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Chapter 5

Chapter 5 BU481.docx

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Department
Business
Course
BU481
Professor
Karin Schnarr
Semester
Fall

Description
BU481Chapter 5Environment Analysis The StrategyEnvironment LinkageWeek 2Conducting Environment AnalysisProcedural steps are not intended to lock you into a rigid approach they are created for clarity of exposition and to represent a general progression of analysis The first step is preparation the second step is increasingly rigorous tests of the strategy and to forecast of its performance if adopted the final step is deciding whether there is justification to carry forward the proposal Step 1 Focus the Environment AnalysisYou are not expected to use all the tools for environment analysis as given in the previous chapter but they are used as a mental checklist to identify those tools which are particularly salient to your situation Find and focus on the major forces that will affect the success of your strategic proposal Establish the rough boundaries of the targeted environment Within this limited environment you will need to establish a time horizon for analysis and to isolate the specific forces of demand supply competition and government policy that will have the greatest impact on the strategy under consideration Focus is critical to understanding the prospects of a strategy There is risk that the pursuit of focus can go too far to the point where you might miss important external facts and forces Three tools will be useful in achieving a focused and properly timed environment analysis your assessment of the performance of the business the strategic proposal itself and the profit model underlying the business and the specific proposal Performance Assessment as a Focusing ToolAs a focusing tool your performance assessment can help you to set an appropriate time horizon for environmental analysis and to indicate the range detail and depth of study that suits the situation at hand The first task is to project how long you expect the good times to last The forecasts of future performance will likely have to stretch well into the future and uncover and examine very fundamental trends A business in crisis has the base case questions of how much time doyou have What are the most significant problems that you have to resolve right awayYour environment analysis will have to be as immediate tangible and detailed as possible The Strategic Proposal as a Focusing ToolThe strategic proposal that you are considering helps to identify the relevant business environment and the specific conditions on which the analysis should focus 1 Strategic goals establish the performance priorities and expectations that need to be evaluated in your environment analysis 2 Product market focus sets up a bounded environment for the analysis of demand competition and so on 3 A proposals value propositionthe very core of strategydefines a tangible benchmark for testing customer appeal and competitive differentiation 4 The nature and structure of a proposals core activities provide a basis for identifying the cost control and flexibility tradeoffs that would be sensitive to external trends and developments The Profit Model as a Focusing ToolUnderlying every strategy is a profit model that consists of the structure of revenues costs profits and investment associated with it You can develop the profit model for a current strategy from the actual performance records of the business For new proposals you can develop a profit model out of the substance of the proposal and particularly from the structure of goals and core activities
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