Critical Success Factors

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Transcript of Critical Success Factors

STRATEGIC MANAGEMENT

CRITICAL SUCCESS FACTORS & SWOT ANALYSISApril 1, 2012 NRKA/MBA-STR.MGMT 1

IDENTIFYING THE INDUSTRYS CRITICAL SUCCESS FACTORS

April 1, 2012

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What are Critical Success Factors (CSFs)? CSFs highlight the things all firms in the industry

must pay close attention to in order to be successful. CSFs vary from one industry to another Some common ones include

speed of delivery quality product or service offering, innovativeness wider distribution network a good corporate or brand image price competitiveness, speedy response to customer needs.

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Identifying CSFs A top priority strategic consideration. Management needs to know the industry well enough

to conclude what is more important to competitive success and what is less important. CSFs serve as cornerstones on which business strategy is built frequently, a firm can gain competitive advantage by concentrating on being distinctively better than rivals in one or more of the industrys key success factors. CSFs differ from one industry to another, and changes from time to time within the same industry as driving forces and competitive conditions change.

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Some Industry-Based Examples of CSFs 1) 2) 3)

4)

5) 6)

7)8)

In the brewery industry for example, CSFs include: Capacity: Availability of capacity to cater for rising demand Efficient Utilization of brewing capacity - to keep manufacturing costs low. A strong network of wholesale distributors - to gain access into many retail outlets, achieving national coverage. Creative advertising to induce beer drinkers to buy a particular brand and thereby pull beer sales through established channels of distribution, including hotels, pubs or drinking bars. Expertise in brewing and marketing beer products Innovation being innovative, building powerful brands Financial Performance consistent growth in profitability, earnings per share, dividend cover, etc. Investment in research and development (R&D) and modern state of the art technology5

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CSFs In the Automobile & Life Assurance Industries In the automobile industry, a firm must: o Build strong dealer network o Develop manufacturing cost control systems o Have the capacity to meet EPA standards o Develop a strong R&D capacity for introducing new models In the life assurance industry, a firm must: o Have high calibre agency personnel o Be innovative in policy development and marketing strategy

o Have effective control of clerical personnelo Have a substantial financial back-up to respond to claims

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CSFs in the Household Appliance Industry In the household appliance industry, a firm must: o Achieve low costs, typically by building large manufacturing

o o o o

facilities for making multiple versions of one type of appliance, such as washing machines. Have a strong presence in the mass merchandiser distribution channel. Offer a full range of appliances Provide just-in-time delivery system to keep store inventory and ordering costs down Have excellent R&D facilities to provide consumer expectations of reliability and durability.

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CSFs in the Clothing Industry 1) 2) 3) 4)

In the clothing industry CSFs include: Fashion design to create buyer appeal Manufacturing efficiency to keep selling prices competitive. Specialized distribution to reach the life style buyer through the appropriate retail outlets Advertising in life-style magazines to appeal to the right target user.

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CUSTOMERS

COMPETITORS

COST

COMPANY

CSF Identification - The 3Cs Model Approach Customers: What are customers real needs? What are the

segments in the market? Which customer groups do we target? Competition: How can the firm beat or survive the competition? What resources do they have? What customers are they targeting? How successful are they? How does the firm compare on price, quality and speed of delivery? Does the competitor have a wider distribution network? Corporation ( Resources): What requisite resources does our company possess? How do these resources compare with our competitors? How does our costs compare with that of our rivals? Do we have the requisite skills, technologies, and organizational culture?

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Illustrative CSFs and Related ConsequencesCompany: A Bank offering lending products to customers comprising small-scale businesses. Competitors: Intense competitive rivalry from other lending banks Customer Requirements (CSFs): Understanding customer needs Understanding customers business Cost (charges/rate) Consistent/Reliable service Continuity of primary contact Speed of response Speed of supply (making funding available) Quality of primary contact Competitive terms of business (security fees, etc.)11

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Illustration CSF Prime Contact quality & continuity

Action RequiredAppointment of relationship managers with high personal credibility. Training of Relationships Managers in business/commercial awareness, and needs identification skills. Strong cost control and efficiency measures. Effective lending risk assessment and margin management Reliable systems Staff development and Motivation Highly developed customer awareness

Price Competitiveness

Service responsiveness, Accuracy & Quality

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Competitor Profiling

KEY SUCCESS FACTORS Market share Price competitiveness

WEIGHT 0.30 0.20

RATING +4 +3

WEIGHTED SCORE +1.20 +0.60

Facilities locationRaw materials costs

0.200.10

+5-3

+1.00-0.30

Caliber of personnel

0.20

+1

-0.20

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SWOT ANALYSIS

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NRKA/MBA-STR.MGMT

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Introduction to SWOT Analysis One of the useful ways of getting a clearer picture of the key issues and

trends persisting, or anticipated from the external and internal environmental analysis is to develop a SWOT analysis. SWOT is an acronym for a firms internal Strengths and Weaknesses, set against the business Opportunities and Threats identified in its external environment. The analysis is a widely used technique through which managers create a quick overview of a firms strategic position in its competitive environment. It is based on the assumption that an effective strategy derives from a sound fit between a firms internal resources (strengths & weaknesses) and its external environmental situation (opportunities & Threats). A good fit maximizes a firms strengths and opportunities and minimizes its weaknesses and threats.NRKA/MBA-STR.MGMT 15

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The Importance of SWOT Analysis

SWOT highlights the attractiveness or otherwise of a firms

competitive position in the market. It drives the formulation of corporate and business-level strategy. SWOT analysis helps a company to develop competitive advantage at the marketplace: By recognizing its current competitive situation a firm is able to match its competences with the critical success factors of the industry. Accurately applied, this simple technique provides a framework for the design of a successful strategy.

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What are Opportunities?

a) b) c) d) e)

An opportunity is a major favourable situation in a firms environment. Opportunities are prevailing or emerging factors, trends and events in the external environment that opens important avenues for business development, stability and growth. Examples of recent events creating opportunity for business in Ghana, include Ghana @ 50, CAN 2008, UNCTAD XII. Opportunities include the following: Identification of previously overlooked market segment Changes in competitive or regulatory circumstances Technological changes Improved buyer relationship Improved seller relationship

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Other Sources of Opportunities

Opportunity to: 1) Enter new markets or segments 2) Expand product line to meet broader range of customer needs. 3) Diversify into related product/market 4) Vertically integrate merger, acquisition, take-over 5) Exploit fast growing markets 6) Exploit complacency among rival firms 7) Take advantage of falling trade barriers in attractive foreign markets. Opportunities must be attractive in terms of the competitive advantage they offer.

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Attractive Opportunities

Opportunities are attractive when: a) No competitor has identified it. b) Company has huge resources and capabilities to exploit. c) Market has high growth rate potential, but not attractive to big competitors

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What are Threats?

a) b) c) d) e) f) g) h) i)

Threats are challenges posed by an unfavourable event, trend or environmental development, that can endanger a companys competitive position or impose constraints on its efforts to be successful. Threats can stem from: Changing buyer needs and tastes Increasing demand of substitute products Entrance of new competitors Slow market growth Vulnerability to business cycle in time of recession Increased bargaining power of key buyers or suppliers. Lacking the appropriate resources to exploit business opportunities Technological changes New or revised regulations20

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Other Sources of Threats Emergence of cheaper technologies The launching of new or better products by rival firms The entry of low-cost foreign competitors into a firms market

stronghold Rising inflation and interest rates Potential of