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Wilfrid Laurier University
Leanne Hagarty

Critical Success Factors • Achieving financial performance (profits) o It is essential for the growth and expansion of the business o Creating profit is essential for a business to be successful • Meeting customer need (understand customer and what they need) o Buy pleasing your customer with products they need not only do you guarantee sales but also brand loyalty and recognition because if your product is good, people will continue to purchase that product • Building quality products and services (understand your customer and make the quality based on that make it consistent) o Good quality is essential for brand loyalty and recognition o Better quality products will make your business better than your competitors business • Encouraging innovation and creativity o Innovation is essential so that the business can run for many years. o New products and bettered products are essential, so that customers continue to purchase products • Gaining employee commitment o If employees are happy than they will be less likely to leave and will be more motivated to work harder and better the business o This helps insure that all products are made to quality • Creating a distinctive competitive advantage o It is essential to create a unique selling point so that you can differentiate yourself from the competitors o Through r&d it is more likely for your company to have this competitive advantage because you have more resources to build and provide better products or services. All the critical success factors are essential for a business and they all require the help of the other to be successful. To create profit a business needs to have a product or a service that allows them to be uniqe from their competitors, so that customers will purchase their products. This is done through producing quality products and always innovating so that you are always one step ahead of the competitors. Employee commitment is essential for quality products because these are the employees that care. Diamond-E Framework* • Identifies key variables to be considered in strategic analysis • Management Preferences: managers in an organization make the decisions, natural biases and desires push them to make decisions • Organization: culture, leadership style, capabilities, and structure • Strategy: a company’s statement of what opportunities they are pursuing; will determine needed resources, organizational capabilities, and management preferences; any variable can either drive or constrain strategy • Resources: three main resources are human, capital, and financial • Environment: outside world is always changing • First task- deal with strategy- environmental linkage • Principal logic: consistency or alignment • Internal consistency leads to performance • External consistency ensures strategy is right for the given environment • Challenge- environment is always changing ExternalAnalysis • Process of scanning and evaluating the external environment • How managers determine opportunities (positive trends or changes) and threats (negative trends or changes) • General Environment (effects all businesses) o PEST model is used to conduct the analysis, which considers political, economic, social/demographic, and technological factors o Identifies general trends and changes • Specific Environment (affects industry participants which applies to your business) o Porters five forces are used to conduct the analysis, it includes five important sources of competitive pressure and intensity; predicts profitability of industry o Look at data, statistic, trends, forecasts and expert opinions Benefits of ExternalAnalysis • Makes manager proactive • Provides info used in planning • Helps organization get needed resources • Helps organization cope with uncertainty • Improves consistency and performance Challenges of ExternalAnalysis • Forecasts and trend analyses imperfect • Rapidly changing environment hard to keep up with • Time consuming PEST • Political, Economic, Social, Technology • Three most important issues facing Canadian business: o Value of Canadian dollar o Skilled labour shortage o Natural/ physical environment • Question to answer for PEST o Do the economic conditions support my business? o What legal protection do I have or laws do I have to consider? o What demographic and social trends affect my business and how? o What technological forces affect me now and in the future? How do they assist or constrain? o What opportunities or threats does the environment possess? Porters Five Forces • 1) Suppliers o Fewer suppliers, high switching cost, low attractiveness of substitute suppliers, high threat of forward integration means= increased bargaining power for supplier o Bargaining power increases costs of inputs o Solution is to use strategic alliance or internal supply • 2) Potential Entrants o Can cause big changes o Can be big competitors in the industry o Ease of entry= more intense competition o Solutions for a business to help keep competitors out  Create or use barriers, capital intensity, technology, know-how.who, regulatory approval, brand loyalty, access to distribution • 3) Buyers o Few or concentrated buyers, standardized products, low switching costs, discretionary purchases- increase bargaining power for buyer o Reduces price that you can demand o Solution- create alliances with other firms, build strong marketing • 4) Substitutes o Many substitutions increases competition o Put ceiling on price that can be charged o Pressure increases as price of substitutes and switching costs decline o Solution- make buyers believe your unique and lock them in to be successful • 5) Industry Competitors o Rivalry among existing firms o Results in price competition and increased costs o Most powerful of five forces o Causes include:  Many competitors of equal size  Growth rate of an industry (industry slow or declining)  Consumers switching costs  Products are commodities or perishable In porters own words • five forces help find what’s causing profitability in the industry Questions to answer with five forces • 1) is the industry a realistic place for a new venture to enter? • 2) can we do a better job than incumbents at avoiding or diminishing factors that suppress industry profitability? • 3) is there a unique position we can pursue?
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