Let’s try to look at the analysis framework in more detail:
External Analysis:
The external analysis looks at factors and elements that can influence a firm’s fate and are external to an organisation. There are four key factors that are important for external analysis, they are:
1. Customer Analysis: This involves identifying organisation’s customer segments and each segment’s motivations and unmet needs. Segment identification defines alternative product markets and thus structures the strategic investment decision. Analysis of customer motivations provides information needed to decide which customer value proposition to purse. Understanding unmet needs of customers can be critical in dislodging entrenched competitors
2. Competitor Analysis: Competitors are classified in to two types current and potential. When there are many competitors it is helpful to combine those with similar characteristics like size, resource, and brand equity & distribution depth. Key elements that are worth exploring about competitors are their performance (sales, sales growth and profitability), Image – How is competitor positioned and perceived?, Objectives – commitment to pursue competition and strengths to pursue competition, Cost structure – Does competitor have cost advantage?, Culture – Who runs the show? and finally competitors strengths & Weaknesses
3. Market/Sub-market analysis: The objective of here is to determine the attractiveness of the market and sub-markets. On average, will competitors earn attractive profits or will they lose money? To understand the dynamics of market it is important to analyze following elements: Size – What is the current market and sub-market size and their future potential if new customers are attracted to the market. Growth prospects – Asses growth trend and product-life cycle stage for the industry and its sub-market. Emerging submarkets – Evolution of key submarket is a key market dynamic. Market profitability – Number & vigor of existing competitors along with Porter’s five forces. Cost structure and distribution channel of the market and sub-market.
4. Environment Analysis: Standard PESTLE framework helps in understanding and evaluating the environment. The elements of PESTLE being Political environment, Economic environment, Social environment, Technological relevance, Legal and Environmental effects.
Internal Analysis:
Internal analysis aims to provide a detailed understanding of strategically important aspects of organisation. The major aspects of internal analysis include:
· Performance Analysis: Profitability and sales provide an evaluation of past strategies and indication of the current market viability of a product line. Profitability measure, Return on Asset, is compared to cost of capital to determine if business is adding value to bottom line. Sales figure indicate trends that show shift in customer base that have long term implications. Other financial analysis like NPV provides a base for future investment options. Other non financial analysis includes customer satisfaction, product/service quality, Brand associations, new product activity and product portfolio analysis.
· Determinants of strategic options: Some non quantifiable attributes also play important role in understanding factors that will influence strategic options. Strategy review gives an insight in to where is the organisation currently vis-à-vis its competitors and markets. Strategic problems give an insight in to understanding challenges that the business is currently confronting and helps in prioritizing resource allocation. Organisational capabilities and constrains helps implement a strategy and limits the scope of strategy.
Strategic Analysis output:
The strategic alternatives that’s made available through the process of external and internal analysis is synthesized to churn out certain key outputs. These include identifying external threats for the business, opportunities available, trends in the market, and external uncertainties. It also helps identify internal strength and weakness, problem areas and constrains and internal uncertainties.
Strategy Identification and Selection:
This helps in selecting the product/service market in which the firm will operate and deciding how much investment is allocated to each, determine customer value proposition, identify assets and competencies and develop functional areas strategies.
Criteria for Strategy selection
· Consider possible future scenarios and develop matrix of response
· Ability to generation of attractive ROI
· Ability to pursue sustainable competitive advantage
· Be consistent with organisational vision and objectives
· Be feasible
· Consider interrelationship with other firm strategies
Data is a source of information and information helps make decisions. Understanding broad market and industry direction was possible by relying on quantitative methods. I had to use qualitative data collection technique of face-to-face interviews to understand the unmet needs of customers which are hard to quantify.
Similarly I have gathered data from variety of sources, spreading the source of data and information is very important to maintain the reliability of data. Even the credibility of data is not compromised since all my qualitative data come from trustworthy sources. Below is the list of sources for my data, I have included the detailed references of my data sources in appendix.
1. Government database: Office of National statistics, UK & UK Dept for Business, Innovation & Skills (BIS)
2. Industry Associations: Electrical Contractors Association, UK & Heating and Ventilating Contractors association
3. Market Intelligence Reports: Keynote Publications, Mintel Reports, Hewes Associates and ONS, Experian
4. University Libraries: Access to journals and magazines.
5. On-line Surveys: Self Designed
6. Face-to-Face interviews
7. Company websites
Secondary Data:
Secondary data is data that a researcher extracts from other data gatherers who have already compiled them. Given the requirement to understand the Industry trends and projections and the limitations imposed by time and resources most of the competitor and Industry data in this report is collected from secondary sources. Sources include: Government database: Office of National statistics, UK & UK Dept for Business, Innovation & Skills (BIS) and Market Intelligence Reports: Keynote Publications, Mintel Reports, Hewes Associates and ONS, Experian.
Advantages of secondary data collection include, apart from saving time and resource, it provides large and high quality data which is often impossible for individual researcher to collect. They also help avoid duplication of efforts. Secondary data can also form the basis for subsequent primary data collection based on insights thrown by secondary data.
Disadvantages of using secondary data include opaqueness of data gathering methods, opaqueness of designing the data gathering methods, obscurity of intent of the data gathered, and relevance of data and time expiry of data.
Primary Data:
Data that is collected by the researcher from the source of interest is categorized as primary data. There was a strong need to gather sensitive customer information. The information gathered was critical in understanding the current level of service perception on the part of customer and also it was essential to understand the potential future opportunities for business.
I designed the online surveys and also carried out some face-to-face and telephonic interviews to extract the relevant data. Online surveys were designed to understand the order qualifying criteria for X’s services and Face-to-Face interviews were carried out to understand order winning criteria that will differentiate X’s service offerings from its competitor’s service offerings.
Some of the draw backs in primary data collection include - Flaw in design of data extracting mechanism can result in skewed results. The process of collecting data is laborious and time consuming. Data collected are raw and incorrect interpretation could lead to incorrect conclusions.
