Vulnerability analysis

The aim of vulnerability analysis is to identify the pillars, factors that might
Destroy those pillars and possible actions to be taken in response.

In IT context, it is also known as Vulnerability assesment – which is a process

that defines,identifies and classifies the security holes(vulnerabilities)in a
computer,network or communications infrastructure

Discussion – simulate vulnerability analysis for a Textile garments firm:

1. ??????????
 VULNERABILITY ANALYSIS – Business strategy

High

Defenceless
Impact Endangered
Of threat

Vulnerable Prepared

Low

Low Company,s ability to react High

 BCG Matrix – case study

High

Stars
Market Question marks
growth

Cash Cows Dogs

Low

High Market share Low

 GE Nine – cell planning grid

The GE / McKinsey Matrix is more sophisticated than the BCG Matrix

in three aspects:

1. Market (Industry) attractiveness - replaces market growth

2. Business strength - replaces market share

3. Finally the GE / McKinsey Matrix works with a 3*3 grid, while

the BCG Matrix has only 2*2,which allows for more sophistication.
Typical (external) factors that affect Market (industry)Attractiveness:

- Market size
- Market growth rate (in BCG Matrix the only factor)
- Market profitability
- Pricing trends
- Competitive intensity / rivalry
- Overall risk of returns in the industry
- Entry barriers
- Opportunity to differentiate products and services
- Demand variability
- Segmentation
- Distribution structure
- Technology development
Typical (internal) factors that affect Competitive Strength
of a Strategic Business Unit:

- Strength of assets and competencies

- Relative brand strength (marketing)
- Market share (only factor in BCG matrix)
- Growth rate of Market share
- Customer loyalty
- Relative cost position (cost structure compared with
competitors)
- Relative profit margins (compared to competitors)
- Distribution strength and production capacity
- Record of technological or other innovation
- Quality
- Access to financial and other investment resources
- Management strength
 GE Nine cell Planning grid

Medium Low
High

High

Business
Strength

Medium

Low

Industry/Product
attractiveness
 GE Nine cell Planning grid

Based on Projected strength and projected attractiveness,the business

units are classified into:

1. Invest/Grow

2. Invest /Selectively grow

3. Harvest/Divest
 GE Nine cell Planning grid

Steps involved:

1. Identify factors giving rise industry attractiveness

2. Assign weights to each attractiveness factor & rate each
(Scale 0-1)to arrive at weighted attractiveness
3.Identify factors relating to business strength
4.Assign weights…………………………
5.Classigy scores into High/Medium/Low
(industry attractiveness)
H M L

H
(Strength)
M

L
6.Classify business units –Invest/grow
- Invest/selectively manage
- harvest/divest
 The life cycle perspective of organizations -1
“A life cycle refers to a pattern of predictable change”

Organizations also move through a set of predictable transitions as they

develop over time.

1.Entrepreneurial stage : ( “Formation phase” or Embryonic in the

traditional model)
infancy – goals are ambiguous – creativity is high – further progress
depends on the steady flow of resources for sustenance

2.Collectivity stage : (“Growth phase” in the traditional model)

Innovation continues – but organizational mission is clarified –
communications and organizational structure essentially informal –
long hours and high level of commitment by the organization members

3.Formalization and control stage : (“Maturity phase” in the traditional

model)
Organization structure stabilizes – Formal rules and procedures –
Innovation is DE EMPHASIZED and stability and efficiency is emphasized
 The life cycle perspective of organizations -2

4. Elaboration of structure stage : ( “Maturity phase” in the traditional

model)
Diversification into new products and markets – search for growth
opportunities – organization structure more complex and elaborate –
decentralization of decision making

5. Decline stage : (“Decline” in the traditional model)

Increasing competition, shrinking markets, or other reasons set the decline

stage in motion – low profitability - high employee turnover – increasing
conflicts in the organization – new leadership change and centalization of
decision making again.

• Not necessary that all organizations pass through the same phases and
for the same duration
• We can reconcile the above model with the traditional 4 stages of
“Formation(1) , growth (2), maturity (3 and 4) , and decline (5)
Arthur D Little Life cycle approach:

2 factors

Business Environment Business strength

(indicates life cycle) (indicates competitive position)

• Embryonic Dominant
• Growth Strong
• Mature Favorable
• Ageing Tenable
Weak
Non viable
Arthur D Little Life cycle approach: (6 steps)

1. Identify each line of business – identify commonality amongst

business How ???
2. Assess life cycle stage of each business How ???
3. Identify competitive position How???
4. Identify the strategy for the business
5. Assign a natural thrust to the strategy - set of specific action plans

• Natural devolopment
• Selective development
• Prove viability
• OUT

6. Select one of the 24 generic strategies

 Arthur D Little Life cycle approach: (24 generic strategies )

1. Backward integration
2. Develop business overseas
3. Develop overseas facilities
4. Distribution rationalization
5. Excess capacity
6. Export
7. Forward integration
8. Hesitation
9. Initial market development
10. Licensing abroad
11. Complete rationalization
12. Market penetration
13. Market rationalization
14. Method/functions efficiency
15. New products in New markets
16. New products in same markets
17. Production rationalization
18. Product line rationalization
19. Pure survival
20. Same products/new markets
21. Same products/same markets
22. Technological efficiency
23. Traditional cost cutting
24. Unit abandonment

(Assignment - Go through the ONGC growth story and identify the different
strategies That ONGC has adopted at different times )
 SWOT Analysis

Numerous opportunities

Cell 1 –
Cell 3 –
Supports Aggressive strategy
Supports a turnaround
strategy

Critical internal Substantial internal

weaknesses Strengths

Cell 4 – Supports a defensive

strategy Cell 2 –
Supports Diversification strategy

Major environmental
threats
Product market matrix of Ansoff

1. 1960s – SWOT analysis was a significant contribution to

competitive thinking – but failed to define what is “distinct and
unique” for a firm

2. Distinctive competence – something which is enduring and

sustaining over long periods of time

3. This distinction of “Distinctive competence was important because

strategy is about Long term development of the enterprise

4. If the firm was pursuing opportunities beyond its distinctive

competence,then it had to acquire these competencies
The Product market Matrix of Ansoff

The Debate
– should a firm work on its existing
distinctive competencies or build such
competencies?
Theodore Levitt – firms should not rely
on merely delivering products based on
existing competencies – instead should
work to fulfilling market needs and
develop new products to survive
Ansoff – firms are taking risk by
developing new products that might not
fit distinctive competencies
According to Ansoff, firms should try to identify the “common thread “
With its existing products .

What is this common thread?

The firm’s mission or its commitment to exploit an existing need in the

Market/new markets
 Product/Mission matrix of Ansoff

Present product New Product

Present
Mission/ Market Product
markets Penetration Development
Strategy Strategy

New
Mission/ new Market Diversification
markets Development Strategy
Strategy
 Formulating long term strategies,also
known as grand strategy/master strategy

1. Concentration – focus all resources in a single product

2. Market development – market existing products in other markets

3. Product development – modification of existing products

4. Horizontal integration – grow through acquisition of businesses

5. Vertical integration – backward or forward integration

6. Tapered integration – developing external sources,in addition

to internal capacity enhancement Eg:Coca Cola,Pepsi,etc

7. Quasi integration – building relationships with suppliers varying between

Long term contracts and full ownership, like minoroty equity,loans,
,Joint R & D,guarantees, etc

8.Diversification
 Behavioral considerations affecting
strategic choice

1. Role of past strategy – general tendency of various managerial levels is to

Show a tendency towards continuity

2. Attitude towards risk

3. Competitive reaction – how aggressive are the competitors

4. Degree of firms external dependence –greater the dependence,lower the

firms flexibility in strategic choice

5. Values and preferences – back ground,needs,desires and values of owners

and managers