Business Policy JCP

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Part 2-A

CONDUCT A STRATEGIC GAP ANALYSIS AND IDENTIFY MAJOR ISSUES

ASSESS OVERALL FIT AND IDENTIFY KEY ISSUES/PROBLEMS:

(ENVIRONMENT  STRATEGY  ORG. CAPABILITIES)

Having worked through each of the individual components of the “criterion of consistency” framework, it is now time to put the various pieces together to assess the overall fit between the current strategy and both the external environment and the org. capabilities (built on resources, management preferences and organization). In doing so, you should also be able to identify the key issues/problems that the firm is facing. If you have done your analysis correctly, the key issues/problems that surface should provide evidence of and an explanation for the current performance of the firm.

The process is the same as that used in each of the previous steps – Collect all the needed information (Data Collection), put the information into a form that can be reviewed and studied (Analysis and Organization), and then synthesize and integrate what you have learned so that you can make good decisions (Conclusions and Recommendations). The difference is the levels of analysis. In previous steps you looked at each component of the model. Now, you are going to bring the information and conclusions from previous steps together to gain an overall understanding of the firm’s position.

1. DATA COLLECTION

As noted, you have collected the data through your work on each of the previous steps. What is needed now is to simply bring it all together in one place. Review your conclusions from the previous steps on firm performance, environment, strategy, and org. capabilities and jot-down the important information here. Note that you can use “short-hand notes” here, so long as you remember the richness of your ideas in each section and refer back to those when you are analyzing and making decisions on the information in steps 2 and 3 below.

THE ENVIRONMENT/INDUSTRY

1. Drivers of change

2. Key survival factors

3. Product/Market and Value Proposition possibilities

STRATEGY OF THE FIRM

1. Goals

2. Product focus and market focus

3. Value proposition

4. Core Activities

ORGANIZATIONAL CAPABILITIES OF THE FIRM

1. ___________________

2. ___________________

3. ___________________

PERFORMANCE OF THE FIRM

1. Financial Performance

2. Market Performance

3. Organizational Health

2. ORGANIZATION AND ANALYSIS

a. The Strategy  Environment Link

Compare the drivers of change and key survival factors of the environment with the strategy components of the firm. Identify:

• Where, if at all, there is a good fit between environmental demands and the firm’s strategy. That is, identify how the strategy does a good job of addressing/responding to specific drivers and/or KSFs

• Where, if at all, there is a misfit between the environmental demands and the firm’s strategy. That is, identify how the strategy does a poor job of addressing/responding to specific drivers and/or KSFs

• Where there are potential future misfits (given current industry trends). That is, identify where the strategy is likely to fall short of addressing/responding to specific drivers and/or KSFs in the future

b. The Strategy  Org.s Capabilities Link

Now look inside the firm and compare the package of Org. Capabilities created by Resources, Management Preferences, and Organization with the strategy components of the firm. Identify:

• Where, if at all, there is a good fit between the org. capabilities of the firm and the firm’s strategy. That is, show how the capabilities support specific aspects (value proposition, goals, etc.) of the firm’s strategy

• Where, if at all, there is a misfit between the org. capabilities of the firm and the firm’s strategy. That is, show how the capabilities fail to support specific aspects (value proposition, goals, etc.) of the firm’s strategy

• Where there are potential future misfits (given current trends within the firm). That is, show where/how the capabilities may fail to support specific aspects (value proposition, goals, etc.) of the firm’s strategy in the future

c. Firm Performance and Strategic Gaps

Theory and empirical research inform us that firm performance is closely related to the firms position vis-à-vis the criterion of consistency. That is, the better the fit among the three components of in the criterion of consistency framework, the better is the firm’s performance.

Review the results of your “fit” analysis and attempt to document how the fits/misfits identified in your analysis may explain the achievements or lapses in firm performance on one or more of the three dimensions: financial performance, market performance and organizational health

3. CONCLUSIONS AND RECOMMENDATIONS

Given the above, answer the following questions:

a. Overall FIT and Symptoms: Taken together, how do you see the overall alignment among the elements of the “criterion of consistency”? That is, is there a good fit, an ok but weakening fit, a poor fit, a really bad fit, etc.? Be sure to explain WHY you believe this is the case. Next, refer back to your assessment of firm performance and show how this fit (or lack of fit) is reflected in the performance of the firm. That is, can the “symptoms” of underlying problems (e.g., decreasing sales or market share, poor profitability, disgruntled employees, etc.) identified in your analysis of the firm’s performance be traced to specific strategic “fit” problems?

I. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________

II. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________

III. ___________________________________________________________________________________________________________________________________________________________________________________________________________________________

b. Selecting the Most Significant Issues Facing the Firm:

Based on the fit/misfit identified above, highlight the areas that you see as the biggest issues/problems. That intent here is to move beyond the symptoms identified through performance and other previous analysis above to reveal the underlying causes that the firm must address. That is, what is causing the symptoms (e.g., decreasing sales or shrinking market share, poor profitability, disgruntled employees, etc.) that were identified above? Where possible, these causes should be expressed in terms of the alignment (or misalignment) between specific strategy components and specific aspects of the environment and/or org. capabilities (e.g., the product/market focus is no longer appropriate for the environmental conditions of … because; the … org. capabilities do not support the value proposition because ..., etc.).

c. Project Future Performance of the Firm Given the Challenges identified in “a’ and “b” above:

Given your descriptions of this “current state” of the firm, what would you expect performance to be like in the next few years if they do not make any changes to their strategy and/or operations? Undertake the following:

I. Briefly describe the likely future state of the firm in words, showing where/how the issues identified above are likely to affect the actions and outcomes of the firm.

I. Use techniques taught in earlier classes (e.g., accounting, finance, marketing, etc.) to project a 5-year pro forma income statement that assumes a logical progression of the firm’s current strategic fit and performance levels.

Specifically, do the following:

· Use a 5-year timeframe

· Use the common-size (sometimes called “vertical analysis”) technique/tool to project the performance of the firm over the next five years, assuming that (a) it makes no changes to its current strategy or capabilities and, (2) industry changes will occur in the direction predicted by you in Part-1A of the SBI process

· Provide this projection, in a table, and on a single page

· Use additional sheets (if needed) to identify the “base components” line item used in the computations of other line items, any assumptions made, and any clarifications that are deemed necessary

PART 2-B

SELECTING A NEW STRATEGY

In the previous steps, you evaluated the current fit in the company and, in doing so, highlighted the major issues/problems faced by the firm. Your task now is to generate and evaluate possible solutions. Given your previous work, you probably have a number of ideas of what the company “could do”. Note that this is very different from what they “should do”. Following the process outlined below will help you move from generic “coulds” to justifiable “shoulds”.

1. DATA COLLECTION

This is where you can collect all your ideas, new and old, about what the company could do. Try to brainstorm here, being open and not rejecting things at this point. The intent is to get all of the ideas out on the table, and the only caveat is that the ideas be directed at solving the issues/problems addressed in the previous step. However, do try to channel your thinking into two broad categories:

Strategic Adjustments : These are changes in strategy components (goals, product focus/market, focus, value proposition and core activities) that the firm could consider

Capability Changes : These are changes in org. capabilities that the firm could consider to address the strategic adjustments proposed (above) by you.

2. ORGANIZATION AND ANALYSIS OF DATA

With all the ideas on the table, you now need to sort through and organize them into at least two viable strategic proposals (you are welcome to do more than two if you want). For each proposal, you need to document the following:

1. Describe the specific changes in strategic components being recommended

2. Clearly explain how and why you believe the proposal addresses the major issues/problems facing the company

3. Describe, in general, the changes to the current capabilities that need to be made so that the firm can successfully implement its new strategy

4. Identify (at least broadly) the impact that all these changes would have on both the revenues and expenses of the company. .

Note : While there can be some overlap in the two proposals, they need to be unique in substantive ways .

Proposal -1

1. ______________________________________________________________________

2. ______________________________________________________________________

3. ______________________________________________________________________

4. ______________________________________________________________________

Proposal-2

1. ______________________________________________________________________

2. ______________________________________________________________________

3. ______________________________________________________________________

4. ______________________________________________________________________

3. CONCLUSIONS AND RECOMMENDATIONS - STRATEGIC CHOICE

Now you must make a choice between your proposals. Use the information in your tables as well as any other thoughts you have to determine your preferred proposal. Then answer the following questions.

· Which proposal do you prefer? ________________________________________________

· Why do you prefer this proposal? _______________________________________________

· Which proposal carries more risk? Why? _____________________________________

· What might occur (inside or outside the firm) that would make your preferred proposal fail? _____________________________________________________________________