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In this class we're focusing our attention
on Porter and, and the SWOT analysis method.
Not because those are the only tools but
just because we have a limited amount of time.
So, I just wanted to introduce you to a few other tools.
I'm not going to, I'm not going to really use them to analyze our case situation.
I'll just briefly go, go over these, but I wanted you
at least be aware of a few others and you can, you
know, then it's sort of a starting point for some independent research
on, on various methods for, for different, different types of strategic analysis.
Hopefully.
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so, we're really looking at sort of the broad business environment,
when we're asking things like the political environment you're dealing with,
you know, what do we think the economic factors are that matter you
know, major workforce trends or unemployment, inflation, things like that.
Socio-cultural factors within a particular
business environment or technological factors.
You can think of this really being applied very
similar to the way that you would use SWOT analysis.
You would basically use these headings to help organize some of your thinking.
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And identify risks to strategy implementation.
There's lots of variations you know, when you, along
that lineage or, or the tradition of SWOT analysis.
There's also an acronym called the SLEPT which
adds the, SLEPT would add the, basically just adds legal.
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Legal considerations to this.
There's one called PESTLE.
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These are all various, just little acronyms for the various headings, so it
adds, specifically,
environmental.
Well, I know there's one called TECOP.
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the, sort of current I guess, but importantly, potential scope
for growth in that business segment of yours and what that implies
then is, potentially, a need for investment or a potential use
of financial resources that, presumably, are coming out of our your operations.
Share indicates, kind of of thinking about the share of the market, indicates
some potential source of cash, so if you're thinking about categorizing
your business units, a business unit that has a large market share is generating
lots of cash that can go into various uses.
A business unit that's assessed as having large market, market growth potential
would be potentially a a, a use of
that cash or income, because you would be investing in, in that business line.
So, there are four different categories.
The, the, the category down here.
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Is, you have a high market share, but low growth.
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And what a cash cow does is it just
generates lots of cash that can be used elsewhere.
Now, presumably, what you want to do over time is move all of your business
units, the basic idea here is that ultimately, if you are trying to return
some value to financial claimants like creditors
and equity holders, you would want to move
all of your business units eventually in the general direction of being a cash cow.
Because that's when they're throwing off basically
more financial resources than they are using.
So, there is some sense in which over time everything is, is you're
trying to manage everything to wind up in, in this quadrant down here.
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market share, but high need for cash, high growth area, so high need for cash.
So, you have a high market share, it might be financing itself, but it's not really
throwing off lots of extra resources and that's
what we call a star, a star business.
Which you know, to me, is a little bit
ironic because you don't really want things just to
be stars unless you just like running, you know,
empires, which, I suppose, some business leaders aspire to do.
If you're really running the business to return,
return value to the owners, ultimately you're trying it.
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you know, or cut costs and gather market share.
And maybe turn it into a cash cow.
Or you might just think about divesting the thing eventually.
So, basically, you know, those would be the kind of two
options, is, cut costs, or cut this business line out altogether.
In the literature, you'll typically see just thinking
about cutting it out altogether because presumably, if it's
a dog, you're really far behind other market leaders
in that, in that business line or business segment.
And then the last one is they
actually creatively just characterize with this question mark.
This is the one that, where you have a
low market share but you actually identify a high potential.
So, presumably, you're either going to, it's going to become a
dog and be gone, or it's going to become you know,
a star where you can gain more market potential, and then,
hopefully over time, it will become one of your cash cows.
So, that's how you make use of thinking about
different business lines using the Boston Consulting Group Matrix.
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Another tool that I don't know if it's maybe a liberal
use of the word tool, is, is just a, an approach, is scenario planning.
And thinking about characterizing potential future states of the world, but
more in a narrative framework rather than just purely numerical forecasts.
So, this is obviously a very old idea for thinking about preparing for the future,
it presumably has been done in many cultures
over centuries you know, maybe going back to the very earliest stages
of us communicating with each other and, and thinking about the future.
Modern scenario planning has its roots in work done for the
U.S. Department of Defense at the Rand Corporation in the 50s.
And, what I believe is the strength of scenario
planning, is that you tend to come up with stories.
Number one, you tend to come up with stories, and there's a benefit in that.
Because not everyone is, sort of, motivated
and highly sensitized to purely technical analysis.
So, having a narrative is actually very
useful for change management and for communication.
But importantly, they're not just stories, they tend to be internally consistent.
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So you wind up telling a, a story
of a very tough business environment in the future.
And what I mean by internally consistent is
the tough business environment kind of it makes sense.
Tough business environment means there's going to be
lots of competition, or maybe our inputs are costly.
That's the kind of thing.
And what that means in more of a, a, you know, if
you were to do an analysis in a purely technical way, then
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the way you would achieve internal consistency in your analysis is you
would have to be careful to ensure that certain assumptions are correlated.
So, if, you know, when I tell a story that the business environment is
going to be bad, and then I have lots of bad things like high
input costs mean, you know, maybe a lower quality workforce because we might be
forced having to to cut, cut some of our, our search and, and compensation policies.
And maybe if the high input, if the input cost are high that means
actually there's going to be some minimum amount
beyond which we can't really cut our prices.
Which means actually it's going to you know, scare away some demand because of
the high prices, so actually there's a lot of different assumptions in that in that
scenario I just described and if you want to do it in a purely
technical way, one method you might think
of using is called Monte, Monte Carlo simulations.
But importantly, in the Monte Carlo
simulations, in these more technical approaches
to forecasting, you would have to explicitly go in and say make sure.
Hey, did I correlate my demand to somehow my price to
somehow, you know, my statement about input costs and all of that.
You'd want to make sure that your model was internally consistent.
So, you can achieve, you can achieve coherent scenarios in both purely
technical approaches like Monte Carlo or through these narrative approaches,
but sometimes it's a little more intuitive to to in least, compliment your
technical approaches or forecasting with these, with these narrative scenarios.
Probably the most the best known modern proponent
of scenario planning is Shell, the Shell Oil Company.
And if you go to their website and you look
for their future scenarios, they describe these, you know, long-range
forecasts of what the future might look like, and they
tend to have what we expect the world to be.
And then some kind of very tough, difficult scenario that we
want to make sure our strategy is robust to, and also some
sort of very positive, optimistic scenario, that we want to make sure
our strategy would put us in a position to take advantage of.
That's the advantage of scenario planning is, is is creating
12:58
And then, we have something called the balanced scorecard, and
the balanced scorecard, I think of as really more of a strategy execution
tool, and for me, in particular, it's a, it's a good communication tool.
The balance score card was developed by Kaplan
and Norton in, at Harvard in the 90s.
It's designed to measure a broad spectrum of organizational effectiveness.
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So, the innovation of the balance score card is to
include multiple perspectives beyond simply
measurable economic and financial criteria.
You know, you will think about well, one kind
of acronym that's, that's sort of in the same spirit of the Balanced Scorecard
you say it would be 3Ps, people, profit, and people, planets,
and profit or whatever order you'd, you want to put them in.
But the idea is to basically keep in mind
the broader set of stakeholders in the, in the business.
And I think that's why it's particularly useful for
communication because you know ,what you want to do is,
you, when you're running a business, you want to
be clear and coherent to all of the stakeholders.
So, no one, sort of, you don't wind up with a
set of stakeholders who really are pulling the organization in a
different type of, type of direction, so it sort of organizes
and communicates to all of the stakeholders the very broad set of
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goals and objectives that you have.
In that sense, it, it is more of a, not
only a communication tool but a, but an implementation tool.
A place to kind of warehouse and update all of
your goals and objectives and measures, and things like that.
So, those are just a couple of different types of
strategy development and implementation tools that you could make use of.