CHAPTER 4, CRITICAL SUCCESS FACTORS

1. CHAPTER 4, CRITICAL SUCCESS FACTORS I used to be indecisive, but now I am not so sure

2. Vision, Mission and Values What is Desired? Examining the Company Profile Defining the Industry Situation Phase 1 Long-Term View of Success What is Possible? Make a choice of Long and Short-Range Goals Defining Challenges and Opportunities Define Critical Success Factors Figure 4.1, the Planning Model

3. Matching the Profile to the Environment Examining the environment Doing an independent and honest review of each aspect Examining the organizational profile Determining the level of competence required to operate effectively in this environment as to: Determining the level of competence the organization has as to: Marketing and sales Production Financial Management Research and Development Human Resource Management Matching what needs to be done With what can be done In all aspects of the business Marketing and sales Production Financial Management Research and Development Human Resource Management Defining Critical Success Factors • Figure 4.3. Matching the profile to the environment.

4. Analyzing the Environment, Opportunities and Challenges (threats) The terms defined • An opportunity is something that if taken, will result in something positive for the organization. • A challenge (threat) is quite different. Out of the environment, something with a negative consequence to your organization is going to happen unless you act in some way.

5. Remote Environment for a Ski Area Description o/t Economic The amount of disposable income available for recreation, in the hands of customers. T Social The perception of people regarding health and wellness and the use of recreation to achieve those ends. O Political Government regulations regarding development of park land and the environmental impact of the development of recreation areas. T Technological Internet based advertising systems and reservation systems. O Remote environment, opportunities and challenges (threats) • Figure 4.4. the remote environment for a ski area

6. Force Issue o/t Substitute products Demand is high for the total industry relative to supply T O Customers are not product sensitive T New entrants to the market Profits are Low O Large capital investment is required O Demand exceeds supply in the industry for the product or service T The Industry Environment, Opportunities and Challenges (threats) • Figure 4.5, Opportunities And Challenges From The Five Forces Applied To The Recreation Industry (Ski Area)

7. Buyers Buying groups are formed T The buyers are brand sensitive O Suppliers There are a large number of travel agents O There are a small number of suppliers of chair lifts and equipment T Rivalries Among Ski Areas Industry profits are low T Customer growth rate is high O Customers are not brand sensitive T Switching costs are high T Opportunities And Challenges From The Five Forces Applied To The Recreation Industry (Ski Area)

8. Analyzing the local Environment Issue Questions and answers o/t Customers Demographic Do the features of the product match the demographic of the market? O Competitive Position Product Quality Do customers perceive the product as high value for the price paid? T Creditors Financial Claims Are creditors willing to let the loan serve its purpose? T The Local Environment, Opportunities and Challenges (threats) • Figure 4.6. Characteristics of the local environment.

9. Employees Availability Can the organization attract and hold the right people? O Suppliers Quantity Are suppliers able to meet your present and future demand for their products? T Ecological issues Impact Does a change in the season or a change in the weather impact your operations? O Characteristics of the local environment

10. The Organizational Profile, Strengths and Weaknesses • A strength means you are already equipped to handle the situation and you are using state of the art procedures. • A weakness means you don’t have the tools to deal with the issue. Put another way: • A strength is something you have that you need, • A weakness is something you don’t have that you need.

11. Major areas Potential issues S/W Explanation Strategic planning Quality of long and short range objectives S We hired a college graduate to facilitate the development of goals. Marketing Market share W We hold a small market share of a rapidly growing market. We are not growing at the same rate. Financial and accounting Profitability S We earn a rate of return that is significantly higher than the industry average Figure 4.8, Step 3, a partially complete organizational profile.

12. Production, operations and technical Efficiency of production processes S Our unit production costs are lower than industry average because we have state of the art machinery and equipment. Human resource management Union/Management relationship W Four of the last five rounds of negotiations were resolved after a work stoppage, two strikes and two lockouts. Organization and management Willingness of management to delegate tasks and authority. W Management is willing to hold others responsible and accountable, but they are not willing to delegate authority and control. Step 3, a partially complete organizational profile.

13. Maturity Decline Growth Development Growth Rate Profits Stages of Industry Evolution • Figure 4.9 , Industry life cycle

14. Function Development Growth Maturity Decline Marketing & Sales Create wide spread awareness. Establish brand recognition. Find effective marketing channels. Hold existing markets and promote to new markets. Introduce successor products to extend maturity. Focus on the best channels. Replace old products with new ones. Finance Finance initial R&D losses. Finance expansion and net cash outflows. Reinvest profits and employ cost controls. Prune the product line and harvest the resources from liquidation. Figure 4.10, Critical Success Factors at Each Stage of Industry Evolution

15. Production Limit number of designs, use standards. Increase capacity while retaining quality. Improve the product and reduce operating costs. Re-deploy unused equipment, simplify processes and reduce product variants. R&D Ability to make changes and take the bugs out. Focus on quality and ability to make product variants to satisfy customers. Improve processes to reduce costs and introduce successor products. Commit resources to new growth products. Human Resources Flexibility in staffing and training. Motivated and loyal workforce with excellent product knowledge and selling skills. Reduce workforce and increase efficiency. Reduce and reallocate personnel. Critical Success Factors at Each Stage of Industry Evolution

16. Focus area Engineering and marketing Development Growth Sales and market share Maturity Production efficiency and successors Decline Finance and investment recovery Critical Success Factors at Each Stage of Industry Evolution

17. Environmental Opportunities Internal Weakness Internal Strength Environmental Threats Defining Organizational Critical Factors • Figure 4.11, SWOT diagram

18. Environmental Opportunities Internal Weakness Internal Strength Environmental threats Figure 4.12, SWOT Analysis

19. Environmental Opportunities Cell “A” Redesign practices Cell “B” Be aggressive Internal Weakness Internal Strength Cell “D” Use your strengths in new places Cell “C” Be Defensive Environmental threats Figure 4.13, the “cells” of a SWOT diagram

20. Cell “A” Grand Strategy, “Re-design practices” • An organization with internal weakness which is facing an industry with numerous opportunities • must focus attention on re-designing how business is done so that the opportunities can be effectively captured.

21. Other Cell “A” Strategies • Retrenchment/turn around • Joint Venture • Strategic Alliance

22. Cell “B” Grand Strategy, “Be aggressive” • An organization with internal strengths which is facing an industry with numerous opportunities • expand operations into new markets, invest in growth and reproduce success in other areas.

23. Other Cell “B” Strategies • Product development • Market development • Vertical Integration

24. Cell “C” Grand Strategy, “Be Defensive” • An organization with internal weakness which is facing an industry with numerous threats • needs to revaluate whether or not it is advisable to stay in business.

25. Other Cell “C” Strategies • Divestiture • Liquidation

26. Cell “D” Grand Strategy, “Use your strengths in new places” • An organization with internal strengths which is facing an industry with numerous threats • evaluate whether or not their expertise could be transferred to a new, less threatening environment.

27. Other Cell “D” Strategies • Horizontal Integration • Concentric Diversification

28. Summary • The objective of chapter 4 was to define “Critical Success Factors”. The factors relate to an industry and an organizational perspective. • The “Stages of Industry Evolution” was introduced as a tool to pinpoint the critical success factors from an industry point of view. • The SWOT diagram was introduced as a tool to match the industry critical success factors with the organizational profile developed in chapter 3.