chapter  5
22 Pages

Existing Position Appraisal

Overview The existing position appraisal should provide the basis for developing the future strategies and plans with which the organisation aims to achieve its goals and objectives. A major objective of this appraisal is therefore to highlight relevant constraints and opportunities that may impact on either these objectives or the appropriate strategies. A number of techniques have been developed and subsequently refined to help

this process. The SWOT analysis (strengths, weaknesses, opportunities and threats) is a good example of these techniques. It requires very careful implementation but, if properly used, can provide very helpful insights into the current relative positioning of the company (its strengths and weaknesses) and how this may be affected by potential future developments in the external environment (the opportunities and threats). Ideally, the selected strategies should build on and develop the organisation’s existing strengths so that they reduce the impact of the threats, while enabling the opportunities to be exploited and the significance of the weaknesses minimised or removed. In other words, the existing position appraisal should highlight those areas of the business and its environment that are critical to the achievement of its goals and objectives. Porter’s ‘5 forces model’ is a good diagrammatic way of representing the

relative strengths of the various competitive forces within any industry; internal existing rivalry, buyer power, supplier power, threat of new entrants and threat of substitute products. The key to applying this technique is to focus on which force is the most important, rather than producing a balanced view on all five; whereas it is important to produce a more balanced SWOT analysis. Another very popular Michael Porter model outlines generic strategies that could create shareholder value if successfully implemented. A company has to be either the lowest cost supplier in its chosen market or have a sustainable differentiation advantage that enables it to command a higher selling price. These alternative strategies may be implemented industry-wide or by focusing on a smaller niche or market segment. Increasingly many businesses now talk about needing to achieve both lowest cost status and a differentiated position; what they normally really mean is that one particular advantage can no longer sustainably offset any significant disadvantage in the other!