those potentially frustrating
Exploit / capitalize on its strengths
This matching of the SWOT variables/issues results
into SWOT matrix that guides the appropriateness of
your future strategic choice
Develop a SAP chart for Strengths and weaknesses,
and an ETOP chart for Opportunities and Threats
to decide on the appropriate tactics (actions) to use in
your chosen strategies
A firm should single out those SWOT
facts that are more urgent, important
and most likely to influence its
strategy/approach to your strategic
A firm should also match its strengths
and weaknesses, to its opportunities
and threats in the environment in form
of a SWOT matrix.
Before your SWOT matrix ,ask
In what areas have our strengths improved within this period,
and to what extent?
Where have we managed to counter our weaknesses?
In which areas of weakness are we continuously deterioting?
Are we too weak, strong enough, or stable? Are these areas of
importance to us?
What can we then do with our strengths, and about our areas
Not ignoring those relevant Opportunities and Threats, after
answering those relevant questions, go a head with your
-Growing market for
-Future hostile takeover
-Strong capital base
-Many loyal customers
-Low market share
Opportunit Using strengths to
exploit opportunities weaknesses to
Using strengths to
Expansion/diversify Acquisition of the
Controlled outsourcing to such
Use a white
Identify the strengths and weaknesses of such
a model using all the models above. Use a firm
of your choice
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