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Format for Strategic Analysis Report Strategic analysis of: _______________________________________ (case or company)

EXTERNAL ENVIRONMENT MACRO ENVIRONMENT Political:  Regulation  Trade barriers  Change in tax laws/incentives  Other… Summary Legal:  Anti-trust  Equal pay/employment  Environmental protection  Health & Safety  Other… Summary Economic:  Interest Rate  Recession (aggregate demand)  Energy prices  Other… Summary

MICRO ENVIRONMENT Industry – Competitive Analysis: Define the (primary) industry in which this firm competes Key segmentation variables: Identify the industry segment in which your firm competes

Power of suppliers: Factors affecting relative bargaining power (high or low threats?)  What proportion of the value of our product(s) is provided by suppliers? Cost of Goods Sold / Sales

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Price sensitivity Cost of purchases relative to total costs Profitability of suppliers vs. buyers Importance of the product to the quality of buyer’s quality Bargaining Power Size and concentration of buyers relative to suppliers Buyer’s switching costs Buyer’s information Buyer’s ability to backward vertically integrate Risk of owning obsolescent technology Related experience in making the supplies Is owning non-complementary assets required?

Summary

Power of buyers: (high or low threat?)  Factors affecting relative bargaining power Price sensitivity: Size of purchase(s) relative to total discretionary income of the buyer Profitability of buyers vs. suppliers Importance of the product to the buyer’s quality requirements  Bargaining power Size of the purchase relative to the supplier’s total sales Buyer’s switching costs Buyer’s information Buyer’s ability to backward vertically integrate Risk of owning obsolescent technology / locations Related experience with the product Is owning non complementary assets required? Summary

Potential new entrants: (high or low threat?)  Factors creating barriers to entry in industry Capital requirements Economies of scale Economies of scope Excess plant capacity Access to channels of supply/distribution Government and legal barriers Other…  Factors creating barriers mobility Identify resources which prevent other firms in your industry from entering your segment Summary Potential substitutes (high or low threat?)

Examples of most likely substitutes for this industry or segment Factors affecting demand elasticity Product’s proportion of total cost Relative price performance differences (differentiation) Switching costs Time required learning to use new product Ease of obtaining product, parts, and repair/service Other Summary  

Level of rivalry: (high or low threat?)  Factors affecting rivalry power Similarity of strategies Geographic regions covered Price ranges  Concentration ratio/relative market share Horizontal integration (merging with competition) Unused capacity/demand growth Barriers to exit Summary SUMMARY: Which of the five forces is our greatest strength, greatest threat?

INTERNAL ENVIRONMENT BUSINESS STRATEGY Organizational Goals/Mission: 

Is the firm successful? Describe the organization’s mission What are the organization’s values? What are the organization’s goals? Is the firm’s performance meeting or exceeding the goals of the firm?

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Which is the dominant goal currently: growth, profitability, survival? To what extend has the firm been successful in achieving that goal?

SUMMARY of the internal environment

COMPETITIVE ADVANTAGE: (what is the profit margin?) Differentiation:  Describe the ways in which the firm differentiates its products / services.

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For each of the major differentiation advantages, estimate how vulnerable the differentiation tactics are to imitation/substitution: o Durability Obsolescence Depletion of the resource o Mobility Transaction costs Firm-specific resources o Replicability Causal ambiguity / Uncertain imitability Organizational routines o Appropriability Relative bargaining power Embeddedness of resources

Summary Low Cost:  Describe the ways in which the firm keeps its costs competitive Keep the entire activity-cost chain in mind Estimate how vulnerable the low cost tactics are to imitation / substitution o Durability Obsolescence Depletion of the resource o Mobility Transaction costs Firm-specific resources o Replicability Causal ambiguity / Uncertain imitability Organizational routines o Appropriability Relative bargaining power Embeddedness of resources Summary 

SUMMARY of competitive advantage

VOLUME EXPANSION STRATEGY: (what is the market share?) (Discuss in terms of the Product-Market Matrix) Market Penetration (same product, same market)

Identify new customers in current market Selling more to current customers Market development (same product, new market) Geographic expansion Product development (new product, same market) Narrow vs. Board segment scope Similar key success factors Economies of scope Add-on / complementary products Diversification (new product, new market) Potential for coinsurance effect (non-core business) Potential as future “core” business (escape route) Growth Potential Barriers to entry BCG matrix: resource allocation assessment

STRATEGIC PROFIT MODEL Overview Briefly describe what you found in each section Liquidity (and Coverage): (is survival at stake?) Are we able to meet our current obligations? If not, this is our number one concern! Where are we most vulnerable? Summary Operating Efficiency How efficiently are we managing our resources? ROA, Sales/PE, Sales/Employees, Sales?WC, ect. What are our strengths? Relative to past performance Relative to competitors/industry What are our weaknesses? Summary? Leverage Is our capital structure helping or hurting us? Summary

STRATEGIC PERFORMANCE ASSESSMENT Performance Indicator Return on equity

_Year_ ______

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Industry ______

Net Profit Margin Sales Growth Market Share

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Bankruptcy Prediction (Z-score)

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(Be sure to include a discussion of the data above)

REVIEW AND SUMMARY OF RECOMMENDATIONS Should summarize all previously mentioned recommendations Each recommendation should be tied clearly to one of the following: 1. Weaknesses: a current problem 2. Vulnerabilities: will be a problem if not addressed 3. Opportunities: new tactic, a bit risky, but targets high rewards

ADDITIONAL NOTES Strong or Weak, Opportunity or Threat: When beginning a discussion, take a stand (ex: this is a strength) Explain why: Relative to others Trend is improving / worsening Summary: Identify the important items in the group Why are these important?

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