SAP Project Part 2

MGMT

Strategy Analysis Project Part 2

Selected Company: Freeport-McMoran

The Strategic Analysis Project is designed to teach you to conduct a comprehensive strategic analysis of a publicly-owned company of your choice. In this project, you will need to apply the concepts, analytical tools and frameworks of this course to analyze the firm’s external and internal environment, evaluate its strategic options and recommend a course of action for the firm to maximize its long-term performance. In the second part of this project, you will conduct a comprehensive internal analysis of the firm and combined with your insights from your analysis in Part 1 of the project, come up with an independent assessment of the firm’s performance and strategic direction. In particular, you are being asked to (1) identify the most pressing strategic problems or challenges facing the company and (2) recommend viable solutions to these challenges.

The report for SAP Part 2 is limited to 7 pages double spaced. References and supporting analysis (including all graphs, plots and tables) should be included in the appendix and referenced throughout the report but don’t count against the page limit.

The written report should be prepared following the outline below:

1. SWOT Analysis (no more than three pages)

3.1 Opportunities and Threats Summary

Opportunities: Based on the external analysis you had conducted in SAP Part 1, clearly identify and summarize the top three opportunities identified by the external environmental analyses.

Threats: Based on the external analysis you had conducted in SAP Part 1, clearly identify and summarize the top three threats identified by the external environmental analysis.

• 1. Strength and Weaknesses
     1. Company Resources: Consider the company’s resource base in the following four categories. Quantitatively/Qualitatively assess the company’s resources across each of these categories with respect to its primary competitors.

Financial Resources: Consider the company’s current assets, borrowing capacity, and its ability to generate funds quickly either internally (e.g., move money from one business to another) or externally (e.g., additional borrowing or stock sale).

Physical Resources: Consider the company’s physical resources including building and property assets (owned or leased), its business locations, and geographic access to product markets, geographic access to supply markets, and/or plants and equipment.

Human Resources: Consider the management expertise and experience of the company’s top management team. Compare the expertise and experience of your company’s top management team (i.e., Chairman, CEO, and COO, if applicable) to those of its top three rivals.

Organizational Resources: Consider the company’s culture, reputation, brand identity, trademarks, copyrights, patents, trade secrets, other intellectual property, etc.

• • 1. Company Capabilities: Consider the company’s capabilities in the following four categories. Quantitative/Qualitatively assess the company’s resources across each of these categories with respect to its primary competitors.

Operations and Distribution Capabilities: Consider the company’s use and management of supply chain, distribution channels, and general logistics. For example, you might look for information on inventory costs/turnover ratios, supply chain bottlenecks, and efficiency.

Human Resource Capabilities: Consider the company’s ability to attract, retain, empower, motivate and train employees. For example, you might look for information on employee turnover, workforce training programs, salary comparisons, and education benefits.

Marketing Capabilities: Consider the company’s ability to build and promote its brand(s), customer service abilities, merchandising, etc. For example, see if you can calculate an annual Advertising Intensity ratio (advertising expenditures / divided by total sales).

Product/Technology Development: Consider the company’s ability to “see the future” of the market and/or develop new technology or products quickly. For example, see if you can calculate an R&D Intensity ratio (R&D expenditures / divided by total sales).

• 1. VRIS Analysis

Consider the top three resource strengths and the top three capability strengths you have identified above. Thoroughly assess them using the VRIS framework. Your analysis should be presented in a table as follows:

Resource name	Is it valuable	Is it rare	Is it difficult to imitate	Is it difficult to substitute?	Implications for competitive advantage
Resource 1	Yes, because
Resource 2
Resource 3
Capability 1
Capability 2
Capability 3

1. Strategic Problems and Priorities (no more than one and a half pages)
   1. Problem Statements

Based on the summary findings of the strategic analysis, briefly list the top three strategic issues/problems/ opportunities/challenges revealed by the SWOT analysis, and the VRIS strategic assessment. Think strategically: what are the most critical and fundamental issues the company needs to grapple with to obtain and/or sustain a competitive advantage? Make sure the problem/issue statements are focused, concise, clear, and well written. Each problem statement should be communicated in one sentence and written in italics to make it easy to see. When writing each problem statement, please keep the following in mind:

BAD problem statements are not firm-specific, meaning they are generic and could be said about any company. Moreover, problems like poor profitability and limited market share are often symptoms of more fundamental issues such as poor R&D, bad customer service, failing to leverage company resources/capabilities, improper management, etc.

• Bad Example #1: ABC Inc. needs to internationalize to increase its market share. (This statement is superficial and not firm-specific.)
• Bad Example #2: ADAMS Division of ACME Corp needs to increase profits or sales. (This statement identifies a symptom of a problem, not the problem itself.)

GOOD examples of business-level problem statements are detailed and firm-specific:

• Good Example #1: BETA Corp has failed to exploit its strong marketing capabilities to target college students with their digital notepad products, which convert pen-and-paper notes into digital format, resulting in severe declines in new and repeat sales from the college segment over the past five years.
• Good Example #2: The central problem with GAMMA Inc. is that its production facilities are geared for small, niche jobs in support of its product differentiation strategy despite the fact that the industry environment—especially intense rivalry—is generally better suited to a low-cost leadership strategy.

Once listed, briefly discuss each problem statement. Use very specific information, facts, data, etc. to convey the relevance, significance, and importance of the problems/issues. Again, be as specific as possible—no vague or generic commentary here. For each statement, discuss the following: What is the magnitude of the problem? Is the problem/issue major or minor? Is the problem part of a bigger problem? Is the problem/issue “stand alone” or is it intertwined with more fundamental factors/problems/issues inside or outside the company? What happens if the problem/issue is ignored? If the problem/issue is inadequately resolved, are we talking about the end of the company as we know it or would it be a minor setback? (NOTE: the bigger the problem/issue, the more interesting and engaging the project will be.)

• 1. Strategic Priority

Now look over your list of problem statements. Clearly state which of the core problem statements from the above list is the single most important problem/issue/challenge/opportunity for the company to address or resolve? Clearly explain why this is the strategic priority for the company.

By the way, if you are convinced that your company is very well run and faces no major problems (this has to be justified), focus on any future problems/issues indicated by your situation analysis. Your problem statements should discuss any future problems/issues/opportunities/challenges the company will have to deal with to maintain its competitive advantage. Remember, no company—no matter how successful—can keep doing the same thing and remain competitive. Stated differently, “If it isn’t broken, don’t fix it” is not a valid conclusion for the strategic plan.

1. Strategic Options (no more than one page)

Identify as many alternative strategies as possible for fixing/addressing the strategic priority. These options should be creative and strategic, realistic and plausible, and build on firm-specific information uncovered by the situation analysis. DO NOT suggest generic or “business as usual” solutions to the problem. Also, each option MUST be mutually exclusive (this means that it is not possible to implement more than one strategy to fix the Strategic Priority). When writing each strategic response statement, please keep the following in mind:

BAD Strategic Options for the BETA Corp problem statement above:

• Bad Option #1: BETA should reduce their marketing budget by 50 percent. (This is a bad example because it does not fix the “repeat customer” problem.)
• Bad Option #2: BETA should expand their operations overseas. (This is a bad example because it is too generic, does not fix the repeat customer problem, and is not mutually exclusive with other responses.)

GOOD Strategic Options for the BETA Corp problem statement above:

• Good Option #1: BETA should develop a strategic alliance with textbook publisher GOTCHA LLC to develop paper templates for students to speed note taking in class or while reading. (This is a good example in that it may fix the specified problem, builds on firm specific resources, and it suggests a firm-specific action.)

Once stated, briefly discuss each strategic option. Use quantitative information, facts, data, etc. to convey the effectiveness of your solution. Again, be as specific as possible—no vague or overly general commentary here. For each strategic response, discuss the following: How likely is the strategic response to fix/address the strategic priority? Will the strategic response fix/address other problems in addition to the strategic priority? How risky it the strategic alternative? What happens if solution fails?