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Strategic Audit
Preamble
If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.
Sun Tzu Art of War
Agenda
What is strategic audit Purpose of strategic audit
Performance objectives
Key success factors and strategic assumptions
Definition
Strategic Audit is the process of evaluating a firms strategy.
-John Kay
1995
Purpose
Analyse firm is going in the right direction with respect to Strategy formulation
Corporate governance tool used by the independent directors in evaluating executive management
How to audit
1. What business are we in? 2. What forces are shaping our competition? 3. What is competitive advantage? 4. Is there money to be made? 5. What is our current strategy? 6. What is our distinctive competence? 7. What about functional area indicators? 8. How do we best compete for the future? 9. What of priorities, timing and resource? 10.What provisions exist for the implementation?
Business Definition
Satisfy the consumer need for a safe, reliable mode of transport Firm A, D and E Satisfy consumer passion for status, style and performance Firm B and C
Competitive advantage
Competitive strategy is the search for a favourable competitive position in an industry -- Porter 1985
Competitive advantage is a status in which one company is able to receive profits above that of the industry average, or even another firm.
In StratSim, there are generally several aspects relevant to a firms cost: 1.Productive capacity 2.Experience curve 3.Technological capability
Firm D Vs Firm A
Differentiation advantage
Product differentiation Distribution differentiation Advertising and Promotion differentiations
Innovation
..
Cumulative net income Market value
Analysis object
Family class: Review the actions different firms have taken in this market and analyze their respective objectives during each round
Family class-Period 1:
Name Sales MSRP (000s) 315 $24,084 Adv Pro (mill.) (mill.) $80 $40 size Eng. (hp) 165 Int styl safe qual
Alfa
28
Boffo
98
$35,003
$60
$40
49
200
Cafav
191
$31,361
$60
$40
49
165
Defy
417
$25,921
$80
$40
43
165
Efizz
418
$18,869
$80
$40
35
140
Period 2
Name Sales MSRP (000s) 317 $25,499
size
Int
styl
safe
qual
Alfa*
28
Boffo
105
$35,003
$120
$80
49
200
Cafav * Defy
220
$29,999 $25,922
$70
$40
49
165
449
$80
$40
43
165
Efizz
423
$19,341
$80
$40
35
140
Period 3:
Name Sales MSRP (000s) 382 $25,789 $34,997 $29,999 Adv (mill.) $85 Pro (mill.) $45 size Eng. (hp) 165 Int styl safe qual
Alfa
28
Boffo
88
$65
$40
49
200
Cafav
264
$40
49
165
Defy
465
$25,922
$50
43
165
Efizz
447
$19,631
$40
35
140
Period 4
Name Sales MSRP (000s) 311 $25,99 8 $33,49 7 $29,99 9 $26,00 0 $19,82 8 Adv (mill.) $70 Pro (mill.) $40 size Eng. (hp) 165 Int styl safe qual
Alfa
28
Boffo
98
$65
$40
49
200
Cafav
286
$100
$40
49
165
Defy*
482
$75
$55
43
165
Efizz
414
$80
$40
35
140
Period 5:
Name Sales MSRP (000s) 385 $26,998 Adv (mill.) $75 Pro (mill.) $60 size Eng. (hp) 165 Int styl safe qual
Alfa*
40
Boffo
109
$31,250
$65
$40
49
200
Cafav
210
$29,999
$100
$40
49
165
Defy
536
$26,260
$70
$60
43
165
Efizz
239
$20,224
$80
$40
35
140
Period 6:
Name Sales MSRP (000s) Adv (mill.) Pro (mill.) size Eng. (hp) Int styl safe qual
Alfa
528
$75
$65
40
165
Boffo*
100
$65
$40
55
200
Cafav * Defy*
203
$115
$45
49
165
480
$70
$70
45
165
Efizz
190
$80
$40
35
140
Split each of the critical success factors in to three parts: 1. Assets needed to manage the factor 2. Capabilities (people) needed to execute the factor 3. Systems needed for managing the business process of that particular critical part Compare those individual factors to best competitor or to market ideal to find gaps to them Based on the gap analysis, define the precise areas where key strategic initiatives are needed.
Strategic assumptions
What assumptions have been made?
Have they been confirmed?
High price strategy Not do any upgrades (family segment) Introduce a new car (Hybrid, Delivery)
High price strategy No upgrades Introduce new car (Sport, Hybrid, Delivery)
Similar to our firm Large distribution strategy Attributes match Small price increase Introduce a new car (Utility, Hybrid, Delivery)
Conclusion
[Agenda]
Reference:
BAYSINGER, B. & HOSKISSON, R. E. (1990) The Composition of Boards of Directors and Strategic Control: Effects on Corporate Strategy. The Academy of Management Review, 15, 72-87.
Electronic sources: Critical success factor analysis as a tool for strategy execution, viewed 21st September 2009, < http://enduragement.wordpress.com/2008/05/13/critical-successfactor-analysis-as-a-tool-for-strategy-execution/>
Hooley, G, and N.F. Piercy, B. Nicoulad: Marketing Strategy and Competitive Positioning. (2008) 4th KAY, J. A. (1995) Why firms succeed, Oxford, Oxford University Press. RAY, S. (No Year) Strategic Audit. Indian Institute of Management Calcutta.