Identify Demings for Management. Not all the points will relate to all businesses or corporations.
1. Analyze the company's history, development, and growth
- A convenient way to investigate how a company's past strategy and structure affect it in the present is to chart the critical incidents in its history - that is, the events that were the most unusual or the most essential for its development into the company it is today
- Some of the events have to do with its founding, its initial products, how it makes new-product market decisions, and how it developed and chose functional competencies to pursue. Its entry into new businesses and shifts in its main lines of business are also important milestones to consider
2. Identify the company's internal strengths and weaknesses - (Strength, Weaknesses, Opportunity, and Threats) SWOT analysis
- Use all of the incidents you have charted in the historical profile to develop an account of the company's strengths and weaknesses as they have emerged historically
- Examine each of the value creation functions of the company, and identify the functions in which the company is currently strong and currently weak
- Some companies might be weak in marketing; some might be strong in research and development
- Make lists of these strengths and weaknesses
3. Analyze the external environment - identify environmental opportunities and threats
- Here you should apply all information you have learned to analyze the environment the company is confronting. Which factors in the macroenvironment will appear salient depends on the specific company being analyzed. However, use each factor in turn (for instance, demographic factors) to see whether it is relevant for the company in question
- Having done this analysis, you will have generated both an analysis of the company's environment and a list of opportunities and threats
- The SWOT checklist lists some common environmental opportunities and threats that you may look for, but the list you generate will be specific to your company
4. Evaluate the SWOT analysis - what do your findings mean?
- Balance strengths and weaknesses against opportunities and threats
- Is the company in an overall strong competitive position?
- Can it continue to pursue its current business- or corporate-level strategy profitably?
- What can the company do to turn weaknesses into strengths and threats into opportunities?
- Can it develop new functional, business, or corporate strategies to accomplish this change?
5. Analyze corporate-level strategy
- First, define the company's mission and goals. Sometimes the mission and goals are stated; at other times, you will have to infer them from available information
- The information you need to collect to find out the company's corporate strategy includes such factors as
- Its line(s) of business and the nature of its subsidiaries and acquisitions
- An analysis of the relationship among the company's businesses
- Do they trade or exchange resources?
- Are there gains to be achieved from synergy?
- Alternatively, is the company just running a portfolio of investments?
- This analysis should enable you to define the corporate strategy that the company is pursuing (for example, related or unrelated diversification, or a combination of both) and to conclude whether the company operates in just one core business
- Other issues should be considered as well
- How and why has the company's strategy changed over time?
- What is the claimed rationale for any changes?
- Often it is a good idea to analyze the company's businesses or products to assess its situation and identify which divisions contribute the most to or detract from its competitive advantage
- It is also useful to explore how the company has built its portfolio over time. Did it acquire new businesses, or did it internally venture its own?
- All these factors provide clues about the company and indicate ways of improving its future performance
6. Analyze business-level strategy
- Can the company deal with these threats?
- How should it change its business-level strategy to counter them?
- To evaluate the potential of a company's business-level strategy, you must first perform a thorough SWOT analysis that captures the essence of its problems
- Once you know the company's corporate-level strategy and have done the SWOT analysis, the next step is to identify the company's business-level strategy
- If the company is a single-business company, its business-level strategy is identical to its corporate-level strategy
- If the company is in many businesses, each business will have its own business-level strategy
- You will need to identify the company's generic competitive strategy - differentiation, low cost, or focus - and its investment strategy, given the company's relative competitive position and the stage of the life cycle
- The company also may market different products using different business-level strategies
- For example, it may offer a low-cost product range and a line of differentiated products
- Be sure to give a full account of a company's business-level strategy to show how it competes
- Identifying the functional strategies that a company pursues to build competitive advantage through superior efficiency, quality, innovation, and customer responsiveness and to achieve its business-level strategy is very important. The SWOT analysis will have provided you with information on the company's functional competencies
- You should further investigate its production, marketing, or research and development strategy to gain a picture of where the company is going
- For example, pursuing a low-cost or a differentiation strategy successfully requires a very different set of competencies
- Has the company developed the right ones?
- If it has, how can it exploit them further?
- Can it pursue both a low-cost and a differentiation strategy simultaneously?
- The SWOT analysis is especially important at this point if the industry analysis, particularly Porter's model, has revealed the threats to the company from the environment
- Once you complete this analysis, you will have a full picture of the way the company is operating and be in a position to evaluate the potential of its strategy. Thus, you will be able to make recommendations concerning the pattern of its future actions. However, first you need to consider strategy implementation, or the way the company tries to achieve its strategy
7. Analyze structure and control systems
- The aim of this analysis is to identify what structure and control systems the company is using to implement its strategy and to evaluate whether that structure is the appropriate one for the company
- Different corporate and business strategies require different structures
- For example, does the company have the right level of vertical differentiation (for instance, does it have the appropriate number of levels in the hierarchy or decentralized control?) or horizontal differentiation (does it use a functional structure when it should be using a product structure?)?
- Similarly, is the company using the right integration or control systems to manage its operations? Are managers being appropriately rewarded?
- Are the right rewards in place for encouraging cooperation among divisions?
- These are all issues that should be considered. In some cases, there will be little information on these issues, whereas in others, there will be a lot. Obviously, in analyzing each case, you should gear the analysis toward its most salient issues. For example, organizational conflict, power, and politics will be important issues for some companies. Try to analyze why problems in these areas are occurring. Do they occur because of bad strategy formulation or because of bad strategy implementation?
- Organizational change is an issue in many cases because the companies are attempting to alter their strategies or structures to solve strategic problems. Thus, as a part of the analysis, you might suggest an action plan that the company in question could use to achieve its goals. For example, you might list in a logical sequence the steps the company would need to follow to alter its business-level strategy from differentiation to focus
8. Make recommendations
- The last part of the case analysis process involves making recommendations based on your analysis. Obviously, the quality of your recommendations is a direct result of the thoroughness with which you prepared the case analysis. The work you put into the case analysis will be obvious from the nature of your recommendations
- Recommendations are directed at solving whatever strategic problem the company is facing and at increasing its future profitability
- Your recommendations should be in line with your analysis; that is, they should follow logically from the previous discussion
- For example, your recommendation generally will center on the specific ways of changing functional, business, and corporate strategy and organizational structure and control to improve business performance
- The set of recommendations will be specific to each case, and so it is difficult to discuss these recommendations here. Such recommendations might include an increase in spending on specific research and development projects, the divesting of certain businesses, a change from a strategy of unrelated to related diversification, an increase in the level of integration among divisions by using task forces and teams, or a move to a different kind of structure to implement a new business-level strategy