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Strategic Management Internal Analysis Inputs to Strategy … 1/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management Write Wit
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Learn M The Mission Statement
A mission statement defines the fundamental purpose of an organization
or enterprise. LEARNING OBJECTIVES Outline the appropriate content necessary to construct a comprehensive mission statement KEY TAKEAWAYS Key Points A mission statement is generated to retain consistency
in overall strategy and to communicate core organizational goals to all stakeholders.
The business’s owners and upper managers develop
the mission statement and uphold it as a standard … 2/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management across the organization. It provides a strategic framework by which the organization is expected to abide.
In a best-case scenario, an organization conducts internal and external assessments relative to the mission
statement to ensure it is being upheld.
A mission statement informs the key market, contribution, and distinction of an organization. It describes
what the organization does, why it does so, and how it
Key Terms mission: A set of tasks that fulfills a purpose or duty; an assignment set by an employer.
stakeholder: A person or organization with a legitimate interest in a given situation, action, or enterprise. A mission statement defines the purpose of a company or organization.
The mission statement guides the organization’s actions, spells out overall goals, and guides decision making. The mission statement is generated to retain consistency in overall strategy and to communicate core
organizational goals to all stakeholders. The business’s owners and upper managers develop the mission statement and uphold it as a standard across the organization. It provides a strategic framework by which
the organization is expected to abide. … 3/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management Mission statement: An example of a mission statement, which includes the
organization’s aims and stakeholders and how it provides value to these
stakeholders. In a best-case scenario, an organization conducts internal and external
assessments relative to the mission statement. The internal assessment
should focus on how members inside the organization interpret the mission statement. The external assessment, which includes the business’s
stakeholders, is valuable since it offers a different perspective. Discrepancies between these two assessments can provide insight into the effectiveness of the organization’s mission statement. Contents
Effective mission statements start by articulating the organization’s purpose. Mission statements often include the following information:
Aim(s) of the organization
The organization’s primary stakeholders, including
clients/customers, shareholders, congregation, etc.
How the organization provides value to these stakeholders, that is,
by offering specific types of products or services
A declaration of an organization’s core purpose … 4/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management According to business professor Christopher Bart, the commercial mission statement consists of three essential components:
1. Key market – Who is your target client/customer? ( generalize if
2. Contribution – What product or service do you provide to that
3. Distinction – What makes your product or service so unique that
the client would choose you? Assimilation
To be truly effective, an organizational mission statement must be assimilated into the organization’s culture (as the theory states). Leaders have
the responsibility of communicating the vision regularly, creating narratives that illustrate the vision, acting as role-models by embodying the
vision, creating short-term objectives compatible with the vision, and encouraging employees to craft their own personal vision that is compatible with the organization’s overall vision. Porter’s Competitive Strategies
Michael Porter classifies competitive strategies as cost leadership, differentiation, or market segmentation. LEARNING OBJECTIVES Discuss the value of using Porter’s competitive strategies of
cost leadership, differentiation, and market segmentation KEY TAKEAWAYS … 5/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management Key Points Michael Porter defines three strategy types that can attain competitive advantage. These strategies are cost
leadership, differentiation, and market segmentation (or
Cost leadership is about achieving scale economies
and utilizing them to produce high volume at a low cost.
Margins may be narrower, but quantity is larger, enabling high revenue streams.
Differentiation is creating a unique service or product
offering, either through good branding or strong internal skills. This strategy aims at offering something difficult to copy and is strongly associated with an organization ‘s brand.
Market segmentation strategy is narrower in scope.
Both cost leadership and differentiation are relatively
broad in market scope and can encompass both strategic advantages on a smaller scale.
Porter warns that companies who try to accomplish
both cost leadership and differentiation may fall into the
“hole in the middle”; he notes that specializing is the
ideal strategic approach.
Key Terms competitive advantage: Something that places a com- pany or a person above the competition.
Market Share: Percentage of a specific market held by a company. Michael Porter described a category scheme consisting of three general
types of strategies commonly used by businesses to achieve and maintain competitive advantage. These three strategies are defined along
two dimensions: strategic scope and strategic strength. Strategic scope
is a demand-side dimension and considers the size and composition of … 6/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management the market the business intends to target. Strategic strength is a supplyside dimension and looks at the strength or core competency of the firm.
Porter identifies two competencies as most important: product differentiation and product cost (efficiency). He originally ranked each of the three
dimensions (level of differentiation, relative product cost, and scope of
target market) as either low, medium, or high and juxtaposed them in a
three-dimensional matrix. That is, the category scheme was displayed as
a 3x3x3 cube; however, most of the twenty-seven combinations were
not viable. Cost Leadership, Differentiation, and Market Segmentation
Porter simplified the scheme by reducing it to the three most effective
strategies: cost leadership, differentiation, and market segmentation (or
focus). He characterizes each as the following:
Cost leadership pertains to a firm’s ability to create economies of
scale though extremely efficient operations that produce a large
volume. Cost leaders include organizations like Procter & Gamble,
Walmart, McDonald’s and other large firms generating a high volume of goods that are distributed at a relatively low cost (compared to the competition).
Differentiation is less tangible and easily defined, yet still represents an extremely effective strategy when properly executed. Differentiation refers to a firm’s ability to create a good that is difficult
to replicate, thereby fulfilling niche needs. This strategy can include creating a powerful brand image, which allows the organization to sell its products or services at a premium. Coach handbags
are a good example of differentiation; the company’s margins are
high due to the markup on each bag (which mostly covers marketing costs, not production).
Market segmentation is narrow in scope (both cost leadership and
differentiation are relatively broad in scope) and is a cross between … 7/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management the two strategies. Segmentation targets finding specific segments
of the market which are not otherwise tapped by larger firms. Avoiding the “Hole in the
Empirical research on the profit
impact of marketing strategy indicates that firms with a high market share are often quite profitable, but so are many firms with
low market share. The least profPorter’s competitive strategies:
Porter’s three strategies can
be defined along two dimensions:
strategic scope and strategic
strength. itable firms are those with moderate market share. This is sometimes referred to as the “hole-inthe-middle” problem. Porter explains that firms with high market share are successful because they pursue a cost-leadership strategy,
and firms with low market share are successful because they employ
market segmentation or differentiation to focus on a small but profitable
market niche. Firms in the middle are less profitable because of the lack
of a viable generic strategy. SWOT Analysis
A SWOT analysis allows businesses to assess internal strengths and
weaknesses in relation to external opportunities and threats. LEARNING OBJECTIVES Explain how a SWOT analysis can be used as a tool in strategic
decision making KEY TAKEAWAYS … 8/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management Key Points SWOT analysis is a strategic planning method used to
evaluate a business’s strengths, weaknesses, opportunities, and threats.
The goal of a SWOT analysis is to analyze the business
environment to develop a strategic plan of action that
captures opportunities using internal strengths (and
avoids threats while addressing weaknesses).
Businesses set objectives after the SWOT analysis has
been performed, which allows the organization to define achievable goals.
Key Terms environment: The surroundings of, and influences on, a particular item of interest. A method of analyzing the environment in which businesses operate is
referred to as a context analysis. One of the most recognized of these is
the SWOT (strengths, weaknesses, opportunities, and threats) analysis.
Performing a SWOT analysis allows a business to gain insights into its internal strengths and weaknesses and to relate these insights to the external opportunities and threats posed by the marketplace in which the
business operates. The main goal of a context analysis, SWOT or otherwise, is to analyze the business environment in order to develop a
strategic plan. SWOT and Strategy
A SWOT analysis is a strategic planning method used to evaluate the
strengths, weaknesses, opportunities, and threats related to a project or
business venture. A SWOT assessment involves specifying the
business’s objective and then identifying the internal and external factors
that are favorable and unfavorable toward the business’s ability to
achieve its objective. Setting the objective, in terms of moving from strategy planning to strategy implementation, should be done after the … 9/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management SWOT analysis has been per- SWOT ANALYSIS formed. Doing so allows the organization to set achievable
Internal origin Strengths Weaknesses Strengths: internal characteristics of the business that
give it an advantage over Opportunities Threats (attributes of the organization)
(attributes of the environment) Components of SWOT Harmful to achieving the objective External origin Helpful to achieving the objective goals and objectives. competitors
Weaknesses: internal characteristics that place the
business at a disadvantage
chances to improve performance in the overall business environment
Threats: external elements
in the environment that
could cause trouble for the SWOT analysis: The SWOT analysis
weaknesses lie relative to factors in
opportunities (the S and O of SWOT)
are both helpful toward achieving
company objectives, but strengths
opportunities originate externally.
Similarly, weaknesses and threats
(the W and T of SWOT) are harmful
toward achieving objectives, but
weaknesses originate internally and
Assessing all four points of the
SWOT acronym ensures a thorough
Identifying SWOTs is essential, as subsequent stages of planning can be
derived from the analysis. Decision makers first determine whether an
objective is attainable, given the SWOTs. If the objective is not attainable,
a different objective must be selected, and then the process can be repeated. Users of SWOT analysis must ask and answer questions that
generate meaningful information for each category to maximize the benefits of the evaluation and identify the organization’s competitive
Forecasting is the process of making statements about expected future … 10/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management events, based upon evidence, research, and experience. LEARNING OBJECTIVES Demonstrate the value and role of effective forecasting in the
development of successful strategies KEY TAKEAWAYS Key Points An important aspect of forecasting is the relationship it
holds with planning. Forecasting can be described as
predicting what the future will look like, whereas planning predicts what the future should look like.
As part of the implementation of policies and strategies,
the forecasting method develops a reliable picture of
the company’s expected future environment.
Quantitative forecasting generally employs statistical
confidence intervals and historical data to project potential future trends that are based upon the criteria being analyzed.
Qualitative approaches are the opposite: they rely on
logical premises, expertise, or past experience to generate estimates of future circumstances.
Forecasting enables a manager to look at the current
environment and identify likely scenarios, each of which
may require a deviation from the overall strategy.
Key Terms forecast: An estimation of a future condition. … 11/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management scenario: An outline or model of an expected or sup- posed sequence of events.
planning: The act of formulating a course of action or of drawing up plans. Forecasting is the process of making statements about expected future
events based upon evidence, research, and experience. For example, a
business might estimate the exchange rate between the U.S. and the EU
one year from now to determine the real financial cost of a project.
An important and often overlooked aspect of forecasting is the relationship it holds with planning. Forecasting can be described as predicting
what the future will look like, whereas planning predicts what the future
should look like. While both are managerial functions, forecasting is rife
with external uncertainty while planning is hindered by internal
uncertainty. Forecasting Methods
Forecasting can be accomplished in a variety of different ways, some
more statistically reliable than others. Following are a few critical points
of differentiation and specific strategies to keep in mind when
forecasting. Quantitative vs. Qualitative
One of the simplest points of differentiation between methods is the reliance on numbers for accuracy. Quantitative forecasting generally uses
statistical confidence intervals and historical data to project potential future trends that are based upon the criteria being analyzed. In this format, results are expressed in certainty intervals (i.e., how confident can
we be that this will be the case?) and often rely on financial data (exchange rates, industry growth, etc.).
Qualitative approaches are the opposite; they rely on logical premises or
past experience to generate estimates about future circumstances. The
inherent problem with the qualitative approach is simple: subjectivity. … 12/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management While quantitative measure use data to express objective results, qualitative approaches do not have this luxury. Generally this type of forecast
will include the opinions of experts, upper management, and market
research. Quantitative vs. qualitative forecasting: This flow chart compares
quantitative and qualitative forecasting methods. Qualitative forecasting
relies more on opinions than data and can employ market research, salesforce input, or a jury of executives. In contrast, quantitative forecasting relies
more on objective, numerical data, and can look at chronological trends and
statistical regression to infer cause-and-effect. Causal Forecasting
Another method of forecasting, which is likely to be both quantitative
and qualitative, is the causal/econometric approach. This strategy tasks
managers with identifying cause and effect relationships of past instances by defining a series of if/then statements that express the likelihood of the outcome which follows. For example, if consumer spending
is down in Q2, then it is likely that gross domestic product (GDP) growth
will be down in Q3. Whether or not this is true would have to be sup- … 13/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management ported with data, but the forecast is that Q2 consumer spending results
could forecast Q3 GDP growth. Implications of Forecasting
Keeping these methods in mind, it is important to understand how management uses these forecasts to draw conclusions. Forecasting plays a
role in the implementation of policies and strategies. The practice helps
businesses create plans for different situations, in addition to contingency plans for adapting if and when necessary.
Forecasting enables a manager to look at the current environment and
identify likely scenarios, each of which may require a deviation from the
overall strategy. As the management team implements the broader strategy, it must continuously monitor the current environment for deviations
and use forecasting to adapt both the primary strategy and contingency
plans for potential shifts.
To summarize, forecasts enable businesses to prepare new strategies or
reinforce the existing strategy, based upon the projections made. The Resource-Based View
In the resource-based view (RBV), strategic planning uses organizational
resources to generate a viable strategy. LEARNING OBJECTIVES Describe the intrinsic competitive advantage defined by the
resource-based view strategy KEY TAKEAWAYS … 14/18 6/27/2021 Internal Analysis Inputs to Strategy | Boundless Management Key Points Strategic approaches are wide and varied, and the resource-based view is a commonly cited strategic approach to attaining competitive advantage.
To transform a short-run competitive advantage into a
sustained competitive advantage requires that these
resources be varied in nature and not perfectly mobile.
They also must not be easily imitated or substituted
without great effort.
The RBV theory involves first identifying the firm’s potential key resources and deriving a strategy to apply
them to create synergy.
If key resources are valuable, rare, inimitable, and nonsubstitutable (VRIN), they may enable a strategy for
achieving competitive advantage.
Key Terms heterogeneous: Diverse in kind or nature; composed of diverse parts.
imitable: Capable of being copied.
substitutable: Capable of being replaced. The resource-based view (RBV) of strategy holds company assets as the
primary input for overall strategic planning, emphasizing the way in
which competitive advantage can be derived via rare resource combinations. To transform a short-run competitive advantage into a sustained
competitive advantage requires that these resources are heterogeneous
in nature and not perfectly mobile. Effectively, this principle translates
into valuable resources that are cannot be either imitated or substituted
without great effort. If the firm’s strategy emphasize...
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