ENGM115 – Organisations and

Systems

Session 3b: Strategic Analysis

Strategic Analysis - Structure
• Review to date…..
• The Business Change Lifecycle

• Strategic Analysis Tools –

• External Environment
– PESTLE
– Porters five forces
• Organisational Capabilities
– SWOT
The
Business
Change
Lifecycle
 PESTLE Analysis is a popular tool /
framework for investigating the
Drivers of external environment for an
organisation…..
Strategic
Planning – • Political
• Economic
External • Social
• Technological
Environmental • Legal
Analysis • Environmental
 • Workshop / Meeting with wide ranging
members from various specialisms within an
organisation…
• It will probably involve (prior) research with
organisations such as the Office for National
PESTLE Statistics (https://www.ons.gov.uk/), private
research based companies such as Gartner
Analysis – (https://www.gartner.com/en) or possibly
your own commissioned research.
How….. • Form a consensus opinion and attempt to
rank factors
• Present as a matrix – with more detailed
analysis in support….
 • Look for factors that are 1) outside the
organisations sphere of influence & 2) they
will have some impact on the organisation.
Do not at this stage identify a potential
course of action.
•
PESTLE These external factors are shown as
opportunities and threats in a SWOT
analysis….
Analysis – • Do not become overly concerned by
categorisation, e.g. political or legal…. – the
How…….. important issue is to identify the factor…
• PESTLE can be used on a more local level
for areas within an organisation… for
example for Sales, Logistics, etc.
 • Aiding the understanding of the
What does complex and ever changing business
environment
PESTLE • Ensure your organisation is
successfully (as far as possible)
attempt to aligned with the environment
•
measure / To be aware of influences which may
threaten your organisation
inform? • Useful when moving into new
markets
 Possible examples / areas…

• Tax Policy
• Employment Legislation
• Trade Restrictions
Political • Environment Regulations
• Political Stability
 Possible examples / areas
• Interest rates
• Disposable income
• Economic forecasts
• Exchange rates
Economic • Inflation rates
• Unemployment rate
• Labour costs
• Employment Patterns
• Energy costs, etc.
Socio-Cultural
Possible examples / areas
• Demographics
• Social mobility
• Leisure Interests
• Education
• Culture
• Lifestyle interests
 Possible examples / areas
• Impact of emerging technologies
• Impact of Internet, reduction in
communications costs and increased
Technological remote working
• Research and Development activity
• Impact of technology transfer
• Opportunities for innovation
 Possible examples / areas
• Legislation relating to trade practices
and trade
• Employment law
Legal • Health and Safety legislation
• Company law
• Financial regulation
 Environmental Influences
Possible examples / areas

Global warming and climate change

Animal welfare

Waste, for example unnecessary packaging

Environmental protection legislation,

Potential Impact

High

Medium

Low

Undetermined
 Implication and Importance

Time Frame

Positive or Negative Effect

Increasing, Decreasing,
Impact Unchanging

Critical, Important, Unimportant,

Relative Importance Unknown
 PESTLE - Summary

Useful for looking Take advantage of Minimise the

at the Big Picture the opportunities threats
Porters Five Forces – External
Environment Analysis
 Porters Five Forces – External
Environmental Analysis….
• Developed by Michael Porter in the 1980’s to determine the
competitive intensity or attractiveness of an industry / sector /
marketplace…..

• Different focus to PESTLE – examines the business domain /

industry

• Usually applied to a suite of products / services delivered by an

enterprise.
 Strategic Analysis - SWOT

A SWOT (Strengths, It is an instrument Simplicity

Weaknesses, within strategic
:
Flexibility
Opportunities, Threats) planning
analysis generates Integration and
information that is synthesis
helpful in matching an Collaboration
organisation’s or a
group’s goals, Lower costs
programs, and
capacities to the social
environment in which
they operate
 Strategic Analysis – SWOT
• Is a widely used framework for organising and using
data and information gained from situation analysis
• It encompasses both internal and external
environments
• One of the most effective tools in the analysis of
environmental data and information
• Factors affecting an organisation can usually be
classified as:

Strengths Weaknesses
Internal factors
• Strengths (S)
• Weaknesses (W)
External factors Opportunities Threats
• Opportunities (O)
• Threats (T)
 • Business related….. • Personal related…..

– A business… – Personal career

– A product (old or development…
new)
– An investment
SWOT - – A business
idea….
opportunity…
– Education and
Versatility – A method of sales
distribution… career
– A potential development….
collaboration… – Moving abroad….
– Changing a – Changing your life…
supplier… – Improving your
– A potential relationship!
acquisition….
– Etc.
– Etc.
 SWOT: Internal Factors

Internal Factors
• Strengths
– Positive tangible and intangible attributes,
internal to an organisation. They are within the
organisation’s control
• Weaknesses
– Factors that are within an organisation’s control
that detract from its ability to attain the core goal.
In which areas might the organisation improve?
 SWOT: External Factors
External Factors
• Opportunities
– External attractive factors that represent the reason for an
organisation to exist and develop. What opportunities exist in
the environment which will propel the organisation?
– Identify them by their “time frames”
• Threats
– External factors, beyond an organisation’s control, which could
place the organisation’s mission or operation at risk. The
organisation may benefit by having contingency plans to
address them should they occur
Classify them by their “seriousness” and
“probability of occurrence”
 • Examples
– Strong brand
– Patents
– Good Reputation
Strengths – Cost advantages (Economies of scale)
– Cost advantages (Knowledge)
(+) – Exclusive access (real or perceived) to

Internal natural resources

– Location and access to distribution
networks
Analysis – Competitive advantage – price,
differentiation, etc.
Factors – Financial reserves
– Internal processes
Tend to be – Resources, assets and people

in the – Innovative culture

Present
 • The opposite of strengths!
• Examples
– Weak brand
– No Patents
– Poor Reputation
– Poor Cost advantages (Economies of
Weaknesses scale)
– Poor Cost advantages (Knowledge)
- – No Exclusive access (real or perceived)
to natural resources
Internal – Poor location to market and Poor
access to distribution networks
Analysis – Weak competitive advantage – price,
differentiation, etc.
Factors Tend – Low financial reserves, poor cash flow
– Inefficient internal processes
to be in the – Lack of resources, assets and people
– Poor innovative culture
Present – Poor management strategies
 • Examples
– Innovation / Development of
Opportunities new technologies
– Lifting/Relaxing of regulations
External – Removal of trade barriers
– Unfilled customer need
Analysis – New Markets, vertical,
horizontal?
Factors Tend – Competitor vulnerabilities
to be in the – Industry / life style trends
– Positive global trends
Future
 • Opposite of opportunities!
• Examples
– Slow development of new
Threats technologies
External – Tightening of regulations
– Growth of trade barriers
Analysis – Filled customer need
Factors Tend – Old Markets
– Competitor strengths
to be in the – Global / National recession
Future – Innovation in new technologies
 1. The assessment of strengths and
weaknesses should look beyond products,
services and resources to examine
processes that meet customers’ or
stakeholders’ needs
2. Achieving goals and objectives depends on
transforming strengths into capabilities by
matching them with opportunities

SWOT- 3. Weaknesses can be converted into

strengths with strategic investment. Threats
can be converted into opportunities with the
Driven right resources
4. Weaknesses that cannot be converted
Planning become limitations which must be minimised
if obvious or meaningful to customers or
stakeholders. Risk Management can be key
here!
 SWOT Analysis Template
[Translate into tasks for the Strengths Weaknesses
Project Plan]
● ●

Opportunities
[How do I/We overcome the
● [How do I/We use these
weaknesses that prevent me
strengths to take advantage
taking advantage of these
of these opportunities?]
opportunities?]

Threats
[How do I/We use these
[How do I/We address the
● strengths to reduce the
weaknesses that will make
likelihood and impact of
these threats a reality?]
these threats?]

Source: JISCinfoNet
 Capitalise on your strengths

Overcome or minimise your

weaknesses

What steps can you take to:

Take advantage of some new

opportunities

Create a Set goals and objectives, like with any

other plan (strategic / tactical)

Respond to the threats

Plan of SWOT analysis can be very subjective.

Action
Do not rely too much on it. Two people
rarely come up with the same final
version of a SWOT

Caution

Use it as a guide and not as a

prescription
Strengths
SWOT – Starbucks - An Example
• Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004.
• It is a global coffee brand built upon a reputation for fine products and services.
• Starbucks was one of the Fortune Top 100 Companies to Work For in 2005. The company is a respected employer that
values its workforce.
• The organization has strong ethical values and an ethical mission statement.
Weaknesses
• Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility
that their innovation may falter over time.
• The organization has a strong presence in the United States of America. It is often argued that they need to look for a
portfolio of countries, in order to spread business risk.
• The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow to
diversify into other sectors should the need arise.
Opportunities
• Starbucks are very good at taking advantage of opportunities.
• In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard,
where customers create their own music CD.
• New products and services that can be retailed in their cafes, such as Fair Trade products.
• The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific
Rim nations are beginning to emerge.
• Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and
services both have potential.
Threats
• Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or
leisure activity will replace coffee in the future?
• Starbucks are exposed to rises in the cost of coffee and dairy products.
• Since its conception in Pike Place Market, Seattle in 1971, Starbucks' success has lead to the
• market entry of many competitors and copy cat brands that pose potential threats.
 References / Acknowledgements
• Paul D, Cadle J and Yeates D (2014) – Business Analysis - 3rd
Edition. BCS Learning and Development Ltd.
• Paul D, Cadle J and Yeates D (2014) – Business Analysis
Techniques - 3rd Edition. BCS Learning and Development Ltd.
• Spencer, J. (2015). Business Strategy: Managing Uncertainty,
Opportunity, and Enterprise. Oxford: Oxford University Press.
• https://www.visual-paradigm.com/guide/strategic-analysis/what-is-
five-forces-analysis/ www.businessballs.com