CHAPTER 4, CRITICAL

SUCCESS FACTORS

I used to be indecisive, but now I am not so sure

Figure 4.1,

the Planning Model

Defining Critical Success

Factors

Figure 4.3. Matching the profile to the environment.

Matching the Profile to the Environment
Examining the
environment

Determining the level of

competence required to operate
effectively in this environment
as to:
Marketing and sales
Production
Financial Management
Research and Development
Human Resource
Management

Doing an
independent
and honest
review of each

aspect

Matching what
needs to be done
With what can be
done
In all aspects of
the business

Examining the
organizational profile
Determining the level of
competence the organization
has as to:

Marketing and sales

Production
Financial Management
Research and Development
Human Resource Management
3

Analyzing the Environment,

Opportunities and Challenges (threats)
The terms defined

An opportunity is something that if taken, will

result in something positive for the organization.
A challenge (threat) is quite different. Out of the
environment, something with a negative
consequence to your organization is going to
happen unless you act in some way.

Remote environment, opportunities

and challenges (threats)

Figure 4.4. the remote environment for a ski

area
Remote Environment for a Ski Area
Description

o/t

The amount of disposable income available for

recreation, in the hands of customers.

Social

The perception of people regarding health and wellness

and the use of recreation to achieve those ends.

Political

Government regulations regarding development of park

land and the environmental impact of the development
of recreation areas.

Internet based advertising systems and reservation

systems.

Economic

Technological

The Industry Environment,

Opportunities and Challenges (threats)

Figure 4.5, Opportunities And Challenges From The Five

Forces Applied To The Recreation Industry (Ski Area)
Force
Substitute

Issue

o/t

Demand is high for the total industry relative to

supply

Customers are not product sensitive

Profits are Low

Large capital investment is required

products

New
entrants
to the
market

Demand exceeds supply in the industry for the

product or service

Opportunities And Challenges From The Five Forces

Applied To The Recreation Industry (Ski Area)

Buyers

Suppliers

Buying groups are formed

The buyers are brand sensitive

There are a large number of travel agents

There are a small number of suppliers of chair

lifts and equipment

Industry profits are low

Rivalries
Among

Customer growth rate is high

Ski Areas

Customers are not brand sensitive

Switching costs are high

T
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The Local Environment, Opportunities

and Challenges (threats)

Figure 4.6. Characteristics of the local environment.

Analyzing the local Environment
Issue

Questions and answers

o/t

Do the features of the product

match the demographic of the
market?

Customers

Demographic

Competitive
Position

Product
Quality

Do customers perceive the

product as high value for the price
paid?

Creditors

Financial
Claims

Are creditors willing to let the loan

serve its purpose?

T
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Characteristics of the local environment

Employees

Availability

Can the organization attract and

hold the right people?

Quantity

Are suppliers able to meet your

present and future demand for
their products?

Does a change in the season or a

change in the weather impact
your operations?

Suppliers

Ecological
issues

Impact

The Organizational Profile,

Strengths and Weaknesses

A strength means you are already equipped to

handle the situation and you are using state of
the art procedures.
A weakness means you dont have the tools to
deal with the issue.

Put another way:

A strength is something you have that you need,
A weakness is something you dont have that
you need.
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Step 3, a partially
complete organizational profile.
Figure 4.8,

Major areas
Strategic
planning

Marketing

Financial and

accounting

Potential issues
Quality of long and
short range

S/W

We hired a college
graduate to facilitate the
development of goals.

We hold a small market

share of a rapidly growing
market. We are not
growing at the same rate.

We earn a rate of return

that is significantly higher
than the industry average

objectives

Market share

Profitability

Explanation

11

Step 3, a partially complete

organizational profile.
Production,
operations
and technical

Human
resource

Efficiency of
production

Our unit production costs

are lower than industry
average because we have
state of the art machinery
and equipment.

Four of the last five

rounds of negotiations
were resolved after a work
stoppage, two strikes and
two lockouts.

Management is willing to
hold others responsible
and accountable, but they
are not willing to delegate
authority and control.

processes

Union/Management
relationship

management
Organization
and
management

Willingness of
management to
delegate tasks and
authority.

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Stages of Industry Evolution

Figure 4.9 , Industry life cycle

Maturity

Decline

Growth
Development

Growth
Rate

Profits

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Critical Success Factors at

Each Stage of Industry Evolution

Figure 4.10,

Function

Marketing
& Sales

Finance

Development

Growth

Maturity

Decline

Create wide
spread
awareness.

Establish brand
recognition. Find
effective
marketing
channels.

Hold existing
markets and
promote to new
markets.
Introduce
successor
products to
extend maturity.

Focus on the
best channels.
Replace old
products with
new ones.

Finance initial
R&D losses.

Finance
expansion and
net cash
outflows.

Reinvest profits
and employ cost
controls.

Prune the
product line and
harvest the
resources from
liquidation.
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Critical Success Factors at Each Stage

of Industry Evolution
Production

R&D

Human
Resources

Limit number of
designs, use
standards.

Increase
capacity while
retaining quality.

Improve the
product and
reduce
operating costs.

Re-deploy
unused
equipment,
simplify
processes and
reduce product
variants.

Ability to make
changes and
take the bugs
out.

Focus on quality
and ability to
make product
variants to
satisfy
customers.

Improve
processes to
reduce costs
and introduce
successor
products.

Commit
resources to
new growth
products.

Flexibility in
staffing and
training.

Motivated and
loyal workforce
with excellent
product
knowledge and
selling skills.

Reduce
workforce and
increase
efficiency.

Reduce and
reallocate
personnel.

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Critical Success Factors at Each Stage

of Industry Evolution

Focus
area

Development

Growth

Maturity

Decline

Engineering
and

Sales and
market

Finance and
investment

marketing

share

Production
efficiency
and
successors

recovery

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Defining Organizational Critical Factors

Figure 4.11, SWOT diagram

Environmental
Opportunities

Internal
Weakness

Internal
Strength

Environmental
Threats

17

Figure 4.12,

SWOT Analysis
Environmental
Opportunities

Internal
Weakness

Internal
Strength

Environmental
threats

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the cells
of a SWOT diagram
Figure 4.13,

Environmental
Opportunities

Cell A
Redesign practices

Cell B
Be aggressive

Internal
Weakness

Internal
Strength
Cell C
Be Defensive

Cell D
Use your strengths in
new places

Environmental
threats

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Cell A Grand Strategy,

Re-design practices

An organization with internal weakness

which is facing an industry with numerous
opportunities
must focus attention on re-designing how
business is done so that the opportunities
can be effectively captured.

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Other Cell A Strategies

Retrenchment/turn around
Joint Venture
Strategic Alliance

21

Cell B Grand Strategy,

Be aggressive

An organization with internal strengths

which is facing an industry with numerous
opportunities
expand operations into new markets,
invest in growth and reproduce success in
other areas.

22

Other Cell B Strategies

Product development
Market development
Vertical Integration

23

Cell C Grand Strategy,

Be Defensive

An organization with internal weakness

which is facing an industry with numerous
threats
needs to revaluate whether or not it is
advisable to stay in business.

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Other Cell C Strategies

Divestiture
Liquidation

25

Cell D Grand Strategy,

Use your strengths in new places

An organization with internal strengths

which is facing an industry with numerous
threats
evaluate whether or not their expertise
could be transferred to a new, less
threatening environment.

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Other Cell D Strategies

Horizontal Integration
Concentric Diversification

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Summary

The objective of chapter 4 was to define Critical

Success Factors. The factors relate to an
industry and an organizational perspective.
The Stages of Industry Evolution was
introduced as a tool to pinpoint the critical
success factors from an industry point of view.
The SWOT diagram was introduced as a tool to
match the industry critical success factors with
the organizational profile developed in chapter
3.
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