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Strategic Analysis

Strategic Analysis. Wilson B. Gr ä b May 19, 2009 Hampton Roads Chapter. What is Strategic Analysis?. Strategic Analysis is a process through which industries are analyzed to determine their potential for long-term sustainable profitability and the factors that determine it.

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Strategic Analysis

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  1. Strategic Analysis Wilson B. Gräb May 19, 2009 Hampton Roads Chapter

  2. What is Strategic Analysis? Strategic Analysis is a process through which industries are analyzed to determine their potential for long-term sustainable profitability and the factors that determine it. Strategic Analysis is also a process by which a supplier’s competitive advantage within that industry may be determined Application of Michael Porter’s Five Forces Model is one form of Strategic Analysis

  3. Porter’s Five Forces Model Identify the competitive structural features of an industry/supplier and how they are influenced by five key forces: Threat of entry Threat of substitution Bargaining power of buyers Bargaining power of suppliers Rivalry among competitors

  4. Threat of Entry • Switching Costs • Employee re-training • Cost of new equipment • Disposal of old equipment • Termination costs • Psychological costs • Impact on Bank customers Are acquisitions occurring due to consolidation or diversification? What customer loyalties exist (i.e. brand recognition)? Does the company possess specific know-how, IP, etc. that cannot be easily replicated? Banking Relationships Existing Supplier Relationships

  5. Threat of Substitution How are other institutions like us doing it? Price/Performance trade-offs What are other alternatives to making this purchase? Alter business requirements Outsource (non-core competency Redesign Automate Strategic ventures Off-shoring

  6. Bargaining Power of Buyers (US) How does the product/service fit into our strategic plan? Is the product/service required for us to do business? Does the product add value? How? What percentage of the company’s overall business would WE be?

  7. Bargaining Power of Suppliers Is the product specific to the financial services industry? How is the company’s ability to perform reliant upon the performance of its suppliers? Does the company have a unionized labor force? What is the availability of raw materials? How variable is their cost?

  8. Rivalry Among Competitors • How many players are there? • Highly concentrated? • Dominated by one or few? • How are competitors jockeying for position? • Price wars • Advertising wars • New product innovations • Increased customer service What is the geographic distribution of the players? What is the growth trend in the industry? Maturity level? To what extent is the business driven or limited by capacity? What is the financial vibrancy of the industry? What are the revenue/cost generators? Where is the product in its life-cycle?

  9. Why do Strategic Analysis? This type of analysis gets us thinking more strategically about our engagements and ADDS VALUE to our client by offering possible alternatives that could be better, faster, more cost effective or pose less risk to the Bank.. Understanding the five forces gives us powerful information in our negotiations with suppliers, since many of these areas impact TOTAL COST OF OWNERSHIP

  10. Key Considerations Who does Strategic Analysis? When to do Strategic Analysis? How to do Strategic Analysis What to do with Strategic Analysis?

  11. Next Steps For Your Company Design a proposed process and methodology Identify the leverage points in the Supply Chain Capturing the knowledge gained Incorporating Strategic Analysis into the Sourcing process Define requirements based on leverage points Transfer risk to supplier

  12. Questions

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