Example of context analysis

Define market

First step is to define a market for analysis. Joe decides that he wants to focus on small businesses consisting of at most 20 employees.

Trend Analysis

Next step is to conduct trend analysis. The macro environmental factors that Joe should take into consideration are as follows:

    * Political trend: Intellectual property rights

    * Economical trend: Economic growth

    * Social trend: Reduce operational costs; Ease for conducting business administration

    * Technological trend: Software suites; Web applications

    * Demographic trend: Increase in the graduates of IT related studies

Competitor Analysis

Following trend analysis is competitor analysis. Joe analyzes the competition on four levels to gain insight into how they operate and where advantages lie.

* Competition level:

- Consumer need: Arden Systems will be competing on the fact that consumers want efficient and effective conducting of a business

- Brand: There are software businesses that have been making business software for a while and thus have become very popular in the market. Competing based on brand will be difficult.

- Product: They will be packaged software like the major competition.

* Competitive forces: Forces that can affect Arden Systems are in particular:

- The bargaining power of buyers: the extent to which they can switch from one product to the other.

- Threat of new entrants: it is very easy for someone to develop a new software product that can be better than Arden’s.

- Power of competition: the market leaders have most of the cash and customers; they have to power to mold the market.

* Competitor behaviour: The focus of the competition is to take over the position of the market leader.

* Competitor strategy: Joe intends to compete based on product differentiation.

Opportunities and Threats

Now that Joe has analyzed the competition and the trends in the market he can define opportunities and threats.

* Opportunities:

- Because the competitors focus on taking over the leadership position, Arden can focus on those segments of the market that the market leader ignores. This allows them to take over where the market leader shows weakness.

- The fact that there are new IT graduates, Arden can employ or partner with someone that may have a brilliant idea.

* Threats:

- It graduates with fresh idea’s can start their own software businesses and form a major competition for Arden Systems.

Organization Analysis

After Joe has identified the opportunities and threats of the market he can try and figure out what Arden System’s strengths and weaknesses are by doing an organization analyses.

* Internal Analysis:

- Strength: Product differentiation

- Weakness: Lacks innovative people within the organization

* Competence analysis:

- Functional related competence: Arden Systems provides system functionalities that fit small businesses.

- Market related competence: Arden Systems has the opportunity to focus on a part of the market which is ignored.

Strategic Plan

After creating the SWOT-i matrix, Joe is now able to devise a strategic plan.

* Focus all software development efforts to that part of the market which is ignored by market leaders, small businesses.

* Employ recent innovative It graduates to stimulate the innovation within Arden Systems.

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