Sincerely, Ferrand van Wyk

Transcription

1 Small and Medium Enterprise Strategy (BES7S) Feedback Tutorial Letter Assignment & Dear Student Your feedback for the two assignments are combined. The overall editorial care and professionalism of the two assignments are the same. These assignments required from you to draw graphs and other illustrative analysis and some of you did not bother to do it in a neat and precise way. Please try and teach yourself in using software which could make it simple for yourself. Assignment, question one counted 80 marks. Many of you should in future try to plan how to answer such a question that count so many marks. One example is your numbering of sub answers. I could not sometimes make out where one sub answer stops and continuing to the next. Assignment you needed to orientate how to calculate the sub questions. Here your assignments should be numbered properly as the marker may get confused which answer belong to which question. Students please take care when typing and/or writing for spelling and grammar mistakes. These may lead to a whole different interpretation of what you wanted to write. This course is not called Small and Medium Enterprise Strategy for nothing but for a purpose. You should be able to formulate strategies in the correct language for the next person to understand what you want to bring through. Please see the attached possible answers that made up the assignments. Please work through all the chapters which in turn will prepare you well for the coming examinations. Sincerely, Ferrand van Wyk

2 Ten strategic management tools with their respective input variables are herewith listed: Internal Factor Evaluation (IFE): strengths & weaknesses of the enterprise; External Factor Evaluation (EFE): opportunities & threats in the market; Competitive Profile Matrix (CPM): critical success factors without which the enterprise would not survive; Internal-External Matrix (IE): strengths; weaknesses; opportunities; threats; Matching strategies (SWOT matching): strengths; weaknesses; opportunities; threats; Boston Consulting Group Matrix (BCG): relative market share position; industry growth rate percentage; Strategic Position and Action Evaluation Matrix (SPACE): financial strengths; environmental stability; competitive advantage; industry strengths; Grand strategy Matrix (GSM): rapid market growth versus slow market growth & strong competitive position versus weak competitive position; Quantitative Strategic Planning Matrix (QSPM): strengths; weaknesses; opportunities; threats; Earnings Per Share/Earnings Before Interest Tax (EPS/EBIT): Revenues/turnover/income; share price; interest rate; tax rate; number of shares outstanding; amount of capital required for investment(s) in specified project(s). Compiled by Chris van Zyl Page

3 STRENGTHS WEAKNESSES IFE: INTERNAL FACTOR EVALUATION KPI's IR PR WS CWS KPI's = Key Performance Indicators IR = Importance Rating PR = Performance Rating WS = Weighted Score CWS = Cummulative Weighted Score IFE procedure: Formulate applicable strengths and weaknesses which should describe the key performance indicators of the enterprise. Allocate an importance rating (a value between 0 and ) to each of the formulated strengths and weaknesses (the KPI s) and justify your choice of importance rating. A KPI with a higher importance rating (closer to one) than other KPI s, is regarded to be more important for the performance of the enterprise than the other KPI s The sum of all the allocated importance ratings should be equal to one (). Allocate a performance rating ( = best performance; = good performance; = poor performance and = worst or absence of performance) to each of the formulated strengths and weaknesses (KPI s) and justify your choice in each case. Multiply the allocated importance rating (IR) with the allocated performance rating (PR) for each of the formulated strengths and weaknesses (KPI s) in order to calculate a weighted score (WS) for each of the formulated KPI s. Add up all the weighted scores (WS) in order to calculate the cumulative weighted score (CWS) for the internal environment (the enterprise). Compiled by Chris van Zyl Page

4 OPPORTUNITIES THREATS EFE: EXTERNAL FACTOR EVALUATION IR PR WS KPI's KPI's = Key Performance Indicators IR = Importance Rating PR = Performance Rating WS = Weighted Score CWS = Cummulative Weighted Score CWS EFE procedure: Formulate applicable opportunities and threats which should describe the key performance indicators of the enterprise s external environment (the market). Allocate an importance rating (a value between 0 and ) to each of the formulated opportunities and threats (the KPI s) and justify your choice of importance rating. A KPI with a higher importance rating (closer to one) than other KPI s, is regarded to be more important for the performance of the enterprise than the other KPI s The sum of all the allocated importance ratings should be equal to one (). Allocate a performance rating ( = best performance; = good performance; = poor performance and = worst or absence of performance) to each of the formulated opportunities and threats (KPI s) and justify your choice in each case. Multiply the allocated importance rating (IR) with the allocated performance rating (PR) for each of the formulated opportunities and threats (KPI s) in order to calculate a weighted score (WS) for each of the formulated KPI s. Add up all the weighted scores (WS) in order to calculate the cumulative weighted score (CWS) for the external environment (the market). Compiled by Chris van Zyl Page

5 Internal-External Matrix IE MATRIX IFE Cumulative Weighted Scores E F E C W S = Grow & Build: Backward-, forward-, horizontal integration; market penetration; market development; product development. = Hold & Maintain: Market penetration; product development. = Harvest & Divest: Retrenchment; divestiture. IE Matrix procedure: Draw a matrix as seen above (IE Matrix) with IFE cumulative weighted score (CWS) values ( to ) on the horizontal axis and EFE cumulative weighted score values ( to ) on the vertical axis. There are three distinct regions on the IE Matrix: The dark region; grey region and the white region. Each of these regions are associated with some strategies as seen below the IE Matrix above. Plot the IFE cumulative weighted score that you have calculated in the IFE Matrix on the horizontal axis (x-axis) and likewise the EFE cumulative weighted score that you have calculated in the EFE Matrix, on the vertical axis (y-axis) of the IE matrix as seen above. These two sets of values or coordinates (IFE CWS and EFE CWS) intersect on the IE Matrix in a particular region (dark; grey or white). The suggested strategies associated with the particular region should then be recommended for implementation by the enterprise. Compiled by Chris van Zyl Page

6 CPM: COMPETITIVE PROFILE MATRIX CPY CPY CPY CSF's IR PR WS PR WS PR WS CWS CSF's = Critical Success Factors CPM procedure: Formulate a set of critical success factors (CSF s) for the enterprises that you would like to compare - these CSF s are aspects without which the enterprises could not sustainably perform or exist. Allocate an importance rating (a value between 0 and ) to each of the formulated CSF s and justify your choice of importance rating. Do not allocate a different set of importance ratings for each respective enterprise. All CSF s should therefore only have one importance rating that would apply for all enterprises that are being compared with one another. A CSF with a higher importance rating (closer to one) than another CSF, is regarded to be more important for the performance of the enterprises than the other CSF s The sum of all the allocated importance ratings should be equal to one (). Allocate a performance rating ( = best performance; = good performance; = poor performance and = worst or absence of performance) to each of the formulated CSF s and justify your choice in each case. The performance rating that you select for enterprise, for instance, cannot be repeated for enterprise, or enterprise, etcetera. In other words, each enterprise should be allocated a different performance rating (this is actually a ranking of performances of the respective enterprises at stake). Multiply the allocated importance ratings (IR s) with the allocated performance ratings (PR s) for each of the formulated CSF s (for each enterprise respectively) in order to calculate a weighted score (WS) for each of the CSF s of each respective enterprise that you are comparing with one another. Compiled by Chris van Zyl Page

7 6 Add up all the weighted scores (WS) for each enterprise in order to calculate the cumulative weighted score (CWS) for the respective enterprises. The enterprise with the highest CWS is the most competitive enterprise. STRENGTHS WEAKNESSES OPPORTUNITIES SO-strategies WO-strategies THREATS ST-strategies WT-strategies SWOT matching strategies procedure: Consider the previously formulated strengths, weaknesses, opportunities and threats to formulated matching strategies. The strengths and opportunities (SO-strategies) & strengths and threats (ST-strategies) should be matched in order to formulate matching strategies. The weaknesses and opportunities (WO-strategies) & weaknesses and threats (WTstrategies) should be matched in order to formulate matching strategies. The matching strategies should be actions in other words it should contain action verbs that would describe exactly what to do when the two components (S & O; S & T; W & O and W & T) are combined to form a strategy or strategies. High Medium Low RMSP High 0 Medium I S G R % TT GT FT Low -0 XT Compiled by Chris van Zyl Page 6

8 7 RMSP ISGR% GT FT TT 0 XT STARS QUESTION MARKS Backward/Forward/Horizontal Integration Market penetration Market penetration Market development Market development Product development Product development Divestiture CASH COWS Product development Diversification Retrenchment Divestiture DOGS Retrenchment Divestiture Liquidation BCG procedure: The relative market share position (RMSP) needs to be calculated for each of the competitor enterprises. Information/data such as turnover; sales; number of customers, etcetera should be used for this calculation. Divide each enterprise s figure by the largest enterprise figure as could be seen in the example table above. The largest figure divided by itself would therefore be equal to one () and all the others would be fractions of one. The growth rate (ISGR%) or industry sales growth rate; sales growth rate; etcetera, needs to be calculated for each enterprise. In some cases the growth rate (in a percentage) is provided. In other cases the growth rate needs to be calculated by applying the following formula: Growth rate % = [(sales previous year divided by the sales this year) ] X 00. Draw a matrix as seen above with RMSP on the x-axis and ISGR% on the y-axis. The units for RMSP should be between zero (0) and one () with the zero on the top right of the scale ranging to one on the top left of the scale. The units for ISGR% should vary between zero and plus (+) 0% as well as zero and minus (-) 0% starting with zero in the middle of the scale towards the +0% at the top and -0% at the bottom. Plot the RSMP and ISGR% coordinates that were calculated onto the matrix as in the example above. Compiled by Chris van Zyl Page 7

9 8 The position of each enterprise on the matrix could either be in the stars ; question marks ; cash cows or dogs quadrants. Depending on where an enterprise is positioned on the matrix, the suggested strategies (as in the table provided above) should be applied to improve the enterprise performance. INDUSTRY: QSPM No STRENGTHS No WEAKNESSES No OPPORTUNITIES No THREATS TOTALS (STAS) Strategic Alternatives Strategy option Strategy option IR AS TAS AS TAS QSPM procedure: Formulate a set of strengths (S); weaknesses (W); opportunities (O) and threats (T) as in the SWOT analysis. Identify the alternative strategies that could be implemented by the enterprise. Assign an importance rating (IR) to each of these SWOT variables. The importance rating is an indication of how important each variable is relative to each other when determining the potential impact on the alternative strategies that are considered for implementation. Each Compiled by Chris van Zyl Page 8

10 9 of these IR s should be a fraction of one. If all the variable IR s are summated it should be equal to one (). Assign an attractiveness score (AS) to each of the formulated variables. The AS of each variable indicates the level of support it provides to a specific alternative strategy. The attractiveness scores could vary between (highest support); (good support); (poor support) and (no or very little support). The assigned AS to each variable should not be the same. In other words, if an AS of was assigned to a variable, the other alternative strategy cannot be assigned with the same level of AS (therefore a, or should be considered as alternative AS s). Multiply the IR of each variable with the AS of the same variable to calculate the total attractiveness score (TAS) for each variable for each alternative strategy. Add all the TAS s for each alternative strategy in order to calculate the sum total attractiveness scores (STAS) for each alternative strategy. The alternative strategy with the highest STAS would indicate the best strategic option to implement. SPACE Matrix FS 6 CA 0 IS ES Compiled by Chris van Zyl Page 9

11 0 FS Conservative Aggressive. Market penetration. Backward/Forward/Horizont. Market development. Market penetration. Product developmen. Market development. Related diversificati. Product development. Diversification (related/unre CA IS Defensive Competitive. Retrenchment. Backward/Forward/Horizont. Divestiture. Market penetration. Liquidation. Market development. Product development ES SPACE procedure: From the SWOT analysis that was performed, select variables that could define or describe the financial strength (FS) of the enterprise; the competitive advantage (CA) of the enterprise; the environmental stability (ES) in the market and the strength of the particular industry (IS) within which the enterprise operates. Assign a value to each of the identified FS and IS variables where a +6 indicates a very strong position and a + a very weak position (of enterprise or industry performance respectively). Likewise, assign a value to each of the identified CA and ES variables where a - indicates a very strong position and a -6 a very weak position (of enterprise or market performance respectively). Determine the average score for each category of variables (FS; CA; IS & ES respectively). Add the two average scores for FS and ES together to find the y-axis coordinate. Add the two average scores for CA and IS together to find the x-axis coordinate. Plot the x-axis and y-axis coordinates onto the SPACE Matrix as seen in the example above. Draw a directional vector from the origin of the SPACE Matrix, that means from the (0; 0) coordinates in the centre of the graph, connecting with the calculated x-axis and y-axis coordinates that were calculated above (see example above). The directional vector in the example above was drawn in the top right quadrant of the matrix. The top right quadrant of the SPACE Matrix is associated with aggressive strategies. This suggests that any or a combination of the listed aggressive strategies should be pursued by the enterprise in order to improve on its performance. Compiled by Chris van Zyl Page 0

12 Should the directional vector be drawn in any one of the other three quadrants on the SPACE Matrix, the respective competitive; conservative or defensive strategies could be followed depending on the quadrant position of the vector on the SPACE Matrix. Weak Competitive Position (WCP) Grand Strategy Matrix Rapid Market Growth (RMG) Slow Market Growth (SMG) Strong Competitive Position (SCP) Weak Competitive Position (WCP) Rapid Market Growth (RMG) Quadrant II Quadrant I. Market penetration. Backward/Forward/Horizontal integration. Market development. Market penetration. Product development. Market development. Related diversification. Product development. Horizontal integration. Diversification (related/unrelated) 6. Divestiture 7. Liquidation Quadrant III Quadrant IV. Retrenchment. Diversification (related/unrelated). Divestiture. Joint ventures. Liquidation. Diversification (related/unrelated) Slow Market Growth (SMG) Strong Competitive Position (SCP) Compiled by Chris van Zyl Page

13 GSM procedure: From the SWOT analysis that was performed, select variables that could define or describe the rapid market growth (RMG); slow market growth (SMG); strong competitive position (SCP) or weak competitive position (WCP) of the enterprise. Assign a value to each of the identified RMG and SCP variables where a +6 indicates a very strong position and a + a very weak position (of industry or enterprise performance respectively). Likewise, assign a value to each of the identified WCP and SMG variables where a - indicates a very strong position and a -6 a very weak position (of enterprise or market performance respectively). Determine the average score for each category of variables (RMG; SCP; WCP & SMG respectively). Add the two average scores for RMG and SMG together to find the y-axis coordinate. Add the two average scores for SCP and WCP together to find the x-axis coordinate. Plot the x-axis and y-axis coordinates onto the GSM Matrix as seen in the example above. Draw a directional vector from the origin of the GSM Matrix, that means from the (0; 0) coordinates in the centre of the graph, connecting with the calculated x-axis and y-axis coordinates that were calculated above (see example above). The directional vector in the example above was drawn in quadrant I which is the top right quadrant of the GSM Matrix. This suggests that any or a combination of the listed strategies in quadrant I should be pursued by the enterprise in order to improve on its performance. Should the directional vector be drawn in any one of the other three quadrants on the GSM Matrix, the respective listed strategies is in the table above could be followed depending on the quadrant position of the vector on the GSM Matrix. EPS/EBIT procedures: EBIT (gross income for these purposes); Interest rate for paying back the loan from the Bank (prime rate); Tax rate (company tax rate); Share price; Number of shares outstanding (NOSO) and the Capital requirement (the amount of capital required to finance an identified project). Consider the following two scenarios as examples in order to illustrate how the EPS s could be calculated and interpreted in both scenarios: Scenario : Compiled by Chris van Zyl Page

14 EBIT: N$ 0 million Share price: N$ 0 Existing NOSO:. million shares outstanding Capital amount required: N$. million Interest rate (Bank prime rate): 0.7% Tax rate (Corporate tax rate): % Based on scenario conditions, which financing option would be the best option if you consider between the following four options: 00% debt financing; 00% shares finance; 8% shares & % debt combination financing as well as % shares & 7% debt combination financing? Scenario : EBIT: N$. million Share price: N$ 0 Existing NOSO:. million shares outstanding Capital amount required: N$. million Interest rate (Bank prime rate): 0.7% Tax rate (Corporate tax rate): % Based on scenario conditions, which financing option would be the best option if you consider between the following four options: 00% debt financing; 00% shares finance; 8% shares & % debt combination financing as well as % shares & 7% debt combination financing? EPS/EBIT PROCEDURE FOR COMBINATION FINANCING. Record EBIT (earnings before interest and tax) or gross income.. Calculate the interest amount (I) on that portion of the capital requirement that you want to finance through debt financing (loan from the Bank).. Deduct the interest amount (I) that you have calculated in () above from EBIT in order to derive at (EBT) earnings before tax (EBIT I = EBT).. Calculate the amount of tax (T) payable on EBT.. Deduct the amount of tax (T) calculated in () above from EBT to derive at (EAT) earnings after tax (EBT T = EAT). 6. Calculate the number of shares that you need to sell in order to find that portion of the required capital that you want to finance through the selling of shares by dividing the amount required by the share price. 7. Add number that you have calculated in (6) above to the existing number of shares outstanding (NOSO) to derive at the new (final) NOSO. 8. Calculate the earnings per share (EPS) by dividing EAT by the final NOSO. 9. Interpretation: the highest EPS indicates the best financing option to acquire the capital. Scenario : Compiled by Chris van Zyl Page

15 The analyses outputs display -decimal results because the rounding off to two decimal outputs sometimes fails to distinguish properly between the different EPS values. In scenario the capital requirements for the 8% share / % debt combination financing option was calculated as follows: 8% of the N$. mil. Total capital requirement = N$. mil., and % of the N$. mil. Total capital requirement = N$7 00. Interest on the N$7000 was calculated as N$0, 0. Calculating the extra number of shares to be sold in order to raise the N$. mil. was done by dividing the N$. mil. by the share price (N$0) = 00 number of extra shares to be sold. The 00 was added to the existing NOSO (. mil. shares) to get the final NOSO =. mil. shares. EPS was calculated by dividing EAT by the final NOSO to get A similar procedure was repeated on the % share / 7% debt combination financing option. EPS was found to be EPS for the % share / 7% debt option (8.78) was higher than the EPS of the 8% share / % debt option (8.778) therefore the first option was found to be the better financing option between these two options of scenario. Scenario : 8% Share/Debt % % Share/Debt 7% EBIT Interest EBT Taxes EAT No Shares.0.0 EPS % Share/Debt % % Share/Debt 7% EBIT.0.0 Interest EBT Taxes EAT No Shares.0.0 EPS In scenario the capital requirements for the 8% share / % debt combination financing option was calculated as follows: 8% of the N$. mil. Total capital requirement = N$. mil. and % of the N$. mil. Total capital requirement = N$7000. Interest on the N$7000 was calculated as N$0, 0. Calculating the extra number of shares to be sold in order to raise N$. mil. was done by dividing the N$. mil. by the share price (N$0) = 00 number of extra shares to be sold. The 00 was added to the existing NOSO (. mil. shares) to get the final NOSO = 00. EPS was calculated by dividing EAT by the final NOSO to get A similar procedure was repeated on the % share / 7% debt combination financing option. EPS was found to be EPS for the % share / 7% debt option (0.96) was lower than the EPS of the 8% share / % debt option (0.688) therefore the second option was found to be the better financing option between these two options of scenario. In scenario EBIT was N$0 mil., and in scenario EBIT was N$. mil. with all the other conditions exactly the same. The resulting differences in the EPS values between the two scenarios (and Compiled by Chris van Zyl Page

16 consequently also on the best financing options) were therefore mainly due to the differences in their respective EBIT values. EPS/EBIT PROCEDURE FOR SHARES ONLY FINANCING. Record EBIT (earnings before interest and tax) or gross income.. There is no interest payable if the financing is done only through the selling of shares.. Calculate the amount of tax (T) payable on EBT.. Deduct the amount of tax (T) calculated in () above from EBT to derive at (EAT) earnings after tax (EBT T = EAT).. Calculate the number of shares that you need to sell in order to find that portion of the required capital that you want to finance through the selling of shares by dividing the amount required by the share price. 6. Add number that you have calculated in (6) above to the existing number of shares outstanding (NOSO) to derive at the new (final) NOSO. 7. Calculate the earnings per share (EPS) by dividing EAT by the final NOSO. 8. Interpretation: the highest EPS indicates the best financing option to acquire the capital. Scenario : In shares only financing there is no interest payable, because there is no debt component involved. The number of shares that need to be sold to raise the capital requirement of N$. mil. in this example is calculated by dividing the capital requirement by the share price. In this example the additional number of shares that need to be sold is therefore ( /0 = 0000) fifty thousand. This number of shares is added to the existing NOSO of. mil. to get the final NOSO of. mil. In order to calculate EPS, EAT is divided by the final NOSO ( / = 8.9) to get 8.9. Scenario : Shares only financing EBIT 0.00 Interest EBT Taxes.0000 EAT No Shares.000 EPS 8.9 Shares only financing EBIT.0 Interest EBT.0000 Taxes EAT.600 No Shares.000 EPS 0.67 In shares only financing there is no interest payable, because there is no debt component involved. The number of shares that need to be sold to raise the capital requirement of N$. mil. in this example is calculated by dividing the capital requirement by the share price. In this example the Compiled by Chris van Zyl Page

17 6 additional number of shares that need to be sold is therefore ( /0 = 0000) fifty thousand. This number of shares is added to the existing NOSO of. mil. to get the final NOSO of. mil. In order to calculate EPS, EAT is divided by the final NOSO ( 6 000/ = 0.67) to get EPS/EBIT PROCEDURE FOR DEBT ONLY FINANCING. Record EBIT (earnings before interest and tax) or gross income.. Calculate the interest amount (I) on that portion of the capital requirement that you want to finance through debt financing (loan from the Bank).. Deduct the interest amount (I) that you have calculated in () above from EBIT in order to derive at (EBT) earnings before tax (EBIT I = EBT).. Calculate the amount of tax (T) payable on EBT.. Deduct the amount of tax (T) calculated in () above from EBT to derive at (EAT) earnings after tax (EBT T = EAT). 6. No additional shares need to be sold since the financing is done by debt financing only. NOSO therefore remains unchanged. 7. Calculate the earnings per share (EPS) by dividing EAT by the NOSO. 8. Interpretation: the highest EPS indicates the best financing option to acquire the capital. Scenario : Debt only financing In debt only financing there is no additional shares that need to be calculated to find a new (final) NOSO. Therefore the existing or given NOSO remains the same. In debt only financing the interest amount on the capital requirement needs to be calculated. 0.7% of the full capital requirement is therefore N$6870 (N$. mil. multiplied by 0.7%). In order to calculate EPS for scenario, the procedure as explained above needs to be followed. An EPS of 8.90 was found. Debt only financing Compiled by Chris van Zyl Page 6

18 7 In debt only financing there is no additional shares that need to be calculated to find a new (final) NOSO. Therefore the existing or given NOSO remains the same. In debt only financing the interest amount on the capital requirement needs to be calculated. 0.7% of the full capital requirement is therefore N$6870 (N$. mil. multiplied by 0.7%). In order to calculate EPS for scenario, the procedure as explained above needs to be followed. An EPS of 0.80 was found. Final interpretations: The respective EPS values that were calculated for the different options of scenario are summarised as follows:. 8% shares / % debt financing option % shares / 7% debt financing option Shares only financing option 8.9. Debt only financing option 8.90 The debt only financing option has the highest EPS, therefore between the four options that were considered for scenario, debt only financing was found to be the best financing option. The respective EPS values that were calculated for the different options of scenario are summarised as follows:. 8% shares / % debt financing option % shares / 7% debt financing option Shares only financing option Debt only financing option 0.80 The shares only financing option has the highest EPS, therefore between the four options that were considered for scenario, shares only financing was found to be the best financing option. Key issues to be considered when looking to formulate the strengths & weaknesses of an enterprise and the opportunities & threats in the market. Potential strengths & competitive assets Competencies that are well matched to industry key success factors Strong financial condition; ample financial resources to grow the business Strong brand name image/reputation Attractive customer base Proprietary technology/superior technological skills/important patents Superior intellectual capital Skills in advertising and promotion Strong bargaining power over suppliers or buyers Proven capabilities in improving production processes Potential weaknesses & competitive deficiencies Competencies that are not well matched to key industry success factors In the wrong strategic group.. Losing market share because Lack of attention to customer needs Weak balance sheet, short financial resources to grow firm; too much debt Higher overall unit costs relative to those of key competitors Weak or unproven product innovation capabilities A product/service with so-so attributes or features that are inferior to those of rivals Too narrow product line relative to rivals Weak brand image or reputation Compiled by Chris van Zyl Page 7

19 8 Good supply chain management capabilities Good customer service capabilities Superior product quality Wide geographic coverage/strong global distribution capabilities Alliances/Joint ventures that provide access to valuable technology, competencies, attractive geographic markets A product that is strongly differentiated from those of rivals Cost advantages over rivals Core competencies in. A distinctive competence in. Resources that are hard to copy and for which there are no good substitutes Potential market opportunities Openings to win market share from rivals Sharply rising buyer demand for products/services Unserviced customer groups or market segments Demand in geographic markets A broader range of customer needs than currently Online sales via internet Integrating forward or backward Falling trade barriers in attractive foreign markets Rival firms are open for acquisition with attractive technological expertise or capabilities Potential Alliance or Joint venture partners to expand the firm s market coverage or boost its competitive capability Openings to exploit emerging new technologies Weaker dealer network than key rivals or lack of global distribution capabilities Behind on product quality, R&D and/or technological know-how Lack of management dept Inferior intellectual capital relative to rivals Plagued with internal operating problems or obsolete facilities Too much underutilized plant capacity No well-developed or proven core competencies No distinctive competencies or competitive superiority Resources that are readily copied or for which substitute are plenty No clear strategic direction Potential external threats to future profitability Increasing intensity of competition among industry rivals squeezing profit margins Slowdowns in market growth Likely entry of potent new competitors Loss of sales to substitute products Growing bargaining power of customers or suppliers Vulnerability to industry driving forces Shift in buyer s needs and tastes away from the industry s product/services Adverse demographic changes that threaten to curtail demand for the industry s products/services Adverse economic conditions that threaten critical suppliers or distributors Changes in technology particularly disruptive technology that can undermine the firm s distinctive competencies Restrictive foreign trade policies Costly new regulatory requirements Tight credit conditions Rising prices on energy or key inputs Compiled by Chris van Zyl Page 8