STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENTUNIT 3

Corporate Performance Evaluation

Environmental Scanning

O

T

S

WVision

Mission

Goals

Objectives

STRATEGIESBusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation

STRATEGIC MANAGEMENT PROCESS

External Environment

Internal Environment

Strategic Management Process

Environmental

Scanning

Strategy Formulati

on

StrategyImplementa

tion

Evaluation

&Control

Strategic Management Process

Environmental

Scanning

Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies

Strategy Formulation

UNIT 3ENVIRONMENTAL SCANNING AND INDUSTRY

ANALYSIS

The environmental scan includes the following components:• Analysis of the (external) Macro-environment (Societal

Environment)• Analysis of the firm's (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 an impact or are heavily impacted by the organization. These are governments, local communities, suppliers, creditors, employees/labor unions, special interest groups, and trade associations.

Within the industry environment, Strategic Groups are important because a firm does not compete against everyone in an industry but only against those with similar strategies using similar resources. .

Environmental Analysis

Analyse EXTERNAL Environment Conditions

Analyse INTERNAL Company Situation

IdentifyStrategic Optionsfor the Compan

y

Select the Best Strategyfor the Compan

y

Competencies, Capabilities,

Resource strengths and weaknesses, Competitiveness

TASK ENVIRONMENT

SOCIETAL ENVIRONMENTo

T

W

S

Environmental Variables

MACROENVIRONMENTLegislation

and Regulation

TechnologicalSystem

Socio-

Cultura

l

Fact

ors

Political

System

The Economy

at Large

COMPANY

Suppliers Substitutes

Buyers

NewEntrants

Rival Firms

IMMEDIATE

INDUSTRY AND COMPETITIVE

ENVIRONMENT

Legislation and

Regulation

Politica

l

Syste

m

Socio-

Cultural

Factors

The E

conomic

Situation

The Components of a Company’s Macro-Environment

MACROENVIRONMENTLegislation

and Regulation

Technological

System

Socio-

Cultura

l

Fact

ors

Political

System

The Economy

at Large

COMPANY


Buyers

NewEntrants

Rival Firms

IMMEDIATE


ENVIRONMENT

Legislation and

Regulation

Socio-

Cultura

l

Fact

ors

Political

System

The Econom

ic

Situation



MACROENVIRONMENT


Buyers

NewEntrants

Strat.

Group 1

IMMEDIATE


ENVIRONMENT

Strat.

Group2

Strat.

Group3

Technological

System

Legislation and

Regulation

Socio-

Cultura

l

Fact

ors

Political

System

The Econom

ic

Situation

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

A scan of the external macro (societal) environment in which the firm operates reveals the business opportunities lying ahead and the threats the organization will have to face in future.

Developments or trends in a corporation's societal environment typically do not affect the corporation directly but indirectly through their impact on one or more stakeholder groups in the corporation's task environment. This can be expressed in terms of the following factors:

Political/LegalEconomicSocialTechnological

The acronym PEST (sometimes also labeled as “SLEPT") is used to describe a framework for the analysis of these macro-environmental factors.

PEST Analysis

PEST Factors ( Detailed)

A PEST analysis fits into an overall environmental scan as shown in the

following diagram:Political factors

include government regulations and legal issues and define both formal and

informal rules under which the firm must operate. Some examples include

tax policyemployment laws

environmental regulations

trade restrictions and tariffs

political stability

Economic factors

affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in

the macro-economy

economic growth interest rates

exchange ratesinflation rate

:

Social factors include the demographic and cultural

aspects of the external macro-environment. These factors affect needs and the size of potential markets. Some

social factors include:

population growth rateage distribution career attitudes

health consciousness

Technological factors

can lower barriers to entry, reduce minimum efficient production levels, and

influence outsourcing decisions. Some technological factors include:

R&D activity automation

technology incentives rate of technological

change

PESTFACTORS

How to identify the strategic factors in the External Environment?

List the major trends or developments emerging in each of the four forces of a firm's societal environment.

Then estimate the likely impact of these general trends upon the primary stakeholders, e.g., communities, creditors, competitors, etc. These data form a series of strategic inputs - those trends and developments that are very 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 high probable impact on the corporation are strategic factors.

Categorize these factors as opportunities or threats. (Keep in mind that some strategic factors may be both opportunities and threats depending upon how one views them.)

Example: The trend toward dual-career couples is a development in the societal environment of any company operating in the U.S or Canada. Socio-cultural forces linked to the changing role of women plus the trend toward single family households combined with the economic forces of high interest rates and inflation in the 1970s to send 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 on employee/union groups (who asked for parental leave and/or company-sponsored day care centers), customers (employed parents who increasingly shop for convenience goods 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 problems).

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Issues Priority Matrix(External Strategic Factors of a firm are those that fall under High or Medium priority)

Forecasting Techniques - Trend Extrapolation Vs Scenario

WritingExtrapolation is simply the extension of present trends into

the future. It relies on the assumption that the environment is reasonably consistent and changes slowly in the short run. As a result, extrapolation is fairly easy to do - as witnessed by its being the most widely used form of forecasting. Nevertheless, extrapolation is like driving a car without using a mirror or twisting one's head to look around and backward. Everything will be fine until a sudden new formation occurs! Like driving a car in this way, extrapolation is fine if the time frame to be predicted is short and one is lucky.

Scenario-writing, in contrast, is based upon a series of historical data plus informed hunches from key people in the company who have access to environmental information or from a Delphi panel of outside experts. Like extrapolation, scenario-writing is a very popular forecasting technique, but unlike extrapolation, it can get very complicated and time consuming. It has at least one clear-cut advantage over extrapolation: It encourages forecasters to make their assumptions explicit. One is thus more likely to recognize the dangerousness of moving forward without information. Scenario writing, if done conscientiously, could thus be seen as an attempt to construct a mirror to use in hazardous driving!

Why is environmental uncertainty an important concept in strategic

management?It can be argued that without environmental

uncertainty, there would be no need for strategic management. The Arab oil embargo of 1973 is said to be the single most influential event causing the formation of planning departments in most U.S. corporations. The embargo showed managers just how vulnerable their companies were to environmental change.

A key part of strategic management, environmental scanning is a tool used to help avoid strategic surprise and cope with an uncertain environment. If the environment was certain and predictable, environmental scanning would be a rather easy chore. Simple extrapolation would be the only type of forecasting needed. In a complex and changing world, however, those corporations which engage in environmental scanning and strategic planning tend to deal better with environmental uncertainty and to be more successful than their non-planning brethren.

What can a corporation do to ensure that information about strategic environmental factors gets to the attention of strategy 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 it's 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 management's 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.

The task (industry) environment contains stakeholder groups that have an impact on or are heavily impacted by the organization. These are governments, local communities, suppliers, creditors, employees/labor unions, special interest groups, and trade associations.

However, the level of competitive intensity present in an

industry is more closely felt and determined by the industry structure in which the firm operates.

The model of pure competition implies that risk-adjusted rates of return should be

constant across firms and industries. However, numerous economic studies haveaffirmed 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 being influenced by five forces. The strategic business manager seeking to develop a competitive edge over rival firms can use this model to better understand the industry context in which the firm

operates

An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry

Industry Analysis: Porter’s Five-Forces Model

SUPPLIER POWERSupplier concentrationImportance of volume to supplierDifferentiation of inputsImpact of inputs on cost or differentiationSwitching costs of firms in the industryPresence of substitute inputsThreat of forward integrationCost relative to total purchases in industry

THREAT OFNEW

ENTRANTS(BARRIERSTO ENTRY)

Absolute cost advantagesProprietary learning curveAccess to inputsGovernment policyEconomies of scaleCapital requirementsBrand identitySwitching costsAccess to distributionExpected retaliationProprietary products

THREAT OFSUBSTITUT

ES

-Switching costs-Buyer inclination to substitute-Price-performancetrade-off of substitutes

BUYER POWERBargaining leverageBuyer volumeBuyer informationBrand identityPrice sensitivityThreat of backward integrationProduct differentiation

DEGREE OF RIVALRY

-Exit barriers-Industry concentration-Fixed costs/Value added-Industry growth-Intermittent overcapacity

Diagram of Porter's 5 Forces – Determinants of Industry Attractiveness

Describe the importance of entry barriers in an industry.

Entry barriers are a key variable determining the threat of new entrants into an industry. To the extent that entry barriers are low, it will be relatively easy for a new company to enter the industry and raise the level of competitive intensity.

Some of these barriers are: Economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent 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

Porter’s Model : Example

According to Porter's discussion of industry analysis, is Pepsi Cola a substitute for Coca Cola?

According to Porter, substitute products are those products that appear to be different but can satisfy the same need as another product. The identification of possible substitute products or services means searching for products or services that can perform the same function, even though they may not appear to be easily substitutable. Pepsi and Coke are, therefore, not substitutes for each other. They are merely different brands of the same cola product. The real question here is: what is the product? If the product is colas, then a lemon-lime drink like Seven Up could be a substitute product. If the product is carbonated soft drinks, then other beverages which might perform the same function could be identified, such as coffee, tea, beer, or wine.

According to Miles and Snow, competing firms within a single industry can be classified as

four basic strategic types. Within each strategic group in which a company operates are key competitors. Many of these can be characterized as a strategic type: defender, prospector, analyzer, or reactor. Each of these types has its own combination of structure, culture, and processes to complement its dominant strategic orientation. If one can categorize a firm into one of these four types, then it will be easier to predict their likely reaction to future environmental changes. Defenders are companies with a limited product line

that focus on improving the efficiency of existing operations. (Toyota, Microsoft)

Prospectors are companies with fairly broad product lines that focus on product innovation and market opportunities (HP, SONY).

Analyzers are companies that operate in at least two different product-markets, one stable and one variable, and are able to adjust 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 piecemeal basis in an attempt to better adjust to environmental change

EFAS –Table: External Factors Analysis SummaryExternalFactors

(Societal/ Industry)

Weight(Impact

)0.0 -1.00

Rating(Respon

se)1 – 5

Weighted Score(Strateg

icEfficienc

yLevel)

Comments

Opportunities

O1

O2

O3

O4

O5

Threats

T1

T2

T3

T4

T5

TOTAL 1.00 5.00

Maytag: EFAS –Table: External Factors Analysis SummaryExternal

FactorsWeight

Rating

(Mgmt. Respons

e)

Weighted Scor

e

Comments

Opportunities

Economic integration of European Community (O1)

.20 4 .80 Acquisition of Hoover

Demographics favor quality appliances(O2)

.10 5 .50 Maytag quality

Economic Development of Asia(O3)

.05 1 .05 Low Maytag presence

Emergence of Eastern Europe(O4)

.05 2 .10 New markets (Will take time)

Trend to “Super Stores” (O5) .10 2 .20 Maytag weak in this channel

Threats

Increasing Govt. regulations (T1)

.10 4 .40 Well positioned

Strong US competition(T2) .10 4 .40 Well positioned

Whirlpool and Electrolux strong globally(T3)

15 3 .45 Hoover weak globally

New product advances(T4) .05 1 .05 Questionable

Japanese appliance companies(T5)

.10 2 .20 Present mainly in Australia

TOTAL 1.00 3.15

Corporate Performance Evaluation

Environmental Scanning

O

T

S

WVision

Mission

Goals

Objectives

STRATEGIESBusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation

STRATEGIC MANAGEMENT PROCESS

External Environment

Internal Environment

UNIT 4INTERNAL SCANNING: ORGANIZATIONAL

ANALYSIS•The analysis of a corporation's internal environment reveals the strengths and weaknesses of the firm. It includes an assessment of a firm's structure and culture, and its functional areas (such as marketing, finance, research & development, operations, human resources, and information systems )

Quite a number of techniques and concepts are available to analyze the internal environment of the organization.

According to the resource-based view of the firm, a company's sustained competitive advantage is primarily determined by its resource endowments that are often revealed through the competencies the firm possesses.( Dell, Toyota, Sony, Apple)

The internal competencies of a firm is best explained by Prahlad and Hammel’s concept of Core Competencies. Core competencies are the collective learning and coordination skills behind the firm's product lines. Core competencies are the source of competitive advantage and enable the firm to introduce an array of new products and services.

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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 processes and 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 may have its own competencies. E.g.. One division may have competency in “New product development” while another division may have competency in recruiting human resources

• Core competency - Collection of competencies that crosses divisional boundaries, is widespread within the corporation, and something that the corporation can do exceedingly well. E.g. Fedex competency 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 distinctive competency. E.g. General Electric’s distinctive competency in management development

Core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products by the various business units of the firm. For example, motors are a core product that can be used in wide array of end products. The business units of the corporation each tap into the relatively few core products to develop a larger number of end user products based on the core product technology. Some classic examples include Philip's expertise in optical media and Sony's ability to miniaturize electronics

The intersection of market opportunities with core competencies forms the basis for launching new businesses. By combining a set of core competencies in different ways and matching them to market opportunities, a corporation can launch a vast array of businesses.

There are three tests useful for identifying a core competence. A core 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 collection of discrete businesses. Core competencies serve as the glue that bonds the business units together into a coherent portfolio.

Core competencies tend to be rooted in the ability to integrate and coordinate various groups in the organization.

A firm’s distinctive competencies can also be identified using the VRIO framework in terms of a company’s value, rareness, imitability, and organization .The two basic characteristics of a company's resources and capabilities that determine the sustainability of its distinctive competencies are durability and imitability

What is the relevance of the resource-based view of the firm to strategic management in a global environment?

The resource-based view of the firm is an attempt to bring attention to the importance of a corporation's resources in strategic management. For much of the 1980s, Porter's concepts of industry analysis and competitive strategy dominated the field of strategic management to such an extent that many felt that industry structure alone seemed to determine a firm's profit potential.

Unfortunately, this emphasis on the industry tended to ignore a firm's core skills and competencies. What good is the knowledge that a niche in the market exists that can be reached through a focused differentiation competitive strategy if a corporation doesn't have the resources to implement such a strategy? Experts on the resource-based view suggest that differences in performance among companies may be explained best, not through differences in industry structure identified by industry analysis, but through differences in corporate assets and resources and their application.

The resource-based view of the firm is compatible with the traditional concepts of S.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 overboard again and tend to put too much emphasis on internal factors and not enough on external factors.

Nevertheless, the idea that the durability and imitability of corporate resources determine competitive advance is a very useful one.

The movement toward a more global environment simply accentuates the need to assess 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 competency (or less) in another location in the world

The Experience Curve Advantage (Bruce Henderson – BCG)

Based on the assumption underlying the BCG growth-share portfolio matrix, Henderson argues that the key to profits lies in market share. Results from PIMS research supports this notion. If a corporation is able to sell a very large number of new products by offering them at a very low price (actually below unit cost unless vast quantities are sold), it will gain a dominant market share and pre-empt competition by keeping the price too low for potential competitors to earn profits. This forms a formidable entry barrier.

The corporation successfully using the experience curve will earn large profits either as a star or when it eventually becomes a cash cow. Model-T Fords and Bic ball point pens are just two examples. The experience curve thus is a basis for using financial and operating leverage to achieve a low cost business-level strategy

The experience curve concept does have its limitations, however. For one thing, it does not consider that a corporation can be very profitable with very low leverage by occupying a dependable niche in the marketplace based upon some differentiating strategy such as quality or snob appeal. Rolls Royce automobiles and Maytag washers are just two examples of firms ignoring the experience curve by pricing at a cost above the market price and still achieving solid profits. Differentiation and focus strategies can be very successful without using the experience curve. Another limitation of the experience curve is that much of its success is based upon economies of scale. The use of computers and robots, however, negates much of the experience curve advantages

The Value ChainTo analyze the specific internal activities through which

firms can create a 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 the firm.

A value chain is a linked set of value-creating activities beginning with basic raw materials coming from suppliers, to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer. Industry value-chain analysis can identify which firms are strongest (and weakest) in each stage of the industry’s value chain. Assuming the firm under consideration operates at various stages of the industry value chain, a comparison with other firms at each stage can help identify a firm’s strengths and weaknesses. The systematic examination of an individual firm’s value activities in corporate value-chain analysis can lead to a better understanding of a corporation’s strengths and weaknesses - thus identifying any core or distinctive competencies. According to Porter, “Differences among competitor value chains are a key source of competitive advantage.”

Corporation’s Value Chain

Porter classifies value-chain into

Primary Value Chain Activities and Support Activities

Primary Value Chain Activities:

Inbound Logistics > Operations > Outbound Logistics > Marketing & Sales > Service

The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin

Inbound logistics include the receiving, warehousing, and inventory control of input materials.

Operations are the value-creating activities that transform the inputs into the final product. (Contd.)

Outbound logistics are the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc.

Marketing & Sales are those activities associated with getting buyers to purchase the product, including channel selection, advertising, pricing, etc.

Service activities are those that maintain and enhance the product's value including customer support, repair services, etc.

Support ActivitiesThe primary value chain activities described above are facilitated by supportactivities. Porter identified four generic categories of support activities, the details of which are industry-specific.

Procurement - the function of purchasing the raw materials and other inputs

used in the value-creating activities.Technology Development - includes research and

development, processautomation, and other technology development used to support the value-chain activities.Human Resource Management - the activities

associated with recruiting,development, and compensation of employees.Firm Infrastructure - includes activities such as finance,

legal, qualitymanagement, etc.

Support activities often are viewed as "overhead", but some firms successfully have used them to develop a competitive advantage, for example, to develop a cost advantage through innovative management of information systems.

Industry Vs Corporate Value Chain

The focus of value-chain analysis is to examine the corporation in the context of the overall chain of value-creating activities, of which the firm may only be a small part. In industry value-chain analysis, the value chain is split into two segments, upstream and downstream parts with the corporation under examination being the focal point. In analyzing the complete value chain of a product, note that even if a firm operates up and down the entire industry chain, it usually has a center of gravity - an area of primary expertise where its primary activities (and core competencies) lie. One goal of industry value-chain analysis is to identify where on the chain is the activity providing the greatest return on investment. This might be an activity which a corporation might want to expand when doing strategic planning.

In corporate value-chain analysis, each corporation has its

own internal value chain of activities. Each of a company’s product lines has its own distinctive value chain. Because most corporations make several different products or services, an internal analysis of the firm involves analyzing a series of different value chains. The systematic examination of individual value activities can lead to a better understanding of a corporation’s strengths and weaknesses - thus supporting strategic planning.

The Value SystemThe firm's value chain links to the value chains of

upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a competitive advantage depends not only on the firm-specific value chain, but also on the value system of which the firm is a part

Value chain analysis can be used at both the industry level and at the corporate level to assess a corporation's strengths (competencies) and weaknesses

Organizational Structure

The specific ways in which the value-chain is organized and managed result in a specific organizational structure. The basic organizational structures are simple, functional, divisional, SBU, and conglomerate

If a corporation's structure is compatible with present and potential strategies, it can be viewed as an internal corporate strength. If, however, the structure is not compatible with either present or potential strategies, it is a definite weakness and will act to constrain strategy formulation. For example, if a corporation is structured on the basis of function, this may be a weakness if the firm wishes to grow by acquiring other profitable corporations. In order to implement such a strategy, the strategy formulators may have to reorganize on a divisional basis.

To the extent that top and middle managers have no experience with such a structure, a lot of unforeseen problems can emerge which may seriously effect the success of the strategy

Organizational CultureCorporate culture is the collection of beliefs,

expectations, and values learned and shared by a corporation's members and transmitted from one generation of employees to another

Corporate culture, a collection of beliefs, expectations, and values shared by a corporation's members, acts to shape the behavior of people in a corporation. Since corporate culture has a powerful influence on the behavior of managers as well as other employees, it may strongly affect a corporation's ability to shift its strategic direction.

Acting in a manner similar to structure, to the extent that a corporation's culture is compatible with present and potential strategies, it can be viewed as an internal corporate strength. To the extent that it is not compatible, it may spell disaster for a strategic change in the implementation stage. A strategy which contradicts an entrenched culture may find itself being quietly (or not so quietly) sabotaged by the corporation's most loyal and competent employees.

Maytag IFAS –Table: Internal Factors Analysis SummaryInternal

FactorsWeig

htRatin

gWeight

ed Score

Comments

Strengths

Quality Maytag culture (S1) .15 5 .75 Quality key to success

Experienced top management(S2)

.05 4 .20 Know appliances

Vertical integration(S3) .10 4 .40 Dedicated factories

Employee relations(S4) .05 3 .15 Good, but deteriorating

Hoover’s international orientation(S5)

.15 3 .45 Hoover name in cleaners

Weaknesses

Research & Development (W1)

.05 2 .10 Slow on new products

Distribution channels(W2) .05 2 .10 Superstores replacing small dealers

Financial position(W3) .15 2 .30 High debt load

Global positioning(W4) .20 2 .40 Hoover weak outside UK and Australia

Manufacturing facilities(W5) .05 4 .20 Investing now

TOTAL 1.00 3.05

How to create the SFAS Matrix?

(Strategic Factors Analysis Summary Matrix)IFAS TABLE

SFAS MATRIX

EFAS TABLE

Maytag IFAS –Table: Internal Factors Analysis SummaryInternalFactors

Weight Rating

Weighted

Score

Comments

Strengths

Quality Maytag culture (S1)

.15 5 .75 Quality key to success

Experienced top management(S2)

.05 4 .20 Know appliances

Vertical integration(S3) .10 4 .40 Dedicated factories

Employee relations(S4) .05 3 .15 Good, but deteriorating


.15 3 .45 Hoover name in cleaners

Weaknesses

Research & Development (W1)

.05 2 .10 Slow on new products

Distribution channels(W2)

.05 2 .10 Superstores replacing small dealers

Financial position(W3) .15 2 .30 High debt load

Global positioning(W4) .20 2 .40 Hoover weak outside UK and Australia

Manufacturing facilities(W5)

.05 4 .20 Investing now

TOTAL 1.00 3.05

Maytag EFAS –Table: External Factors Analysis SummaryExternal

FactorsWeig

htRatin

gWeight

ed Score

Comments

Opportunities


.20 4 .80 Acquisition of Hoover


.10 5 .50 Maytag quality

Economic Development of Asia(O3)

.05 1 .05 Low Maytag presence

Emergence of Eastern Europe(O4)

.05 2 .10 New markets

Trend to “Super Stores” (O5)

.10 2 .20 Maytag weak in this channel

Threats

Increasing Govt. regulations (T1)

.10 4 .40 Well positioned

Strong US competition(T2) .10 4 .40 Well positioned


15 3 .45 Hoover weak globally

New product advances(T4) .05 1 .05 Questionable


.10 2 .20 Present mainly in Australia

TOTAL 1.00 3.15

Maytag SFAS –Matrix: Strategic Factors Analysis SummaryKey StrategicFactors

Weight

Rating

Weighted Scor

e

Short

Duration

Intermediate

Dration

Long Duration

Comments

Quality Maytag culture (S1)

.10 5 .50X

Quality key to success


.10 3 .30 X Hoover name in cleaners

Financial position(W3)

.10 2 .20 X High debt load

Global positioning(W4)

.15 2 .30 X Hoover weak outside UK and Australia


.10 4 .40 X Acquisition of Hoover


.10 5 .50 X Maytag quality

Trend to “Super Stores” (O5)

.10 2 .20 X Maytag weak in this channel


15 3 .45 X Hoover weak globally


.10 2 .20 X Present mainly in Australia

TOTAL 1.00

3.05

STRATEGIC MANAGEMENT

Business

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