Strategic Analysis Tools
Managers are constantly being faced with problems and tasks that require strategic analysis and problem solving to remedy or improve their current state. It is every managers’ responsibility to plan for a future state in their organization, whether it is at the strategic level, tactical level, or operational level. With the variety of strategic analysis tools available today it is important to choose the one that makes the most sense for the problem. Two strategic analysis tools that can be applied to most organizations is CATWOE and VRIO.
1st Strategic Analysis Tool
CATWOE is an acronym for Customers, Actors, Transformation Process, World View, Owner, and Environmental Constraints. (Free Management Books, n.d.). Customers is the first step and it refers to the severity of the customer problem. Two questions to ask when at this step are: does the problem directly impact the customer or, is the problem behind the scenes with no immediate impact to the customer? If the problem is going to impact the customer then it needs to be addressed immediately to prevent any negative outcomes. If not, then there is extra time allotted to solving the problem.
Every problem will have people involved with the creation of the problem and the solution. This step defines the Actors who play a role in the problem. Identifying employees, suppliers, agencies, and government officials will help bring the necessary eyes in to ensure all aspects of the problem or problems are covered. It would also be a good idea to bring in some outside eyes for a fresh look at the problem.
Next is the Transformation Process. The question that needs to be asked at this step in the analysis is: how will this problem impact the product or service? Obviously, protecting the finished goods or services that are offered by the organization is a huge priority and if the problem at hand is in any way going to jeopardize the product or service, the solution should be expedited. Be mindful of any transformational efforts being done so that it doesn’t accidentally put a bottle neck in the production process or impede on the daily operations.
Once the Transformational Process has been observed it is time to look at the World View. This is the time to take a step back and see the big picture. Is the problem wide reaching or is it contained? Can this problem be taken care of in the short term or is this going to be a long term effort? This solidifies if the problem is severe or not.
Every problem has someone who must own it. The Owner of the problem is responsible for being at the minimum a team member on the team that is solving the problem. Usually, the manager of the department that is seeing the problem will own it. They will be involved in problem solving, but not necessarily leading the way with the problem solving efforts, depending on the severity of the problem.
The final step in the CATWOE analysis is the Environmental Constraints. Going through the other five steps is important, but to solve the problem there must be available resources to do so. Is there a budget available? Is there time available? This step checks all available resources and laws and regulations pertaining to the problem.
Pros and Cons of CATWOE
The CATWOE is a great strategic analysis tool and provides a holistic approach to problem solving. It ensures thinking from all sides of the problem and relies on input from everyone that is impacted by the problem. This analysis is really only good for large problems as this is time consuming and utilizes a lot of resources.
2nd Strategic Analysis Tool
Another strategic analysis tool at a managers’ disposal is the VRIO analysis. This analysis tool is a four part tool and the acronym stands for Value, Rarity, Imitability, and Organization. (Free Management Books, n.d.). This analysis tool is used to determine to see if a firm’s resources meet the criteria for long-term success and competitive advantage. (Knott, 2015). Determining value, depending on the problem, is key to ensuring long term success. Looking at what resources are in house can allow managers to put themselves in a strategic position within the market. Understanding the value of machines, people, materials, and finished goods will provide a great snapshot of the health of the business.
Part two of VRIO is determining Rarity. This refers to assets and resources the company holds. How hard it is to find plus the necessity for it to last a long time determines its rarity. Does the organization have equipment that is custom made and one off? Is the equipment not easily duplicated or too expensive to reproduce? If it is determined that there are rare items in house they must be used effectively in order to gain competitive advantage.
Every idea will at some point be imitated. Imitability is inevitable if the product is profitable or has a large portion of the market. Since there is no sure fire way of protecting products from imitation, other than to legally protect them but at some point patents will run out, it is absolutely necessary to continually improve the product to keep up with customer demand and maintain market share. The name of the game is to set the product apart from competitors and maintain and gain new customers year over year.
The last part of the VRIO analysis is the Organization. The company has to be structured correctly to take advantage of the value, rarity, and imitability. Exploiting the three will put the company in a position to maintain competitive and pull away from the competition.
Pros and Cons of VRIO
VRIO is an excellent analysis tool for corporations to assess the current standing of one of their locations. It determines the strengths and weaknesses of the product and all of the equipment used to make the product. A weakness for VRIO would be the amount of data needed and man hours involved in collecting the data.
Applying Both Analysis to Capsim Core
Each of the strategic analysis tools can help to better position the company in the marketplace. CATWOE can be used in R&D to gain a clear understanding of customer related problems, who is involved, what changes would be necessary if products are improved, if the problem that has arisen is more than a small contained issue, and if there are necessary resources to fix the problem. Customers are wanting smaller, faster, and more efficient products and it is important that the R&D team see this and act on it. The CATWOE analysis tool will help them compete in the market place and gain market share.
VRIO would be best suited for the finance department and operations. The finance department should have all the information regarding the cost of the valuable resources and machinery while the operations team would know best how to utilize the resources and machinery. Overall, VRIO is high level and could really impact every department used in Capsim Core.
Free Management Books. (n.d). CATWOE analysis. Free Management Books. Retrieved from http://www.free-management-ebooks.com/news/catwoe-analysis/
Free Management Books. (n.d.) VRIO analysis. Free Management Books. Retrieved from http://www.free-management-ebooks.com/news/vrio-analysis/
Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources? Management Decision, 53(8), 1806-1822.