This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/business-document/strategy-toolkit-446 Strategy is often a challenging topic. This Toolkit will help you in the development of your business strategy with some models such as: *Common STEEP Factors *Five Forces Questions *5 Market Test *Generic Strategies *Competitor Analysis *SWOT *TOWS Analysis *Grand Strategy Selection Matrix *Grand Strategy Clusters *Risks & Mitigations

1. Social / Demographic
Level
Impact
Ecological / International
Air and water quality
Recycling
Power sources
Product life-cycle stage
Pollution levels
Substitutibility of raw materials
Environmental regulation
International trade
Effect of climate
Level
Impact
Political / Legal
Policies of political parties
Regulatory activism
Property protection laws
Influence on political decision making
Voting rates and trends
Power and decision making structures
Public opinion
Level
Impact
Ideological Characteristics
Types of Union Organizations
Income Gaps among social segments
Population percentages in economic or social segments
Value systems
Demographic shifts
Cultural backgrounds
Birth/death rates

2. Technological
Level
Impact
Level
Impact
Patents held
R&D budgets
Number of colleges and universities in region
Pace of technological Change
Presence of technological clusters
Pace of process or product improvements
Bandwidth capacity
Intellectual Property Protection
Economic
GDP growth rates
Exchange reserves
Inflation rates
Income levels and distribution
Interest rates
Small business lending levels
Balance of payments
These are the common STEEP factors, but are by no means an
exhaustive list. Next to each factor you can assess its level
(High/Medium/Low) and its impact (+/0/-). This will help determine
what factors are most important in the external environment.
Once you've identified the key factors, you need to understand the
interrelationships between and among the trends. The next step is to
relate the trends to issues, and forecast the future direction of those
issues. Finally, derive implications from those forecasts.

3. Please see "The Five Competitive Forces that Shape Strategy" by Michael Porter for more information on the questions
Industry:
Barriers to Entry (Threat of Entrants)
Absolute cost advantages?
Proprietary learning curve?
Limited access to inputs?
Barriers from government policy?
Economies of scale?
High capital requirements?
Strong brand identity?
Switching costs?
Limited access to distribution?
Expected retaliation?
Proprietary products?
Score
Weight
0
0
0
0
0
0
0
0
0
0
0
0
Average
Buyer Power
Are the buyers concentrated?
No switching costs?
Is the buyer volume high
Is the buyer's purchasing a nondifferented product?
Does the buyer have bargaining leverage?
Does the buyer have the cost information?
Is the buyer price sensitive?
Is there a credible threat of backward integration?
Are substitutes available?
Are buyer incentives offered?
Average
Score
Substitutes
No switching costs?
Are cheaper alternatives available?
Are more beneficial alternatives available?
Score
Average
0
0
0
0
0
0
0
0
0
0
0
Weight
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Weight
0
0
0
0
0
0
0

4. e information on the questions
ry:
Supplier Power
Supplier concentration?
Is volume important to supplier?
Are the supplier's products differentiated?
Do imputs impact cost or differentiation?
Are there switching costs?
Are there substitute inputs?
Is there a credible threat of forward integration?
Is the cost relative to total purchases high?
Average
Score
Rivalry
Does the industry have exit barriers?
Is the industry fragmented?
Are fixed costs high?
Is industry growth low?
Does overcapacity exist?
Are products undifferentiated?
No costs to switch?
Is product branding low?
Are rivals homogenous in size, resources, etc?
Average
Weight
Score
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Weight
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Scores
3 = Yes
2 = Perhaps
1 = No
Weight
0 to 1
Here are a number of the common Five Forces factors. The are worded to allow them to be answered in a "Yes/Perhaps/No"
manner. So it is important to read the question carefully when answering. After scoring each factor, assign a weight of 0 to 1 to
assess the impact of this on the industry. So, for example, if (under buyer power) buyers are concentrated, you would give a score
of 3 and then you would determine the weight of this factor on the industry. If it is only .5 (half way between important and not
important), you would put .5 in the weight column. After filling in all of the questions you should have a score from 0 to 3 in terms
of the effect of that factor on the industry, with 3 indicating substantial effect and 0 indicating no effect.
While precision with this framework is difficult, it is hoped that by considering all the factors listed you will have a better concept of
how attractive the industry is.

5. #
RESOURCE/CAPABILITY
COMPETITIVIVELY SUPERIOR?
INIMITABLE?
1
2
3
4
5
6
Instructions
In the Resource/Capability column, list the resource or capability that you wish to examine u
each column. A 1 is "No", a 2 is "Perhaps" and a 3 is "Yes". These are then multiplied togeth

6. DURABLE?
APPROPRIABLE?
NONSUBSTITUTABLE?
ou wish to examine using the 5 Market Test. Then place a 1, 2, or 3 in
hen multiplied together to generate a score in the far right column.
SCORE
0
0
0
0
0
0

7. Generic Strategy
Firm 1
Firm 2
Firm 3
Firm 4
Firm 5
Firm 6
Firm 7
Firm 8
Firm 9
Firm 10
Broad
Instructions:
Once you have determined the generic strategies being used by the various firms
in the industry, you can map them into a grid similar to that to the right. It is also
often helpful to know in what direction the firms are moving, or if they are solidly
occupying their strategic position
Focused
Characteristics of Business Strategy
Cost Leadership
Differentiation
Value provided by unique features
Efficient scale facilities
and characteristics
Tight control of production costs and
Premium price
overhead
Costs of sales, R&D and service minimized
High customer service
State of the art manufacturing facilities
Superior quality
Monitoring costs of activities provided by
outsiders
Simplification of processes
Relatively standardized products
Prestige or exclusivity
Rapid innovation
Shaping perceptions through
advertising
Features acceptable to many customers
Quality focus
Lowest competitive price
Capability in R&D
Human resources very important
Lower Buyers’ Costs
Raise Buyers’ Performance
Perceptions of uniqueness
Switching costs through
differentiation

8. Example of Business Strategy Matrix
Cost Leadership
Differentiation
Focused Cost Leadership
Focused Differentiation
Cost Leadership
Firm
4
Firm
5
Broad
Differentiation
Firm
2
Firm
1
Focused
Firm
3
Firm
6

9. Resource Similar: The competitor firm has roughly the same resource allocation (e.g., number and type of employees, plant and equipmen
location, technology, raw materials access)
Market Common: The competitor competes in the same markets for the same customers
Instructions: Put a "1" in the column if the answer to the question is "Yes" and a "0" if it is "No"
Competitor
Firm 1
Firm 2
Firm 3
Firm 4
Firm 5
Firm 6
Firm 7
Firm 8
Firm 9
Firm 10
Resource Similar
1
0
1
1
0
1
0
1
0
1
Market Common
1
1
0
1
0
0
1
1
0
0
The two most dangerous types are the "Potentially Dangerous Competitors" and the "Potential Entrants". The first is dangerous becau
different resource allocation, it can take actions that your firm may be unable to take. The second is dangerous because it may enter la
into your markets. "Known Competitors" are less dangerous because they are similar to your firm and won't engage in radical competi
actions because your firm would respond tit-for-tat. "Non-threatening Competitors" should be monitored, but they do not constitute a
danger to your firm.

10. location (e.g., number and type of employees, plant and equipment,
e same customers
swer to the question is "Yes" and a "0" if it is "No"
Competitor Type
Known Competitor
Potentially Dangerous Competitor
Potenential Entrant
Known Competitor
Non Threatening Competitor
Potenential Entrant
Potentially Dangerous Competitor
Known Competitor
Non Threatening Competitor
Potenential Entrant
titors" and the "Potential Entrants". The first is dangerous because with a
e unable to take. The second is dangerous because it may enter latererally
they are similar to your firm and won't engage in radical competitive
g Competitors" should be monitored, but they do not constitute a direct

11. External
Internal
Strengths
Weaknesses
N
Opportunities
Threats
Cell 3: S
turna
oriented
Instructions:
Once you have identitifed the firm's internal strengths
and weaknesses and its external opportunities and
threats, it is helpful to map them into a matrix similar
to that above, joining the various internal and external
components into a more complete picture of the firm's
situation. Then, after doing the mapping, you can use
the hueristics found in the graphic to the right to
determine what type of overarching strategy the firm
may wish to pursue.
Critical internal
weaknesses
Cell 4: S
defensiv
Maj

12. Numerous environmental
opportunities
Cell 3: Supports a
turnaroundoriented strategy
Critical internal
weaknesses
Cell 4: Supports a
defensive strategy
Cell 1:
Supports an
aggressive
strategy
Cell 2:
Supports a
diversification
strategy
Major environmental threats
Substantial
internal
strengths

13. Substantial
internal
strengths

14. Threats
T1 ______________
T2 ______________
T3 ______________
Opportunities
O1 ____________
O2 ____________
O3 ____________
Strengths
S1 ____________
S2 ____________
S3 ____________
Weaknesses
W1 ___________
W2 ___________
W3 ___________

15. TOWS is a powerful analysis tool
where Strenths and Weaknesses
are joined with Opportunities and
Threats to provide a spectrum of
opportunities that the firm could
pursue. The real value of the tool
is the breadth of options it
provides that then can be analyzed
in greater depth using other
analytical tools.

16. Overcome weaknesses
Internal
(redirected
resources
within the firm)
Vertical integration
Conglomerate diversification
Turnaround or
retrenchment
Divestiture
Liquidation
II
I
III
IV
Concentrated growth
Mkt. Development
Prod. Development
Innovation
Horizontal integration
Concentric diversification
Joint venture
Maximize strengths

17. gration
ate diversification
ntegration
diversification
External
(acquisition
or merger for
resource
capability)

18. Rapid market growth
1.
2.
3.
Concentrated growth
Vertical Integration
Related diversification
I
IV
Strong
competitive
position
1.
2.
3.
Related
diversification
Unrelated
diversification
Joint venture
1.
2.
3.
4.
II
III
Reformulation of
concentrated growth
Horizontal integration
Divestiture
Liquidation
Weak
competitiv
position
1.
2.
3.
4.
5.
Slow market growth
Turnaround or retrenchment
Related diversification
Unrelated diversification
Divestiture
Liquidation

19. ted growth
l integration
Weak
competitive
position
d or retrenchment
versification
diversification

20. Threat
High
b
Medium
a
Low
c
Low
a
b
c
Medium
Probability
High
Example Risks
Cannot secure short-term credit
Main customer declares bankruptcy
Increased government regulation
This matrix is simply to have you assess the threats to your recommendation, and the probablity of
those threats occuring. Any risk falling into the yellow or red zones should have appropriate
mitigations outlined for it.