StrategyPractitionerToolsCoreToolsOctober19990?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)structureFinancialperformancevs.competitors,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-ClientandIndustryExperienceAnalysisPlan

Compaq/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?Amazon:Internetbasedchannelsofdistributiononbehalfofshareholders.PaulElkin,“MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking〞

SourceList

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-ClientandIndustryExperienceCompetitiveBenchmarking

BallCorporation/Packaging/VasuKrishnamurthy&MikeWeissMotorola/Technology/VasuKrishnamurthyPwCMCS/Consulting/VasuKrishnamurthyUnitedAirlines/Travel/VasuKrishnamurthyPaulElkin,“MasteringBusinessPlanningandStrategy:ThePowerandApplicationofStrategicThinking〞LiamFahey,RobertM.Randall,“ThePortableMBAinStrategy〞RobertM.Grant,“ContemporaryStrategyAnalysis〞,3rdEditionMichaelGould,AndrewCampbell,MarcusAlexander,“Corporate-LevelStrategy:CreatingValueintheMultibusinessCompany〞

SourceList

CompetitivePositioningSummaryCompetitivePositioninganalysisshowshowacompanyispositionedinitsindustryrelativetoitscompetitorsPositioningMapExample:EntertainmentHighLowLowHighChannelStrengthContentStrengthIntellectualpropertystrengthProductstrengthLowMediumHighMarketStrengthCompetitivePositioningApproachCompetitivePositioningWhenToApplyToshowclientsthatyouunderstandtheirmarketandposition.Canalsobeusedtodevelopstrategicrecommendations.STEPDATAREQUIREDSOURCE(S)1. Chooseaxesthatarerelevanttocustomerdecision-making(first)andthosewhichdifferentiatesuppliers(second)2. Illustratewherecompetitorslieonmap(s)3. Interpretmapforstrategicimplications(e.g.,clustersoropenspaces)InformationonindustryasawholeInformationoncompetingcompanies’strategiesandpositioningTradeassociationsTradeperiodicalsandpublicationsInformationservicesAnalystreportsVariouscompanies’annualreportsandotherpublicinformationInterviewswithcompetitormanagementIndustryexpertsCitations-ClientandIndustryExperienceCompetitivePositioning

BarclaysGlobalInvestors(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〞SourceList

CoreCompetencyAnalysisSummaryCoreCompetencyAnalysisprovidesapracticalandsystematicprocesstoidentifyacompany’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-ClientandIndustryExperienceCoreCompetencyAnalysis

Galileo/Travel/SpencerLin&VasuKrishnamurthyGiddings&Lewis/MachineTool/VasuKrishnamurthyMetLife/Insurance/KITdatabasePwCMCS/Consulting/VasuKrishnamurthySave&Prosper/Banking/KITdatabaseDavidA.Aaker,“DevelopingBusinessStrategies〞,5thEdition

RobertM.Grant,“ContemporaryStrategyAnalysis〞,3rdEdition

MichaelGould,AndrewCampbell,MarcusAlexander,“Corporate-LevelStrategy:CreatingValueintheMultibusinessCompany〞HenryMintzberg,BruceAhlstrand,JosephLampel,“StrategySafari:AGuidedTourThroughtheWildsofStrategicManagement〞HenryMintzberg,JamesBrianQuinn,SumantraGhoshal,“TheStrategyProcess〞HenryMintzberg,JamesBrianQuinn,“TheStrategyProcess:Concepts,Contexts,CasesSourceListEstablishSegmentationObjectivesDataAssessmentModelConstruction

BuildClosedLoopPerformanceToolWhataretheobjectivesofthesegmentation?BetterROI,redistributespending,changesalesefforts?Whatdataisneededtomeettheobjectives?Howmuchofthatdatacanbeobtainedinternally?externally?Whatdataisessentialtothesegmentation?Whatdatacanbeafocusforfurtherimprovementinthefuture?Definethevariablesofthemodelwithaccessibledata?Developananalyticaltoolthatutilizesthevariablestodetermineacustomerrankingorgrouping(iemostidealpartnertomostinefficientpartner).Refocusinternaleffortsbasedonsegmentationoutcome.Establishawaytocapturethekeydataneededtosegmentcustomerbase.Utilizethedataonanongoingbasistoimproveperformanceandcontinuallyrewardthebetterperformingcustomers.CustomerSegmentationMethodologyHighlevelworkflowforacustomersegmentationCustomerSegmentationMethodologySummary

CustomerSegmentationSummaryCustomersegmentationisadivisionofamarketintodistinctgroupsofbuyerswhomightrequireseparateproductsand/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-ClientandIndustryExperienceCustomerSegmentation

Galileo/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.Step1 Plotaccumulatedvolumefordifferentyearsagainstunitcostonalog/logscale(unitcostshouldbedeflatedby usingageneralindexsuchastheGNPdeflator,orspecificindicesforthevariousparsofcostsuchasmaterials andlabor.)Step2 Addastandardregressionlinetothegraph.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:AGuidedTourThroughtheWildsofStrategicManagement

FinancialModelingSummaryFinancialModelingThefinancialmodelwillallowustotestmanagementassumptionsandunderstandhowdifferentactionsmayaffectperformanceonsomekeycompetitivedimensions.ApproachWhenToApplyFinancialModelingiseffectiveinanalyzinghowacompany’sperformance,incoreareasofbusiness,willbeaffectedbypursuingdifferentcoursesofaction.Thistoolfacilitatesanunderstandingofvariouscause-effectandprovidesamodelbywhichtotestvarious"whatif"statements.FinancialModelingFollowthesestepstosuccessfullycreateaFinancialModelStep1 Gatherinformationonkeydriversie.FromthecashflowanalysisperformedaspartoftheSVADataandinsightfromVoiceoftheCustomerisanothersourceofinsightStep2 Maptherelationshipsandidentifyfactorswhichreinforceoneanothervs.thosethathaveanegativerelationship(e.g.increaseinpricemayhaveanegativeeffectondemand)Step3 Buildthefinancialmodelbasedonthecause-effectrelationshipsidentifiedStep4 GatherdatafromindustryanalysisorinternalcorporatedataStep5 Testthequalityofthemodelbydoingmanualcalculationsonsome"whatif〞Step6 Perform"whatif"toassessthecompletenessofthemodelCitations-ClientandIndustryExperienceFinancialModeling

FlemingsFundManagementLtd(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.AttractivenessModelStep1 Identifyproduct,categoryormarketoverallattractivenessasbeinglow,medium,orhigh.Plotalongx-axis.Step2 Identifyproductcategory,ormarketfitwithcompanyobjectivesasbeinglow,medium,orhigh.Plotalongy-axis.Step3 Evaluatenewlycreatedmatrix;aimtorevealproducts,categories,ormarketsthatfallunderhighoverall attractivenessandhighfitwithcompanyobjectives.WhentoApplyTheFitVs.AttractivenessModelisusedtoanalyzeanewproductorserviceoffering’sfitwithinacompany,incomparisontotheoverallattractivenessoftheproductoroffering.Thisparticularmodelrequiresjudgementswhicharesubjectiveinnature;oneshouldbeawarethatthismodelmayoversimplifythemarketsituation.Citations-ClientandIndustryExperienceFitvs.AttractivenessModelSourceList

Galileo/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: Assesstheoveralleffectoftheforcesonindustryattrac