Management Audit and Environmental Analysis

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Management Audit and Environmental Analysis

• Geoff Leese October 2005 Revised September 2006,
  July 2007, August 2008, August 2009

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SWOT analysis

• Strengths
• Weaknesses
• Opportunities
• Threats

Internal (Management audit)
External (Environmental Scanning)
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Management audit

• The 7-S model
• Value chain analysis
• Network analysis

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McKinseys 7-S Framework

• Strategy
• Structure
• Systems
• Shared Values
• Staff
• Skills
• Style

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an approach to organising

• aid to building a cohesive strategy
• all equally important
• 7 interdependent variables
• change one, impacts others
• use this to evaluate strategy developments
• soft is harder to measure
• good for capturing importance of the links

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Value chain analysis (Porter)

• Views the organisation as a chain of
  value-creating activities.
• Must create sufficient value to exceed their cost
  thus generating profit (or at least not
  generating loss!)
• Primary and support value chain activities

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Primary value chain activities
Operations
Inbound logistics
Sales and marketing
Outbound logistics
Service
Any or all of these can be important in a given
scenario sometimes defining them is not so
simple!
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Support value chain activities

• Procurement
• Technology development
• Human Resource Management
• Infrastucture management
• Legal, financial, QA, estates and buildings etc

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Value chain analysis

• Identify the activities and process flows
• Identify linkages between activities
• Identify ways to optimise the value chain
• Outsourcing?
• Involving the customer?
• On-line booking
• Self-assembly furniture
• Involving suppliers?

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Organisational network analysis

• Social network analysis applied to organisations
• Maps nodes (people, groups, functions) and the
  interactions between them (relationships or
  flows)
• Measures centrality of nodes (their importance)
  using mathematical criteria

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Some ONA criteria

• Degrees (number of direct connections)
• Betweenness (nodes that connect other nodes )
• Closeness (short paths to many nodes)

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An ONA diagram
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Environmental scanning(1)

• Macro environment
• PEST,SLEPT,STEP
• Micro-environment
• Competitors, suppliers, distributors, customers
• Methods
• Ad-hoc (usually in response to crisis!)
• Regular scheduled
• Continuous

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Macroenvironmental scanning

• PEST (STEP, SLEPT) analysis
• Political (includes legal!)
• Economic
• Social (includes Green)
• Technological

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Political factors

• Taxation
• Employment/Health and Safety law
• Regulation/deregulation
• Trade restrictions and tariffs (or lack of them!)
• Political stability

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Economic factors

• Connected to political ones
• Economic cycle
• Growth or recession?
• Interest rates
• Inflation rates
• Exchange rates

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Social factors

• Demography
• Age distribution
• Geographical distribution
• Cultural norms
• How we live

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Technology factors

• Rate of technological change
• Automation
• Technology incentives
• Emerging technologies
• Levels of RD activity

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Microenvironmental scanning

• Competitor analysis
• Competitor array
• Competitor profiling
• Consumer analysis (market research)
• Product innovations

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Competitor array example
Should we include ourselves?
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The SWOT matrix
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SWOT Strategies

• Strength-Opportunity
• Make use of strengths to grasp opportunities that
  fit them
• Strength-Threat
• Identify ways to use strengths to minimise
  external threats
• Weakness-Opportunity
• Overcome weaknesses to pursue opportunities
• Weakness-Threat
• Prevent weaknesses from encouraging threats

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Summary

• SWOT analysis
• Assess and analyse strengths and weaknesses
• Seven S
• Value chain
• Organisational network analysis
• Assess and analyse opportunities and threats
• PEST analysis
• Competitor analysis
• Market research
• Devise strategies based on all four

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Further reading

• Bennett Chapter 5
• Johnson and Scholes chapters 3 and 4
• For ONA
• http//www.orgnet.com/sna.html
• General strategic management stuff
• http//www.geocities.com/WallStreet/District/6592/