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StrategyPractitionerToolsCoreToolsOctober19991©1998,PricewaterhouseCoopersL.L.P.DRAFT:FORDISCUSSIONONLY/Version:660_w3/ppt/sfTableofContents1 ANALYSISPLAN2 BREAKTHROUGHMODEL3 COMPETITIVEBENCHMARKING4 COMPETITIVEPOSITIONING5 CORECOMPETENCTYANALYSIS6 CUSTOMERSEGMENTATION7 EXPERIENCECURVE8 FINANCIALMODELING9 FITVS.ATTRACTIVENESSMODEL10 FIVEFORCESANALYSIS11 GANTTCHART12 GAPANALYSIS13 GROWTHSHAREMATRIX14 INDUSTRYVALUECHAINANALYSIS15 ISSUETREE/ISSUEMAP16 KEYPERFORMANCEINDICATORS17 MARKETPROFITABILITY18 PORTFOLIOANALYSIS19 REALOPTIONS/STRATEGICOPTION20 SCALECURVE21 SCENARIOENVISIONING22 SENSITIVITYANALYSIS23 SEVENSFRAMEWORK24 STAKEHOLDERANALYSIS25 SWOT26 VALUEBASEDMANAGEMENT27 VALUECHAINANALYSIS28 VALUETREE29 VOICEOFTHECUSTOMER

AnalysisPlanSummaryTheanalysisplandetailsaproblem-solvingprocessandspecificanalysiswhichmustbedevelopedtoassessahypothesis.Theanalysisplanmustbeflexibleandthattheanalysestobeconductedandthedeliverablestobeproducedmaychangeduringthecourseoftheproject.AnalysisPlanCLIENTEXAMPLE:HYPOTHESIS/ANALYTICALPLANHypothesisAnalysisInfo.RequiredInfo.SourceEndProductsOverallHypothesisOrganizationalphilosophyneedstobemodifiedSupportingHypothesisExistingorganizationdoesnotadequatelysupportthebusinessstrategyDefinebusinesssystem,operatingenvironmentDefineCSFs,organizationalrequirementsalongbusinesssystemDefinehowexistingorganizationsupportsbusinesssystem,CSFsKeyactivities,processesbyLOBCSFsalongbusinesssystembyLOBExistingorganizationalelementsimpactingbusinesssystemManagementinterviewsSecondaryresearchHRdocumentsBusinessSystemDiagramsActivityCSF~~~~

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~~~~Evenafteradjustingforassetwrite-up,financialperformancehasnotmetcorporateexpectationsorcompetitivestandardsduetoaninappropriateorganization(andcost)structureFpetitors,budget/plansOverviewofcoststructure(e.g.,fixedvs.variablecosts)ROA,NIadjustedforassetwrite-upsHistoricandprojectedfinancialdataAssetwrite-upinformationSummarycost,volumeinfoforproductionunitsAnnualreports,10Ks,10Qs,etc.CompanyfinancialreportsFinancialdepartmentinterviewsFinancialMetricsTheincreasingcomplexityofbusinessandtheevolvingimportanceof,andcoordinationrequiredbetweenspecializedexpertiserequireschangesinthedecision-makingprocessandinformationflowsDefineactualvs.perceivedvs.“real”organizationchart,decision-makingprocess/responsibilities;identifygapsDefineexpertise,inforequiredtomakedecision,organizationalrequirementsDefineevolvingnatureoforganizationandinformationflowsKeydecisionsKeyindividualsinvolvedindecision-makingprocessInformationflowsManagementinterviewsOrganizationchartsMemos/documentsonmanagementprocessesSystemflowchartsData/InfoFlowsOrgChartsApproachAnalysisPlanWhenToApplyWhenitisnecessarytolayoutproblem-solvingprocessindepth/detailandidentifytheanalyseswhichneedtobeundertakentovalidatetheselectedhypothesesDefineanissueonwhichaspecificactiondependsandphraseitasa“yes”orno”questionEstablishahypothesis:astatementoflikelyresolutionoftheissueincludingthereasonsforanswering“yes”or“no”Developananalysisstatementthatoutlinesthe“models”thatwillbeexploredinordertoproveordisprovethehypothesisIdentifythelikelylocationormeansofobtainingdatatoaccomplishtheanalysisDevelopendproducts(presentations)tographicallyrepresenttheoutputoftheanalysisCitations-ClientandIndustryExperienceAnalysisPlanCompaq/Technology/VasuKrishnamurthyGalileo/Travel/SpencerLin&VasuKrishnamurthyPostOfficeCountersLtd./TransportationServices/KITdatabasePwCMCS/Consulting/VasuKrishnamurthyUnitedAirlines/Travel/VasuKrishnamurthyRobertM.Grant,“ContemporaryStrategyAnalysis”,3rdEditionSourceList

BreakthroughModelSummaryTheBreakthroughmodelfocusesattentiononmostsubstantialopportunitiesforcreatingvalueforcustomersandshareholders.BreakthroughModelExternalInternalIndustryCompanyTrendsintheeconomicenvironmentinwhichthemarketsexistBestpracticesacrossthisandsimilarindustriesMarket/productstrategyandbasisforcompetitionCapabilitiesofthecompany’speople,processes,technology,systemsandstructure1234Market/ProductRepositioningIndustryTransformationEnterpriseAlignmentBestPracticePerformanceApproachBreakthroughModelWhenToApplyUtilizetheBreakthroughmodeltoidentifyandcategorizeallopportunitiestocreatesubstantialincrementalshareholdervalue.WhencreatingaBreakthroughmodel,thefollowingcriteriashouldbeconsidered:SummarizeallopportunitiestoimprovebusinessperformancefromotheranalysesCategorizethemintofourgroups:EnterprisealignmentBestpracticeperformanceMarket/productrepositioningIndustrytransformationDetermineapproximateeconomicvalueofeachtypeofstrategyCitations-ClientandIndustryExperienceBreakthroughModelNon-PwC:Toyota:theleanproductionsystem•Frito-Lay:end-to-endsupplychainmanagementandtheuseofadvancedtechnology•Intel:highvelocityproductdevelopment•A:Internetbasedchannelsofdistributiononbehalfofshareholders.PaulElkin,“MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking”

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CompetitiveBenchmarkingSummaryCompetitiveBenchmarkingisusedtoidentifyandmeasurethefactorsthatdeterminewhyaprocesshasspecificcost,qualityortimingattributesandincorporatethebestpracticesintoanactionablechangeplan.Itdoessoinpart,bycomparingacompany’sperformanceinkeyareaswithrespecttoitscompetitors’performance.ExamplesofpresentingCompetitiveBenchmarkingfindings:CompetitiveBenchmarkingMonthsHomeGoodsPerishablesApparelAverage=6.7=Maximum#=AverageorMostCommon=Minimum02468101214161820ABCDEFGIJKLMNNEWPRODUCTDEVELOPMENTCYCLETIMEBestPractices~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3.55.04.56.513.55.06.09.07.06.010.56.04.5ApproachCompetitiveBenchmarkingWhenToApplyWhilenotacomprehensivecomparison,CompetitiveBenchmarkingillustratestheefficiencyofspecificprocessesincomparisontoacompany’scompetitors.Selectcompaniestobenchmarkagainstcarefully-rememberthatcompaniesoutsidetheclient’sindustrymaybethebestcandidates.Ensurethatdatacollectedarecomparableandthetherightprocessesarebenchmarked;thosewhichhavethebiggestimpactoncustomerservice/satisfaction/value.Examinetheissuesmostimportanttothecompany’ssituationtodeterminewhetherroles,processes,orstrategicissuesshouldbybenchmarkedIdentifykeyperformancevariablesanddeterminewhichcompaniestouseforcomparison(bothwithincompany’sindustryandoutsidetheindustry)Forprocessbenchmarking,determinethemetricstobemeasured;thesecanbekeyperformanceindicators(KPI’s),orothermeasurementsEstablishdatacollectionmethodology(industrysources,on-linedatabases,on-sitevisits,phoneinterviews,surveyquestionnaires,competitors,etc.)MeasureclientcompanyperformanceMeasureperformanceofcompetitorsandbestpracticeleadersIllustratethespectrumofperformancesonanappropriategraphDeterminegapsandreasoningDevelopactionplans/recommendationtoaddressgapsImplementactionsandmonitorprogressCitations-ClientandIndustryExperienceCompetitiveBenchmarkingBallCorporation/Packaging/VasuKrishnamurthy&MikeWeissMotorola/Technology/VasuKrishnamurthyPwCMCS/Consulting/VasuKrishnamurthyUnitedAirlines/Travel/VasuKrishnamurthyPaulElkin,“MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking”LiamFahey,RobertM.Randall,““ThePortableMBAinStrategy”RobertM.Grant,“ContemporaryStrategyAnalysis”,3rdEditionMichaelGould,AndrewCampbell,MarcusAlexander,“Corporate-LevelStrategy:CreatingValueintheMultibusinessCompany”SourceListCompetitivePositioningSummaryCompetitivePositioninganalysisshowshowacompanyispositionedinitsindustryrelativetoitscompetitorsPositioningMapExample:EntertainmentHighLowLowHighChannelStrengthContentStrengthIntellectualpropertystrengthProductstrengthLowMediumHighMarketStrengthCompetitivePositioningApproachCompetitivePositioningWhenToApplyToshowclientsthatyouunderstandtheirmarketandposition.Canalsobeusedtodevelopstrategicrecommendations.STEPDATAREQUIREDSOURCE(S)1. Chooseaxesthatarerelevanttocustomerdecision-making(first)andthosewhichdifferentiatesuppliers(second)2. Illustratewherecompetitorslieonmap(s)3. Interpretmapforstrategicimplications(e.g.,clustersoropenspaces)InformationonindustryasawholeInformationoncompetingcompanies’strategiesandpositioningTradeassociationsTradeperiodicalsandpublicationsInformationservicesAnalystreportsVariouscompanies’annualreportsandotherpublicinformationInterviewswithcompetitormanagementIndustryexpertsCitations-ClientandIndustryExperienceCompetitivePositioningBarclaysGlobalInvestors(BGI)/Banking/KITdatabaseBlueCross/Insurance/MikeWeissBoots/Retail/KITdatabaseGalileo/Travel/SpencerLin&VasuKrishnamurthyGiddings&Lewis/MachineTool/VasuKrishnamurthyOshKoshB’’Gosh?SP/Retail/MikeWeissPwCMCS/Consulting/VasuKrishnamurthySave&Prosper/Banking/KITdatabasePaulElkin,“MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking”RobertM.Grant,“ContemporaryStrategyAnalysis”HenryMintzberg,JamesBrianQuinn,SumantraGhoshal,“TheStrategyProcess””HenryMintzberg,JamesBrianQuinn,““TheStrategyProcess:Concepts,Contexts,Cases””SourceListCoreCompetencyAnalysisSummaryCoreCompetencyAnalysisprovidesapracticalandsystematicprocesstoidentifyacompany’’scorecompetenciesandassesskeycompetitiveadvantages.ExamplesofCoreCompetencyModels:CoreCompetencyAnalysisMarketingExample:McDonald’sCustomerRefillSupportSales/DistributionOtherCustomerServiceCriticalStrategicCapabilities(SC)-Thecapabilitiesinwhichacompanyisaleader.Thesecapabilitiesarethesourceofcompetitiveadvantage.CriticalEnablingCapabilities(EC)-Thecapabilitiesinwhichacompanyiscompetitivelyequivalenttoothermarketleaders.Thesecapabilitiesareoftenthesourceofabarriertoentry.Strategic/FinancialPlanningTechnologyDevelopmentProductDevelopmentMfg/JointVentureCoreCompetence(CC)-Acompetencewhichdeliversasustainablecompetitiveadvantageincurrentmarkets,providesaccesstoawidevarietyofmarkets,andmakesasignificantcontributiontotheperceivedcustomerbenefitsoftheendproduct.PrimaryCapabilities(PC)-Minimumfunctionalandtechnicalrequirementsnecessarytoparticipate.COMPETENCIESMODEL-FRAMEWORKFast,affordable,fun,familydiningexperienceMarketingandbrandmgmt.TrainingFranchisemgmt.ProductinnovationBigMacrecipeHighquality,lowpriceproductsourcingEfficientoperationHamburgerpreparationMenuselectionApproachCoreCompetencyAnalysisWhenToApplyEmployCoreCompetencyanalysistoevaluateacompany’scapabilitiesineachfunctionofthevaluechainwithahierarchicalmodelwhichidentifiescapabilitiesandthedegreetowhichtheyprovidecompetitiveadvantageandcanbeleveraged.Pleasenotethatthereisariskofdefiningtoonarrowlythemarketinwhichtheclientcompetes,thusfocusingonthewrongcompetencyrequirementsorasubsetofthecompetenciesrequiredtoeffectivelycompete.Itiskeythatthoseprojectsandprogramsthataimatdevelopingcorecompetenciesshouldnotbeopentore-prioritizationatalaterstage.AdheretothefollowingguidelineswhenanalyzingcorecompetenciesanddevelopingaCompetenciesModel-Framework:InterviewcompanyseniormanagementandbusinesslinemanagementaswellascompetitormanagementDefinecompany’sbusinesssystemandactivitiesperformedwithineachfunction-Basedonthetotalrangeofcapabilitiesidentified,askthequestions:Whichonesdowehavetobe“goodat”?Whichonesdowehavetobe“market/worldleadingat”?Determinewhethereachactivityisaprimarycapability,acriticalenablingcapability,acriticalstrategiccapability,oracorecompetence,basedonthedegreetowhichtheactivityprovidescompetitiveadvantageandcanbeleveragedNotethatwhilealltheidentifiedcapabilitieswillbecriticaltoachievethevisionandstrategy,thequestionswillhelpdistinguishcorefromnon-corebyinvokingmanagementattentionandreflectioninasystematicandstructuredmannerCitations-ClientandIndustryExperienceCoreCompetencyAnalysisGalileo/Travel/SpencerLin&VasuKrishnamurthyGiddings&Lewis/MachineTool/VasuKrishnamurthyMetLife/Insurance/KITdatabasePwCMCS/Consulting/VasuKrishnamurthySave&Prosper/Banking/KITdatabaseDavidA.Aaker,““DevelopingBusinessStrategies”,5thEditionRobertM.Grant,““ContemporaryStrategyAnalysis””,3rdEditionMichaelGould,AndrewCampbell,MarcusAlexander,“Corporate-LevelStrategy:CreatingValueintheMultibusinessCompany””HenryMintzberg,BruceAhlstrand,JosephLampel,““StrategySafari:AGuidedTourThroughtheWildsofStrategicManagement””HenryMintzberg,JamesBrianQuinn,SumantraGhoshal,“TheStrategyProcess””HenryMintzberg,JamesBrianQuinn,““TheStrategyProcess:Concepts,Contexts,CasesSourceListEstablishSegmentationObjectivesDataAssessmentModelConstructionBuildClosedLoopPerformanceToolWhataretheobjectivesofthesegmentation?BetterROI,redistributespending,changesalesefforts?Whatdataisneededtomeettheobjectives?Howmuchofthatdatacanbeobtainedinternally?externally?Whatdataisessentialtothesegmentation?Whatdatacanbeafocusforfurtherimprovementinthefuture?Definethevariablesofthemodelwithaccessibledata?Developananalyticaltoolthatutilizesthevariablestodetermineacustomerrankingorgrouping(iemostidealpartnertomostinefficientpartner).Refocusinternaleffortsbasedonsegmentationoutcome.Establishawaytocapturethekeydataneededtosegmentcustomerbase.Utilizethedataonanongoingbasistoimproveperformanceandcontinuallyrewardthebetterperformingcustomers.CustomerSegmentationMethodologyHighlevelworkflowforacustomersegmentationCustomerSegmentationMethodologySummaryCustomerSegmentationSummaryCustomersegmentationisadivisionofamarketintodistinctgroupsofbuyerswhomightrequireseparateproductsand/ormarketingmixes.THECONVERTERMARKETCANBESEGMENTEDUSINGTWOVARIABLES:ECONOMICRISKANDFABRICINNOVATIONHoldinventoryCreditproblemBasicfabrics“Opportunistic”StrategySpecialtyproductsNarrowcustomerbaseNicheStrategy(specializedproducttonarrowcustomerbase)SelltomanufacturersbeforefabricpurchaseEstablishedcreditBroadcustomerbaseBasicfabricsLow-CostStrategySelltomanufacturersbeforefabricpurchaseEstablishedcreditFocusedcustomerbaseNovelfabrics(“fashionforward”)DifferentiationStrategy(specializedproducttobroadcustomerbase)EconomicRiskInventorypositionCreditstatusProductmixCustomerbaseFabricInnovationPercentnoveltiesOrdersizeNumberofcollectionsHighLowHighLowCustomerSegmentationApproachSTEPDATAREQUIREDSOURCE(S)1. Identifysegmentationvariablesandsegmentthemarketa) SurveyStage:Conductinterviews/focusgroupswithconsumerstogaininsightintomotivations,attitudes,andbehaviorb) AnalysisStage:Applyfactoranalysistodatatoremovehighlycorrelatedvariables;applyclusteranalysistocreateanumberofmaximallydifferentsegments2. Formsegmentsbylookingatconsumercharacteristicsaswellasconsumerresponsesa) GeographicSegmentationb) DemographicSegmentationc) PsychographicSegmentationd) BehavioralSegmentationResultsfromfocusgroups,interviews,andsurveysCustomercharacteristics:demographics,statistics,etc.Focusgroups,interviews,surveysCompanydataWhenToApplyApplicablewhenitisusefultobetteridentifymarketingopportunities,todeveloptherightofferingforeachtargetmarket,ortobeabletoreachthetargetmarketinthemostefficientmannerpossible.CustomerSegmentationCitations-ClientandIndustryExperienceCustomerSegmentationGalileo/Travel/SpencerLin&VasuKrishnamurthyGeneralMills/CIP/JohanSauerGiddings&Lewis/MachineTool/VasuKrishnamurthyTheLittlewoodsOrganization/Retail/KITdatabasePwCMCS/Consulting/VasuKrishnamurthyPaulElkin,““MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking””RobertM.Grant,““ContemporaryStrategyAnalysis””HenryMintzberg,JamesBrianQuinn,SumantraGhoshal,““TheStrategyProcess”SourceListTheExperienceCurveforecastsfuturetrendsincost/laboranddeterminestherelativecostpositionofvariouscompetitors.Thetoolquantifiescostsavings,theoreticallyachievedthroughexperiencegainedinconductingaprocess.ExperienceCurveSummaryTheExperienceCurveEXPERIENCECURVEFORWIDGETS-PROJECTIONS5040302010200400600800100020004000UnitVolume(Thousands)UnitCost($)19741975197619771978197919801981198219831984Slope20%ApproachExperienceCurveCreatingtheExperienceCurverequiresyearlyaccumulatedproductionvolumefortheentireindicativeandindividualcompetitors,andtheunitcostfortheentireindustryandcompetitors(usepricedataifcostdataisnotavailable.)Datacanbesecuredfromgovernmentagencies,tradeassociations,andfrominternalcompanydata.Step1Plotaccumulatedvolumefordifferentyearsagainstunitcostonalog/logscale(unitcostshouldbedeflatedbyusingageneralindexsuchastheGNPdeflator,orspecificindicesforthevariousparsofcostsuchasmaterialsandlabor.)Step2Addastandardregressionlinetothegraph.CAVEATS:Costfiguresmustbedefinedinthesamemannerbyallsourcesofdata.Ifcompanycost-accountingdataisused,itmayneedtobeadjustedforoverheadallocationsandothercostsnotconsideredtobepartoftheactivity,process,orproductunderstudy.IfpricedataisusedpricingbehaviorofparticipantsneedstobeconsideredInnovationwithinanyfunctionalarea(e.g.,product,process,distribution)canrenderthecurrentexperiencecurveuselessasastrategytool.Therefore,itisimportanttounderstandtheenvironmentalandcustomertrendsinordernottorelytooheavilyonthisanalysisTheexperiencecurveisonlyananalyticalconcept,andthereisnoguaranteethatcostswillactuallydecreaseaccordingtoit.ThecompanymustactivelymanagecostsdownWhentoApplyTheGrowthShareMatrixmaybeoverlysimplistic,marketsharedoesnotalwayscorrelatewithprofitabilityandnotallbusinesseshavethesameassetintensity.Conclusionsaresensitivetobusinessandmarketdefinitions;wherelinesaredrawn.Practitionersmustbecreative,carefulandconsistentwithmarketdata.Citations-ClientandIndustryExperienceExperienceCurveSourceListDavidA.Aaker,““DevelopingBusinessStrategies”,5thEditionTheBostonConsultingGroup,“PerspectivesonStrategy””RobertM.Grant,“ContemporaryStrategyAnalysis””,3rdEditionHenryMintzberg,BruceAhlstrand,JosephLampel,““StrategySafari:AGuidedTourThroughtheWildsofStrategicManagementFinancialModelingSummaryFinancialModelingThefinancialmodelwillallowustotestmanagementassumptionsandunderstandhowdifferentactionsmayaffectperformanceonsomekeycompetitivedimensions.ApproachWhenToApplyFinancialModelingiseffectiveinanalyzinghowacompany’sperformance,incoreareasofbusiness,willbeaffectedbypursuingdifferentcoursesofaction.Thistoolfacilitatesanunderstandingofvariouscause-effectandprovidesamodelbywhichtotestvarious"whatif"statements.FinancialModelingFollowthesestepstosuccessfullycreateaFinancialModelStep1Gatherinformationonkeydriversie.FromthecashflowanalysisperformedaspartoftheSVADataandinsightfromVoiceoftheCustomerisanothersourceofinsightStep2Maptherelationshipsandidentifyfactorswhichreinforceoneanothervs.thosethathaveanegativerelationship(e.g.increaseinpricemayhaveanegativeeffectondemand)Step3Buildthefinancialmodelbasedonthecause-effectrelationshipsidentifiedStep4GatherdatafromindustryanalysisorinternalcorporatedataStep5Testthequalityofthemodelbydoingmanualcalculationsonsome"whatif”Step6Perform"whatif"toassessthecompletenessofthemodelCitations-ClientandIndustryExperienceFinancialModelingFlemingsFundManagementLtd(FFML)/Banking/KITdatabaseGalileo/Travel/SpencerLin&VasuKrishnamurthyOshKoshB’’Gosh?SP/Retail/MikeWeissPwCMCS/Consulting/VasuKrishnamurthyUnitedAirlines/Travel/VasuKrishnamurthyRobertM.Grant,““ContemporaryStrategyAnalysis””,3rdEditionSourceListTheFitvs.AttractivenessModeloptimizesstrategybydevelopingasenseoftherealisticstateofthemarketandcompanyaffairs.TheModelcomparesproductfitwithamarkettoproductfitwithacompany’sobjectives.Fitvs.AttractivenessModelSummaryTheFitvs.AttractivenessModelBakedGoodsBulbsCheeseFruitKitchenwareMeat/SeafoodNurseryStockSnacks/CandyStationeryDecorativeAccessoriesIndoorPlantsNutsSeedsTrees/ShrubsGourmetFoodBed/BathPool/Patio/GardeningCraftsPersonalCare/GroomingSpecialtyApparelCampingEquipmentChildren’sApparelDrug/Vitamins/HealthFoodHardware/ToolsHosiery/LingerieWomen’sApparelMen’sApparelWomen’sLargeSizeApparelAthleticEquipmentFishingEquipmentHuntingEquipmentSportingGoodApparelCategoryFitWithCompanyHighMediumLowLowMediumHighCategoryAttractivenessCATEGORYEVALUATION-SPECIALTY/SPIN-OFFCategoriesincludedinexistingorplannedspecialtybooksRecommendedadditionalspecialtybookventureEXAMPLEApproachFitvs.AttractivenessModelStep1Identifyproduct,categoryormarketoverallattractivenessasbeinglow,medium,orhigh.Plotalongx-axis.Step2Identifyproductcategory,ormarketfitwithcompanyobjectivesasbeinglow,medium,orhigh.Plotalongy-axis.Step3Evaluatenewlycreatedmatrix;aimtorevealproducts,categories,ormarketsthatfallunderhighoverall attractivenessandhighfitwithcompanyobjectives.WhentoApplyTheFitVs.AttractivenessModelisusedtoanalyzeanewproductorserviceoffering’’sfitwithinacompany,incomparisontotheoverallattractivenessoftheproductoroffering.Thisparticularmodelrequiresjudgementswhicharesubjectiveinnature;oneshouldbeawarethatthismodelmayoversimplifythemarketsituation.Citations-ClientandIndustryExperienceFitvs.AttractivenessModelSourceListGalileo/Travel/SpencerLin&VasuKrishnamurthyPwCMCS/Consulting/VasuKrishnamurthyPaulElkin,““MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking””HenryMintzberg,JamesBrianQuinn,SumantraGhoshal,““TheStrategyProcess””FiveForcesAnalysisSummaryTheFiveForcesAnalysisevaluatestheattractivenessofanindustry.FiveForcesAnalysisDRIVERSOFMARKETATTRACTIVENESSPOTENTIALENTRANTSEntrybarriersarehighifthereare:EconomiesofscaleProductdifferentiationCapitalrequirementsLimitedaccesstodistributionchannelsRestrictivegovernmentpoliciesPotentialretaliatoryreactionofincumbentsINDUSTRYCOMPETITORSRivalryisintenseif:CompetitorsarenumerousorroughlyequalinpowerorsizeIndustrygrowthisslowTherearehighfixedcostsortheproductisperishableTheproductlacksdifferentiationorswitchingcostsCapacityisaugmentedinlargeincrementsExitbarriersarehighRivalsarediverseinstrategies,origins,and"personalities"SUBSTITUTESThreatofsubstitutesishighif:ThereisanabundanceofproductsorservicesthatservethesamefunctionTheprice-performancetradeoffofsubstitutesisattractiveSUPPLIERSBargainingpowerofsuppliersisgreaterif:ThesupplyindustryisdominatedbyafewcompaniesorismoreconcentratedthanthebuyingindustryThesupplyproductisdifferentiatedortherearehighswitchingcostsTherearefewsubstitutesThebuyingindustryisnotanimportantcustomerofthesupplyindustryThesupplyindustryposesacrediblethreatofforwardintegrationBUYERSBargainingpowerofcustomersisgreaterif:ThecustomergroupisconcentratedorbuysinlargevolumeProductspurchasedareundifferentiatedProductspurchasedrepresentasignificantportionofthecustomer'scostCustomersearnlowprofits,creatingincentivetolowerpurchasingcostsTheproductpurchasedisunimportanttothequalityofthecustomer'sproductSwitchingcostsarelowCustomergroupposesacrediblethreatofbackwardintegrationApproachWhenToApplyUsetheFiveForceanalysistoevaluateamarket’’sstructureandthetrendsaffectingamarket’sprofitability.Pleasenotethatthestructuralconditionsalonedonotprovideaquantificationoftotalfuturemarketprofitabilityortheviabilityofacompany.Therefore,itisimportanttointegratecompanyspecificinsightsandconfirmthatthemodelaccuratelyreflectswhatishappeninginthemarket.FiveForcesAnalysisFiveForcesanalysisutilizesafourstepapproachandisappliedasastartingpointforunderstandingamarket’sattractiveness:Step1: CollectdataStep2:Evaluatestrengthofkeyforces,including:(Whatabouttechnology?)BuyersSuppliersSubstitutesCompetitorsPotentialentrantsStep3:Qualitativelyassignahigh,mediumorlowscoretoeachkeyforceStep4:AssesstheoveralleffectoftheforcesonindustryattractivenessandstrategicimplicationsCitations-ClientandIndustryExperienceFiveForcesAnalysisAerospace&ElectronicsAlliance/Multi-Industry/KITdatabaseGalileo/Travel/SpencerLin&VasuKrishnamurthyIberdrolaandJohnson&Johnson/TC-Utilities/KITdatabaselaCaixa/FM-Banking/KITdatabaseLeviStraus,MerkandMotorola/Multi-Industry/KITdatabasePwCMCS/Consulting/VasuKrishnamurthySourceListDavidPBaron,““TheNonmarketStrategySystem”,SloanManagementReview,Fall1995LiamFahey,RobertM.Randall,““ThePortableMBAinStrategy”RobertM.Grant,“ContemporaryStrategyAnalysis””,3rdEditionGANTTChartAGANTTchartgivestheexpectedtimelinefortheengagementbasedontheclient’sneedsandourexperienceandexpertise.GANTTChartIDNameScheduledFinish3/143/213/284/44/114/184/25MarApr1234567891011123/26/933/26/934/23/934/12/933/30/934/1/934/5/934/7/934/8/934/9/934/12/934/19/93MobilizationPwCMobilizationSCMMobilizationDesigncustomerserviceprocessMapcommunicationModeleconomicdecisionsIdentifycostdriversIdentifyvaluedriversSpecifyCSactivitiesSpecifyCSinformationneedsSpecifyCSresourcePreparetrainingmaterialsApproachGANTTChartWhenToApplyWhenitisnecessarytoIllustratefortheclientaroughtimelin