DIAGNOSIS

1
DIAGNOSIS
2
Purpose of Diagnosis

• To develop understanding plus a set of critical
  issues
• Usually problems or threats, sometimes
  opportunities
• Small number - to provide focus
• Issues that should be central and vital to top
  management
• Both short- and long-range considerations
• Framed as issues, rather than solutions

3
Diagnosis Overview

• Current mission, strategic objectives,
  strategies
• Performance
• Scan analyze external environment
• Task (Competitive) environment
• Societal (General) environment

4

• Scan analyze internal environment
• Need to break up into manageable pieces
• Two main ways
• Value chain analysis
• Functional area analysis
• Critical success factors
• S.W.O.T. table
• Set of Critical Issues

5
Scan Analyze External Environment
6

• Have to be selective and smart in scanning
• Competitive Environment
• Porters 5-force model of the industry
  competitive environment
• General Environment
• Technological
• Political-legal
• Economic
• Social-cultural
• Stakeholders (within above and others)

7

• "Awareness of the environment is not a special
  project to be undertaken only when warning of
  change becomes deafening.
• (Kenneth R. Andrews)

8

• "It is not the strongest of the species that
  survive, nor the most intelligent, but the ones
  most responsive to change.
• (Charles Darwin)

9

• The key point is that an organization needs to be
  in tune with its often turbulent external
  environment
• Since there is so much happening in the external
  universe, we have to be selective and smart in
  scanning
• "Things are always different -- the art is
  figuring out which differences matter." (Laszlo
  Birinyi)
• For a given industry (sometimes is country,
  industry, company-specific), certain aspects of
  the external environment tend to be more
  important and should receive primary attention
• It helps to scan initially fairly quickly, then
  zoom in on areas where something of importance
  seems to be happening

10
Key Strategic Questions

• What are the industry's dominant features,
  especially economic ones?
• What is competition like and how strong are each
  of the competitive forces?
• What is causing the industry's competitive
  structure and business environment to change?
• Who are the major competitors and what are their
  relative competitive strengths?
• What strategic moves are rivals likely to make
  next?
• What are the key factors for competitive success?
  
• Is the industry attractive and what are the
  prospects for above-average profitability?

11
Porters 5-Force Model

• Rivalry Among Existing Firms
• Potential New Entrants
• Substitute Products or Services
• Bargaining Power of Suppliers
• Bargaining Power of Buyers

12
General Environment

• Although usually only a few factors and trends
  are important, it is important to identify them
• Is useful to think of four main aspects of the
  general environment
• Technological
• Political-Legal
• Economic
• Social-Cultural

13
Stakeholder Analysis

• What is a stakeholder?
• We need to be selective, consider MAJOR
  stakeholders
• Power
• Interest

14

• Identify topic (usually a change) for analysis
• Identify major stakeholders
• Determine their degree of support or opposition
  to the action or change
• Assess the balance of support
• If not sufficient, work on changing
• Decrease larger opposing forces
• Increase supporting forces
• Ideas re how to do this?

15
Where We Are

• Diagnosis overview
• Scan analyze external environment
• Scan analyze internal ?
• Mission, objectives, strategies, performance
• Functional areas
• Financial
• Marketing
• Production/operations
• Technology
• Organizational

16
Mission, Objectives, Strategies

• Identify and evaluate
• Consistent
• Current
• Appropriate
• Implemented well
• Effective (performance vs. objectives)

17
Internal Diagnosis

• In either value chain or functional area
  analysis
• Subdivide organization into several segments
• For each, identify what is being done, how well
  it is being done, strengths and weaknesses
• Examine linkages and potential synergies among
  various value chains their segments, and/or
  among functional areas
• Look for opportunities to improve and create
  sustainable competitive advantages

18

• Value chain and functional area analysis differ
  primarily in the way of subdividing the
  organization (to aid analysis)

19
Value Chain Functional Areas

• Inbound logistics
• Operations
• Outbound logistics
• Marketing sales
• Service

• Production/operations
• Marketing

• Human resource mgt.
• Infrastructure
• Procurement
• Technology

• Organizational
• Financial
• Technology

20
Financial
21
Financial Diagnosis

• Do not need exotic skills for our purposes
• Do need to do more than generate numbers and
  comment on trends ...need to
• EVALUATE DRAW CONCLUSIONS

22
Analyze Historical

• Have initial data (balance sheets income
  statements for several years)
• Need to develop conclusions about financial
  health of organization
• Are there significant strengths or weaknesses?
• Implications for strategy formulation
  implementation?
• How can we get from data to conclusions?

23

• Calculate some financial ratios
• Analyze trends
• Compare with other companies or industry
• Develop and state conclusions
• Overall financial condition
• Specifics, especially problems

24
Also Look at Future

• Primarily to estimate needs and potential sources
  of strategic funds
• Can get perspective even from a simple forecast
  model
• Could use Index of Sustainable Growth
• What are major sources of additional financing?

25
Marketing Functional Area
26
Marketing Diagnosis

• Four Ps
• Product
• Price
• Place
• Promotion
• Product portfolio analysis

27
Marketing Growth Options
28
Positioning Competitive Strategy
29
Learning About a Model

• A model is a tool, something to help you do some
  aspect of strategic management
• WHAT does the model help you do?
• What FACTORS or variables does it consider?
• HOW do you use the model?
• Limitations, etc.
• Note that a picture of the model is less important

30
Product Life Cycle
31
Production/Operations
32
Production/Operations

• Often neglected
• Much of COGS here
• Also large effects on competitive position

33
Key Strategic Decision Variables

• Locations capacities of facilities
• Planning of output (what, where, when, cycles,
  continuous/intermittent...?)
• Flexibility (economies of scope)
• Efficiency
• Labor/capital intensity (operating leverage)
• Inventory levels (raw, WIP, finished goods)
• Quality

34
Experience Curve
35
Typical Price/Cost Pattern
36
Technology
37
Technology (RD)

• Tie to technology developments in external scan
• Note successive S-curves (product performance vs.
  RD expenditures)
• Key to competitiveness is when to shift resources
  to different technology

38
Major Strategic Variables

• Technology strategy
• Technology position
• How we obtained maintain position
• Buy or build
• Funding levels
• Basic/applied, product/process
• Application
• Technology transfer
• Trends, threats, what competitors are doing

39
Organizational
40
Key Organizational Factors

• Top management resources
• BOD situation
• Employee (labor) relations
• Structure (change needed?)
• Reward systems
• Culture
• Information systems
• Human resources systems...

41
Key Success Factors

• In any industry there are certain key variables
  that significantly affect competitive positions
• Vary by industry
• Vary with life cycle of an industry
• For example, technology early in PC industry, now
  price (cost efficiency)

42
Finish Diagnosis

• SWOT table (list)
• Critical Issues
• Central vital, typically 2-4
• Usually problems or threats, sometimes
  opportunities
• Both short- and long-range considerations
• Framed as issues, rather than solutions

43
(No Transcript)