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MGST 391 (29)
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Chapter 6.docx

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Department
Management Studies
Course
MGST 391
Professor
Ahmad Ali Sohrabi
Semester
Winter

Description
Chapter # 6 : SWOT Analysis ad gap analysis Corporate Appraisal Corporate appraisal (where we are) o Analyzing external environment i. SLEPT analysis ii. Porter’s 5 forces model iii. Scenarios o Analyzing internal environment (Situation analysis/Position audit) i. Resources audit ii. BCG and GEBS matrices iii. Value chain analysis iv. System structure o SWOT Analysis o Gap analysis Corporate appraisal is assessment of SWOT in relation to internal (SW) and external (OT) factors affecting organization to establish long term plans. OT Analysis---Analyzing external broad environment:  Social factors  Legal factors  Economic factors  Political factors  Technical factors What Social factors affect:  Changing values and lifestyle  Changing pattern of work and leisure  Demographic change Why social factors are considered: • Stakeholders are members of society--assessment of their values and beliefs • Good (ethical) reputation • Avoid restrictive legislation • Change = opportunities Legal factors: o Health and safety legislation o Employment laws o Environmental legislation o Information about performance. Economic key forces affecting organizations:  Economic Growth  Interest Rates and Tax rates  Availability of Credit  Inflation Rates  Govt. fiscal policies (taxation, govt. spending, borrowing and repayment) and monetary policies (control of money demand and supply through rates)  Foreign Exchange Rates  Foreign Trade Balances  Consumer income, debt and spending  Govt. Subsidy  Unemployment rate International economic issues: o Extent of protectionist measures o Comparative rates of growth, inflation, wages and taxation o The freedom of capital movement o Exchange rates o Economic agreements Exchange rate is the rate at which a national currency exchanges for other national currency. Determinants are:  Demand and supply of currencies in foreign exchange market (Floating exchange rate)  Govt. (Fixed exchange rate)  Synthesis of above two (Managed exchange rate) Types are:  Spot exchange rate (rate set for immediate delivery of a currency)  Forward exchange rate (rate set for future exchange of a currency)  Closing rate (Spot exchange rate at Balance Sheet date)  Political factors:  Type of Govt.  Stability of Govt.  Govt. attitude i.e. privatization or nationalization  Amount of bureaucracy  Pricing, dividend, tax, employment issues Political risk is the risk that political factors will affect an organization e.g. war, corruption, nationalization, political instability. Jeannet and Hennessry developed a checklist to assess political risk: 1. How stable is Political system. 2. How long will govt. remain in power. 3. How strong is govt.’s commitment to specific rules of game. 4. If present govt. is succeeded, how specific rules of games would change. 5. What would be the effect of change in specific rules of game. 6. In light of these effects, what decisions and actions should be taken now? Technological factors: o Change in production techniques o Invention and innovation OT Analysis ---Analyzing external specific and direct environment: (Porter’s 5 forces model) i) When costumers have powers: •Small number of customers •They make high volume purchases •Products they are buying are undifferentiated •Alternative sources of supply are available (substitute or switching) ii) When Suppliers Have Power: •Small number of suppliers •Few substitutes exist •Suppliers are not dependent on the buyer for a lot of their sales •Suppliers have differentiated their products •It is costly to switch suppliers iii) When Rivalry Among Existing Competitors Is Intense: •Slow industry growth •High fixed costs (plants, machinery, outlets) •Undifferentiated products •A large number of competitors •High exit barriers (what you lose if you leave the business) •Small changes in market share have a big pay-off iv) Barriers That Block New Entrants •Economies of scale •Large capital requirements •Product differentiation •High switching cost •Limited access to distribution channels •Some government policies and regulations •Other advantages that are hard to duplicate such as patents, great locations, subsidies, partnerships, etc. •History of aggressive retaliation toward new entrants v) Indirect Competitors/Substitutes •Close substitutes place a ceiling on the price that can be charged for a product or service •Close substitutes also set indirect performance comparisons •Main product is sensitive to price of substitute. Responding to the Organization/Marketing environment:  Companies can passively take environment as uncontrollable and they must adapt to.  Companies can take environmental management perspe
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