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BU111 Sucess Factor+External Analysis.docx

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Sofy Carayannopoulos

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Chapter 1---Course Model & Environmental Analysis Models Critical Success Factors: Why important, how to approach, how they connect to each other. (1) Achieving financial performance: • How: generating income/revenue, focus on financial growth of the company, so care about Profit & Cash Flow is very important. • Why: required for business to be sustainable, if business can’t make money, the company can’t survive. Sometimes, when the company is gaining the profit, they may not have enough money to pay back the debt in the short period of time • How shareholders feel, in term of stock price (2) Meeting customer needs: • How: reliability, variety, timeliness o Participating, then can keeping good relationship with customers o Understand what customers needs o Building reputation o Following the trend o Multiplying effect (customers may tell something positive about the company to their friends, build loyalty, therefore market share becomes larger.) • Why: customers provide revenue and sales, meeting customer needs and they will tell other people, then the company achieves the financial goals. • EX: RIM doesn’t meet customer needs, but Apple does, so they steal the customers from RIM (3) Building quality products and services: • How: quality assurance, quality is based on customer’s needs. • Why: o Encourages customers to buy products/services, o Build reputation o It doesn’t have to be the best quality, but it should values the money, so consumer willing to pay. • So that we can achieves the financial goals, build quality based on customer’s need, and gain customer loyalty (4) Encouraging innovation and creativity: • How: training programs, incentives, open forum, • Why: o Business should be constantly changing and adapting to environment. o People need to know where the tech goes, o If the company in the leading position, but if customer see other product is more better, then you can’t meet customer needs, o Keep on top of the market. • Putting more money in development process of products • Customer needs are always changing, so companies need to keep satisfy customer needs, target customer’s interest • Work more efficiently and reduce the cost of production (5) Gaining employee commitment: (most important, “people” is the foundation) • How: incentive plans, training, participate in management decision making, offers better working environment, provide more benefits to employee • Why: o Employees are driving force behind a business o Happy employees and productive employees so they can make the creative product o High qualify product so you can meet customer needs • For employees, Engaging & Committing are important • Ex. Even though the company has the best machine in the world, by the end of the day the machine is actually used by the employees. • Comes out with new/better idea, more innovate and creative • Deliver better service, in order to meet their need • Work harder for the company build better product and more efficiently • Employee stay with the company, prevent brain drain, and reduce the cost of training new members (6) Creating a distinctive competitive advantage: • How: adding value, something you have but others don’t, be valuable, trying to be unique and competitive in the market by attracting customers • Why: o Encourage customers and out compete competitors. o Set yourself apart from your competitor • Good employee, better quality/service, creative and meeting customer need better can all be a competitive advantage • Adding value to your product attracts costumer, so they do not go to competitor, and achieve finical performance Diamond-E Framework (internal analysis) 这这这这 key variables How to satisfy the factors to your company? Help identifies the most important variables and the relationships between those variables. A manager would use this when designing a new strategy or on an ongoing basis they use this to revise their existing strategy. By achieving the D-framework provide a link from external environment, pull into strategy and cooperate the entire internal environment. Double arrow means they can affect each other. It identifies key variables to be considered in strategic analysis: • Management- conservative or risk taking • Choices must depend on what resources are available • Organization to management preferences- managers may have certain ideas but must follow set culture in which the organization permits Management Preferences • Acknowledging that managers are human beings and that they have natural bias, different approaches, different desired outlooks. • The better aligned the management preferences are with each other/strategy, the more successful the strategy will be. • Culture of the organization • Managers decide the 3 main parts of resources. • But the employees may don’t like the manager’s plan, risk management Organization • Structure of the company • How is the organization structured, what are the abilities of the organization and what is the culture like (leadership style). • What the leadership looks like. • The organization is very well suited to certain strategies and not so suited to others. • Capabilities, are people trained what we want to do Resources • 1. Human Resource component (what kind of people do you and what kind of skills they have). • 2. Capital Resources (assets). • 3. Financial Resources ($$). • Leaders can effect resource (e.g. leader’s strength can be a resource of the company) • What we have determines the culture of the organization and the capability of the company. • Influence what we can do. (Strategies) Strategy-Environment Linkage Creating a strategy based on what’s going on in the environment • Your plan for competes. • What opportunities should you pursue, this should define what opportunities you should avoid. Strategy is the critical link, connects internal resources and things happening outside the business. It has to fit into both. • Determine what resource needs, organization capability and management preference. • Any variable can drive or constrain strategy Principle Logic: • Consistency (strategy have to consistent with internal variable) o The goal is to have all factors above aligned with one another- consistency between variables-external/internal environment must be aligned. o Internal leads to performance. Each variable impacts and is impacted by the rest o Importance of consistency between variables • Alignment (strategy have to aligned with external environment) o Externally ensure strategies right for the environment o An "aligned" organization will be operating at peak of effectiveness. o Absolute alignment is not realistic Warning: Environment always change, requires constant scanning of alignment and consistency. Examples: • P&G Strategy in 2000 (inconsistency) o The new CEO has aggressive leading style. He wants to earn more profit, so he decides to design more new products and brands. In the end, he failed. The new CEO didn't consider of the capabilities of P&G. the management team don’t work well. The external and internal environments were not aligned. The strategy bigger than their recourse supported. • Ikea Strategy (consistency) o Affordable furniture products, management team works well How to do an External analysis: (What, How, general and specific env.) PS: Before assessing any strategies we need to have a thorough understanding of the environment. Look for data, statistics, trends, forecasts, and expert opinions 1) What: Process of scanning and evaluating the external environment 2) How: Managers determine opportunities (positive external trends or changes) and threats (negative external trends or changes) 3) Firm face multiple environment: • General environment; affects all business o PEST model: (is this environment is more opportunity or thread of my company?) Consider political, economic, social/demographic, and technological factors. Identify general trend and changes. • Specific environment; affects industry participants o Porter’s Five Forces: (Buyers, sellers, potential entrants, substitutes, and rivalry among the existence firm.) Analyzing five important sources of competitive pressure and intensity. Predicting profitability of industry Benefit of External Analysis: 1) Making managers proactive instead of reactive (predict environment around you) 2) Providing information used in planning 3) Helping organization get needed resources 4) Helping organization cope with uncertainty 5) Improves consistency and performance 6) Manager determines what is opportunity and threat to the company Challenges of External Analysis: 1) Forecasts and trend analysis may be imperfect 2) Rapidly changing environment hard to keep up with 3) Time consuming PEST- Political/Legal(5) Elements and How: • Laws, regulations (rules of operation): o Impact on business: Effect how a business can operate (i.e. wages, laws, product labeling) o Governments create incentives, they regulate and they play many roles.  In Canada there are several regulations as to what the product label must look like (i.e. cigarettes), minimum wages, laws for banking industries, laws about how many taxis can be in a city, etc. • Tax policy (quotas, imports and exports): o Impact on business: Create incentives, cost faced by firms o Taxes are in place to get money for the country. o The government can tax things more than others if they don’t want people doing something or follow their strategy. (i.e. high taxes on tobacco) • Trade agreements or conditions (elements of protection): o Impact on business: import and export, protect domestic manufacture from foreign competitor. o Canada applied tariffs (taxes) on cars that are imported from outside of Canada. This helped out Canadian car manufactures. This made TOYOTA set up a factory here in Canada. Tariffs either boost their own manufacturing rates or make outside companies come to Canada to produce their goods. • Political system o Impact on business: determine the support and freedom a company will have. o Canada is a relatively business friendly country, two main types-socialist: business is owned by government, capitalist country-more open market • Political stability o Impact on business: political environment cause strategy altered o Companies would rather to invest money into countries which has a "stable" environment o Companies don’t want to build factories in countries that are politically unstable. Government can create incentives, constraints((((, or support/bail out when needed. Affects uncertainty, risk, and costs faced by firm PEST-Economic(6) Elements: • Economic growth: o GDP这including the profit of all the businesses
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