Strategy Toolkit Strategy Toolkit Strategy Toolkit | MindTools.com Strategy Toolkit This e-book is published by Mind Tools Limited, of 2nd Floor, 145-157 St John St, London, EC1V 4PY. Version 1.2 Copyright © Mind Tools 2009-2011. All rights reserved. This e-book is protected by international copyright law. You may only use it if you have downloaded it directly from the mindtools.com site, or if you have received it under license from Mind Tools Ltd. Cover image © iStockphoto/stockcam © Mind Tools Ltd, 2009-2011. 2 Strategy Toolkit | MindTools.com Contents Introduction ................................................................................................................................ 4 SWOT Analysis ......................................................................................................................... 5 PEST Analysis ........................................................................................................................... 7 The Ansoff Matrix .....................................................................................................................10 The Boston Matrix ....................................................................................................................13 The GE-McKinsey Matrix ..........................................................................................................15 Porter's Five Forces ..................................................................................................................19 Porter's Generic Strategies .......................................................................................................23 Have you found this e-book useful? .........................................................................................27 © Mind Tools Ltd, 2009-2011. 3 Strategy Toolkit | MindTools.com Strategy Toolkit Introduced by Mind Tools CEO, James Manktelow Welcome to our This e-book contains many of the classic Strategy Toolkit! strategy tools taught on MBA courses in top business schools – all in one convenient PDF. Strategy is the art of working out how Enjoy finding out about them – and putting them to win in business into practice! and life. It involves understanding your environment, crafting a unique and valuable competitive position, and using your resources in such a way that you make best use of the opportunities open to you. James Manktelow, CEO, MindTools.com © Mind Tools Ltd, 2009-2011. 4 Strategy Toolkit | MindTools.com SWOT Analysis Discover new opportunities. Manage and eliminate threats. SWOT Analysis is a powerful technique for people in your market. Be realistic: It's far too understanding your Strengths and easy to fall prey to „not invented here Weaknesses, and for looking at the syndrome‟. (If you are having any difficulty with Opportunities and Threats you face. this, try writing down a list of your characteristics. Some of these will hopefully be Used in a business context, it helps you carve a strengths!) sustainable niche in your market. Used in a personal context, it helps you develop your In looking at your strengths, think about them in career in a way that takes best advantage of relation to your competitors – for example, if all your talents, abilities and opportunities. your competitors provide high quality products, then a high quality production process is not a Business SWOT Analysis strength in the market, it is a necessity. What makes SWOT particularly powerful is that, with a little thought, it can help you uncover Weaknesses: opportunities that you are well placed to exploit. What could you improve? And by understanding the weaknesses of your What should you avoid? business, you can manage and eliminate What are people in your market likely to threats that would otherwise catch you see as weaknesses? unawares. What factors lose you sales? More than this, by looking at yourself and your Again, consider this from an internal and competitors using the SWOT framework, you external basis: Do other people seem to can start to craft a strategy that helps you perceive weaknesses that you do not see? Are distinguish yourself from your competitors, so your competitors doing any better than you? It that you can compete successfully in your is best to be realistic now, and face any market. unpleasant truths as soon as possible. How to Use the Tool Opportunities: Start by downloading a copy of our free SWOT Where are the good opportunities facing Analysis Template. you? What are the interesting trends you are To carry out a SWOT Analysis, answer the aware of? following questions: Useful opportunities can come from such things Strengths: as: What advantages does your company Changes in technology and markets on have? both a broad and narrow scale. What do you do better than anyone else? Changes in government policy related to What unique or lowest-cost resources do your field. you have access to? Changes in social patterns, population What do people in your market see as profiles, lifestyle changes, etc. your strengths? Local events. What factors mean that you „get the sale‟? A useful approach for looking at opportunities is Consider this from an internal perspective, and to look at your strengths and ask yourself from the point of view of your customers and whether these open up any opportunities. © Mind Tools Ltd, 2009-2011. 5 Strategy Toolkit | MindTools.com Alternatively, look at your weaknesses and ask Strengths and weaknesses are often internal yourself whether you could create opportunities to your organization. Opportunities and by eliminating them. threats often relate to external factors. For this reason the SWOT Analysis is sometimes called Threats: Internal-External Analysis and the SWOT Matrix What obstacles do you face? is sometimes called an IE Matrix Analysis Tool. What is your competition doing that you should be worried about? You can also apply SWOT Analysis to your Are the required specifications for your competitors. As you do this, you'll start to see job, products or services changing? how and where you should compete against Is changing technology threatening your them. position? Do you have bad debt or cash-flow Example problems? A start-up small consultancy business might Could any of your weaknesses seriously draw up the following SWOT matrix: threaten your business? Strengths: Carrying out this analysis will often be We can respond very quickly as we have illuminating – both in terms of pointing out what no red tape, no need for higher needs to be done, and in putting problems into management approval, etc. perspective. We can give really good customer care, as the current small amount of work Tip: means we have plenty of time to devote SWOT can be used in two ways – as a to customers. simple icebreaker helping people get Our lead consultant has strong reputation together and „kick off‟ strategy formulation, or within the market. in a more sophisticated way as a serious We can change direction quickly if our strategy tool. If you're using it as a serious approach isn't working. tool, make sure you're rigorous in the way We have little overhead, so can offer you apply it: good value to customers. Only accept precise, verifiable Weaknesses: statements („Cost advantage of Our company has no market presence or US$10/ton in sourcing raw material x‟, reputation. rather than „Good value for money‟). We have a small staff with a shallow skills Ruthlessly prune long lists of factors, base in many areas. and prioritize factors so that you spend We are vulnerable to vital staff being sick, your time thinking about the most leaving, etc. significant factors. Our cash flow will be unreliable in the Make sure that options generated are early stages. carried through to later stages in the strategy formation process. Opportunities: Apply it at the right level – for example, Our business sector is expanding, with at product or product line level, rather many future opportunities for success. than at the much vaguer whole Our local council wants to encourage company level. local businesses with work where Supplement it with other option- possible. generation tools – none is likely to be Our competitors may be slow to adopt completely comprehensive. new technologies. © Mind Tools Ltd, 2009-2011. 6 Strategy Toolkit | MindTools.com Threats: services to local businesses. Marketing would Will developments in technology change be in selected local publications, to get the this market beyond our ability to adapt? greatest possible market presence for a set A small change in focus of a large advertising budget. The consultancy should competitor might wipe out any market keep up-to-date with changes in technology position we achieve. where possible. The consultancy may therefore decide to You can see this analysis in diagram format in specialize in rapid response, good value figure 1 below. Key Points Opportunities and Threats you face. This helps SWOT Analysis is a simple but powerful you to focus on your strengths, minimize framework for analyzing your company's threats, and take the greatest possible Strengths and Weaknesses, and the advantage of opportunities available to you. PEST Analysis Understanding ‘big picture’ forces of change Related variants: PESTLE, PESTEL, PESTLIED, STEEPLE and SLEPT Analysis PEST Analysis is a simple, useful and widely- such, it is used by business leaders worldwide used tool that helps you understand the „big to build their vision of the future. picture‟ of your Political, Economic, Socio- Cultural