The thinking techniques are like different tools in a machinist’s tool kit. For a business analyst, a good tool kit with a range of analytical tools, which when used together, increase the strength to get to the bottom of a complex business problem. Introduction The thinking techniques are like different tools in a machinist’s tool kit. For a business analyst, a good tool kit with a range of analytical tools, which when used together, increase the strength to get to the bottom of a complex business problem.
What is strategy? In simple words ‘strategy’ means a long-term plan or a series of stratagems to achieve future goals. These stratagems can be easily identified by using the strategic tools. How appropriate/useful do you think these analytical/modelling tools are for the strategic decision maker? For a decision maker, strategy modelling tools help to look at any complicated business problem in an organised and prï¿½cised way. When other people feel incapacitated and intimidated by the situation, these analytical tools help to find the right approach for solving an unstructured business problem. These techniques are effective to extract valid information from dry facts. Business strategy tools also help to understand the business and its competitive environment which in turn helps to develop a competitive edge and to identify the best way forward.
In my group work on strategic analytical review of the case study organisation ‘STARBUCKS’ we have used many analytical tools to understand the concept of strategy modelling and management. Some of these tools were used for collecting primary and secondary data, technique to find the goals of the company by looking at its Mission Statement, SWOT (strengths, weaknesses, opportunities & threats) analysis, TOWS matrix, SPECCTRe (PEST, PESTLE, PESTEL, PESTLIED, STEEPLE, SLEPT analysis), Marketing mix- the 4P’s, Porter’s 5 forces, core competences analysis etc. These tools help us to solve an intricate business problem.
Focussing on Customer segmentation- This helps to identify the key customers & their expectations. By doing this a company can reduce the gap between customers’ expectations & perceptions and, improve its customer satisfaction rate. Competitor analysis- Now days, for any company, it is critically important to know about its competitors, their strengths-weaknesses & what makes them successful. This type of analysis will help the company to counter-act their strengths and exploiting their weaknesses to achieve their business goals.
Porter’s 5 forces- It is a competition theory model proposed by Michael E. Porter to analyse the industry structure and develop business strategy. The careful analysis of the five forces discussed in this model will give companies the necessary insights to build strategies. This tool is very helpful to judge the profitability of new products/businesses. Competitive advantage- Every company is putting in a great effort to distinguish itself from its competitors. This will help them to attract more customers. According to Kenichi Ohmae:
“Business strategy is all about competitive advantage. The sole purpose of strategic management is to enable an organisation to gain, as effectively as possible, a sustainable edge over its competitors. A good strategy is one by which an organisation can gain significant ground on its competitors at an acceptable cost to itself. Stakeholder analysis- This analysis is done to win supports from people who have power & influence over our projects. These people can Make, Break or, Shake our project.
Core competences analysis- This technique helps to get ahead of our competitors and stay ahead by offering customers something uniquely good which leads to customer choosing our product & paying more for them. What difficulties would you anticipate in applying these analytical/ modelling tools and realistically how could these be overcome? A majority of the times, strategy often fails due to the failure to execute strategy tools effectively against the four key organizational hurdles: There are many reasons why strategic plans fail. Some of them are easy to understand but a majority of them are more subtle and elusive.
A number of factors ignite the failure of strategy models. A number of times the strategy models are made in isolation with the team who was expected to implement the strategy which sometimes leads to lack of motivation. Some of the strategy plans do not figure out the resource ability to perform certain tasks, however they might look apt on papers. The political hurdle is the biggest hurdle for any strategy plans. Strategies are always directed towards a change which might affect people. Therefore, the politics involved in any strategy plan has the maximum impact. A group of individuals might tend to redress strategy plans to suit their plans which might have adverse affect on the overall strategy plan.
Cognitive hurdles are one of the major problems that the organizations face while using the strategy tools. It is a form of mental blocks that the individuals responsible for strategy building have and it can lead to the end of strategy building before it actually begins. A number of times cognitive hurdles are associated with change in employees’ attitude and behaviour which leads to their biased opinion on strategy building. It is good to make such employees see and experience the need to change first hand to involve them in strategy building. Also, such employees can be put face-to-face with their worst operational problems and with disgruntled customers to overcome their barriers in cognitive hurdles.
The organizations weighing strategy plans in the spectrum of simplicity can lead to complex problems in future. It can also lead to overlooking key strategic contact which may occur in the future. The categorization in some of the strategy tools such as SWOT analysis and Porter Analysis might break down the certain aspects of the strategy in simpler forms. The SWOT analysis into strengths, weaknesses, opportunities and threats which might be very subjective based on individual’s own perception of looking at these elements. Moreover, it might lead to more qualitative information without the ability to reflect on the actual scenarios and its impacts. Also, a number of times these tools such as SWOT and Porter’s Five Forces Model do stress upon the significance of the aspects of problem structuring but they do not have any tool to help the organization identify these elements.
Some of the other limitations of strategy tools spans around a number of different aspects of business such as price increase, Inputs/raw materials, government legislation, and economic environment. Also, a number of times, organizations search for new markets for the product which is not having overseas market due to import restrictions. Examples of organisations that have successfully used/applied these analytical/modelling tools introduced so far on the module. The example of European brewing industry was apt for my understanding of PESTLE analysis. Beer consumption was declining in some of the important European markets including Germany and United Kingdom. However, some of the international brands in Europe continued to see strong growth for their products in the markets outside Europe comprising some of the growing developing economies such as China and India.
The industry experts conducted PESTLE analysis to understand the overall environment in which the brewing companies operate in the European markets to benchmark their strategy in-line with their counterparts in other international markets outside Europe. Some of the techniques such as the analysis of political environment, economic stability, social change, and Legal changes in the PESTLE analysis surfaced several key finding for the industry including the consolidation of the businesses through acquisitions, alliances and closures in the industry. Also, there was a major shift in the consumers’ preference from beer consumption to wine.
In some of the northern European countries, particularly In the United Kingdom, there was a growing hostility towards ‘binge drinking’, excessive alcohol consumption in pubs and clubs. The media also played a part in the consumers’ awareness against drunken driving. The drive against drunken driving and binge drinking was adding added pressure on the consumers to shift their attention from ‘on-trade’ beer consumed in the premises, as in pubs or restaurants to the off-trade (retail). All these factors played an important in shift of attention from beer to other alcoholic beverages.
Through this example, I understood that environmental scan is an integral part of strategy building as it gives us an opportunity to understand the internal environment of the business in which we operates and then formulate a strategy in the conditions prevailing in the industry. E-Bay is another interesting example that I analysed to improve on my understanding of the analytical tools that we studied in the module. E-Bay started in 1990 and they did well as a business in the early days of their business. This happens mainly due to the fact that the company has limited competition due to the novelty of their business.
However, there business had several challenges as it was primarily based on the success of the technology. The technology was changing at a rapid pace post 1990s. The company continues to use a few strategy tools such as SWOT analysis to minimise competition which was increasing rapidly after the IT burst in 1990s. It was also important for the company to use a few other strategy tools such as PEST analysis to understand the impact of technology on their business. The company bought Skype in 2005 to gain competitive edge and made it a success around the world. All these developments for the company point out the importance of its strategic thinking in the business.
As technology was the base of the company’s success, the company insured that it always capitalize on its strength through strategic thinking. It continues to make rapid advancements such as buying pay pal in 2002 which now has become a worldwide success for internet payments. A number of elements discussed in the strategy tools are constantly changing and the businesses needs to ensure that they constantly evaluate their strategies in-light of those elements to gain competitive edge both from its competitors’ and the industry itself. The “technology” as an industry itself is constantly upgrading to newer heights which makes it indispensable for companies like E-bay to have strategic thinking for its business on regular basis. Constantly evaluating strategy goals is another important learning that I had from this case study.