Company Situation Analysis

Company Situation Analysis

Questions to Answer: How well is the present strategy working? What are the company’s SWOT? Are the prices and costs competitive? How strong is the competitive position? What strategic issues does the company face?

How Well Strategy Is Working Based on competitive approach Low-cost leader Differentiation Market niche

How Well Strategy Is Working Qualitative analysis Completeness Internal consistency Rationale Suitability to the situation

vs. Quantitative analysis Achieving stated financial and strategic objectives Whether considered an industry leader

How Well Strategy Is Working Indicators of performance Market share Attraction and retention of customers Profit margins Net profit and ROI Credit rating Sales growth Trends in stock price Image and reputation Measures of continuous improvement

SWOT Strengths Skill or important expertise Valuable physical assets Valuable human assets Valuable organizational assets Valuable intangible assets Competitive capabilities Position of market advantage Alliances and cooperative ventures

SWOT Weaknesses Deficiencies in skills or needed expertise Lack of physical, organizational or intangible assets Missing competitive capabilities in key areas

SWOT Opportunities Not every industry opportunity is a company opportunity Offer avenues for profitable growth Offer potential for competitive advantage Match well with company’s financial and organizational capabilities

SWOT Threats Emergence of new products Emergence of new technologies Entry of new competitors New regulations Vulnerability to interest rate fluctuations Vulnerability to FX rate fluctuations Demographic shifts Political upheaval

SWOT Example: Panera, p. C85 Strengths An attractive and appealing menu (see case Exhibit 6) —Panera offers high quality food at a good price (the company delivers good value for the money); moreover, it has menu offerings for the more health/weight-conscious diner Bread-baking expertise (definitely a core competence) —artisan breads are Panera’s signature product Panera Bread is the nationwide leader in the bakerycafé segment Panera Bread has high ratings in customer satisfaction studies A good brand name that management is continuing to strengthen

SWOT Example: Panera, p. C85 Strengths (cont.) The fresh dough operations and sales of fresh dough to franchised stores is a source of revenue and profit (see case Exhibit 1 showing that fresh dough cost of sales to franchisees run well below the revenues from fresh dough sales to franchisees) Initial success in catering—extends the company’s market reach Has attracted good franchisees—sales at franchised stores run a bit higher than those at company-owned stores (see case Exhibit 2) The financial strength to fund the company’s growth and expansion (see case Exhibit 1) without burdening the company’s balance sheet unduly with debt

SWOT Example: Panera, p. C85 Weaknesses A less well-known brand name than some rivals (Applebee’s, Starbucks) Sales at franchised stores run a bit higher than those at company-owned stores—why is this occurring? Are franchisees better operators?

SWOT Example: Panera, p. C85 Opportunities Open more outlets, both company-owned and franchised—there is untapped growth potential in a number of suburban markets as shown in case Exhibit 3 Open Panera Bread locations outside the U.S. as market opportunities in the U.S. begin to dry up

SWOT Example: Panera, p. C85 Threats Rivals begin to imitate some of Panera’s menu offerings and/or dining ambience, thus stymieing to some extent Panera’s ability to clearly differentiate itself from rival chains New rival restaurant chains grab the attention of consumers and draw some patrons away from Panera—in other words, competition from other restaurant chains (either those in the fast-casual segment or other restaurant categories) becomes more intense Panera Bread begins to saturate the market with outlets, such that it becomes harder to find attractive locations for new stores and the company’s growth slows

Company Competencies Company competence Product of experience and learning Real proficiency Consciously built and developed

Competitive capability Valuable and beneficial to customers Differentiate company from competitors Enhances competitiveness

Company Competencies Core competence Internal activities performed well Central to competitiveness and profitability Resides in people, not assets

Distinctive competence Activities performed well compared to competitors Basis for competitive advantage

Distinctive Competence Importance Competitive capability provided Cornerstone of strategy

Sustainable competitive advantage Resource is hard to copy Longevity of resource Resource is competitively superior Not easily trumped

Differences in Costs Items purchased from suppliers Basic technology and age of plants Economies of scale Exposure to inflation and FX rates Marketing, sales and promotion Transportation and shipping Forward channel distribution

Value Chains Activities that create value for the customer Strategy critical Based on core competencies Benchmarking costs of key activities “Best practices”

Value Chains Primary activities Purchases and inbound logistics Operations Outbound logistics Sales and marketing Service

Support activities R & D, technology and systems development Human resources management General administration

Strategic Options Upstream Negotiate Integrate Train suppliers Use substitutes Make up the difference elsewhere

Downstream Push to reduce markup Train distributors Develop more economical distribution strategy Make up the difference elsewhere

Strategic Options Company Streamline Operations Reengineer processes and practices Eliminate cost activities Relocate activities geographically

Outsourcing Technological improvements Innovation Simplify product design (Value Engineering) Achieve backward and forward savings

Company’s Competitive Position Competitive strength assessment List industry’s key success factors Rate firm and rivals on each factor Sum individual ratings Determine net advantage or disadvantage

Weighted vs. unweighted

Company’s Strategic Issues Whether current strategy is adequate to meet trends in competitive forces Adjust to respond to driving forces of industry Industry’s future key success factors Vulnerability to efforts of rivals Capitalize on strengths Prioritize opportunities Protection against threats and weaknesses

Company’s Strategic Issues Competitive advantage or disadvantage Strong and weak spots in current strategy Additional actions needed Improve cost position Capitalize on emerging opportunities Strengthen competitive position