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MICHAEL STRATEGIC ANALYSIS
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MSA Solutions to the Needs of Your Organization
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Strategic Planning: New Strategic Plans
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The
True Strategic Planning Process
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We use the international expert consensus eight-step process
in formulating and implementing strategic plans of our clients. Our firm has
contributed to the field of strategic planning with its particularly refined
scanning process, an especially useful means of linking scans with strategic
choice, and the MSA Product Preference Map, a powerful tool used in
evaluating the portfolio of products or services of an organization.
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The
Competitive Necessity of Strategic Planning
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Our research shows that the single most important determinant
of organizational success, as defined by market share and profitability, is having
a strategic plan, and that, on the average, firms with a strategic plan command
prices 27 to 32 percent higher, bring in nearly double the revenues, and gain
55 percent higher market share compared to rivals without strategic plans.
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Our experience indicates that these advantages are as great
for public sector and non-profit organizations as they are for private-sector
firms. However, we predict that the competitive advantage of strategic
planning will become diluted over the next ten to twelve years as more and
more organizations engage in it. Therefore, organizations which are the
innovators or early adopters of strategic planning in their industries should
be more competitive, grow more rapidly and attain larger market share. Late
adopters and laggards will probably fall behind, be less competitive, and be
more likely candidates for industry shake-outs. Strong competitive advantage
will remain for organizations which began their strategic planning earliest.
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Example: The Ministry of Health in a
rapidly growing Asian nation experienced a budget freeze imposed on the
ministry by the national government. The ministry and the government nevertheless
wanted the National Family Planning Program, deemed of utmost importance in
this over-populated, resource-scant country, to continue to meet its targets.
There was nearly a complete absence of program planning to pursue the
targets. We used several strategic planning tools including product
portfolio analysis and resource allocation to evaluate Program activities,
and then developed Target Setting, a first-of-its-kind application of linear
programming, to reallocate the national budget of the Program. In the
first year in which our work was implemented, the Program increased its productivity,
as reckoned in terms of the number of births averted, by 85 percent with no increase
in the budget. Our Target Setting System was published and later applied in
at least nine other countries.
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Evaluation of Your Current Strategic Planning
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What
Strategic Planning Is Not
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Lack of Credentials and Knowledge- Many planning consultants
or firms which purport to understand strategic planning do not really know
the body of knowledge of the field or the eight-step strategic planning
process which applies it, and can not deliver more than a cook-book business
plan, old-fashioned long-range plan, or worse. Meeting facilitators, CPA
firms and marketing firms which hold themselves out as strategic planners usually
have no one on staff who has studied or taught strategic planning, and can
not deliver true strategic planning. These weak stand-ins for strategic planning
are often harmful.
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Wrong Kind of Plan- Business Plans typically
address marketing, operations, financial projections, key people, and risks
of a business, but seldom employ modern strategic analysis tools to identify
optimal growth strategies for an organization. Long Range Plans usually
amount to just the last two or three of the eight steps of strategic
planning, omitting strategic analysis. These kinds of plans, goals and objectives
thus often become guesswork.
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Have Us
Take a Look at Your Strategic Planning
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Whether you have a Strategic Plan or plan more informally, a
well-qualified confidential independent evaluation of your planning always
leads to improvements.
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Strategic Planning: Competitor Analysis
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Michael Strategic Analysis research shows that high market
share and high profitability are attained from having a good strategic plan,
selling on value rather than price, operating with a convincing Mission, and
using human resources efficiently. How do your customers fare with the value
proposition of your products or services? Do you have a Mission which enthuses you and your
employees, or does it too much resemble a palliative or cliche? Are you producing your products or
services as efficiently as your competitors do, or have they slipped ahead
with labor-saving innovation? How sharp is the Generic Strategy of each of
your products or services? Of
the company as a whole? How much
market share does each of your competitors have in your industry? What are
the key performance indicators in your industry? What will they be in the
future?
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These are a few of the considerations which we examine when
performing a competitor analysis for clients.
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Example: Four years after its founding, a
high technology firm servicing computer manufacturers was repairing $4
billion worth of computers and peripheral equipment annually for one of the
largest computer manufacturers. Our client was a captive company with only
the one customer. Seeking to grow and to diversify its customer base, the
client wanted to gain a clear understanding of the competition in its
fledgling sub-industry, Outsourced Repairs and Logistics, before choosing
strategies. Michael Strategic Analysis was retained to perform a competitor
analysis for this client, a difficult exercise because a fledgling industry
typically has not yet been researched much, and data are hard to find. Mainly
through deep internet intelligence gathering, we identified and examined
twelve direct competitors, determined their relative performance, diagnosed
their strategies or lack thereof, and ranked competitors by strength. We also
projected overall future market size, and market share and rank for each
competitor. We found a rapidly consolidating industry already scrambling for
an ever-smaller number of manufacturing clients as that industry too
consolidates. These findings pointed clearly to certain best growth
strategies for the client and to other strategies to avoid.
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Strategic Planning: Product Portfolio Analysis
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Six fundamental laws of system science, and an additional law
discovered by MSA, apply immutably to businesses and other organizations. One
of these laws, as stated in business terms, is that Successful Organizations
Use Resources Efficiently. While
this might seem a truism, nearly all smaller organizations, businesses and
non-profits alike, misapply resources and thereby either perform well below
potential, or fail. The MSA practice directly addresses how to optimize the
three key components of all types of organizations: what you sell, to whom
you sell it, and who you are, in other words, your products or services, your
markets, and your people.
Product portfolio analysis addresses products or services, starts with
determining the profit margin of every product or service offered, and then
employs a battery of strategic tests to assess the strategic fit, future and
strength of differentiation of each product or service. We use the term
products generically to mean physical products, services, zero-priced products
and all other sources of firm revenue.
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Example: A client selling 44 product lines had
negative profitability of minus two percent.
We determined for the client that 28 of its 44 products were
losing money, that 13 were essentially breaking even, and that three large
cash cows were responsible for virtually all firm profit, propping up the losers.
On our recommendation, the client culled 14 products from its portfolio,
fixed 14 others to make them profitable, and ended up with a pared portfolio
of 30 profitable products. Company profitability was restored immediately.
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Example: When
Peachtree Software pared its portfolio from 150 products to a core three, its
profits and profit margin jumped significantly even in the face of lower
sales from culling so many products. Company focus also was greatly improved.
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Example: As part
of our strategic planning for the second largest Chamber of Commerce in the
western states, the Chamber pared its product portfolio from 148 services, programs
and other claims on resources to 58, nearly a two-thirds reduction. What was
kept related directly to the new Mission, got rid of deadwood activities, and
turned this Chamber around financially.
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It is time to weed and feed your product portfolio. Have us
examine your products or services to focus them and let you deliver more to
your shareholders.
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MICHAEL STRATEGIC ANALYSIS
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Marketing Analysis: Marketing Plans
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Marketing is a specific process which prescribes which of
products or services are sold at which prices in which markets, and how the
organization makes its chosen markets aware and desirous of its products. The
axiom of best products in best markets at best prices provides sustainable
competitive advantage, maximizes profit, and creates shareholder value.
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What Is
the Marketing Mix?
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Our Marketing Plans carefully address all four elements of the
classic marketing mix, careful implementation of the Marketing Plan, and the
institutionalization of excellent marketing within the organization. In the
marketing mix, we use the following standard considerations as the starting
points.
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Your Products- What you sell: How and
why the organization chooses to offer its particular products or services.
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Your Markets- To whom you offer your
products: Why the organization targets its particular markets.
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Your Pricing- What you charge for your
products: Whether prices are set by cost, margin or competition, how prices
are best modified by market segment, and how prices are deliberately set to
maximize profit.
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Your Promotion- How the firm makes its
chosen markets aware of its products and how markets are encouraged to buy
the products. There are two branches of promotion: personal selling and non-personal
selling. Non-personal selling consists of advertising, public relations,
publicity and education.
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Strategic marketing, branding, customer service, market
research, and, especially, marketing management are the other important
elements of an MSA Marketing Plan.
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Example: A dynamic, well-qualified young
risk management and consulting firm needed to begin operating by annual
marketing plans. We established marketing benchmarks for the client, performed
all research for production of the first Marketing Plan the client ever had,
wrote the Plan, interpreted it to the client, and assisted the client in
implementing it. Our work revealed that the client needed to bolster its
capabilities in product selection, supplier research, branding of its premium
product, certain aspects of pricing, and market selection. The client
systematically executed its Marketing Plan, corrected its relatively few
marketing weaknesses, and raised its overall marketing performance to
comprehensively excellent.
Profits increased significantly from better pricing and market
selection.
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Marketing Analysis: Evaluation of Your Current
Marketing Practices and Marketing Plan
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What
Marketing Is Not
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Just Advertising and Promotion- It is misleading
that many firms which hold themselves out as marketing firms can not go
beyond advertising and public relations. Advertising and PR are parts of one
part of marketing, namely promotion.
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Lack of Credentials and Knowledge- Many
marketing firms or marketing consultants who purport to understand marketing
do not really know the body of knowledge of the field or the marketing
planning process, and can not deliver more than a cook-book marketing plan or
worse. There is no control over who may proffer to be expert in marketing,
and many purporting to be are familiar only with promotion.
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Our
Marketing Analysis Practice
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MSA marketing advice delivers expert application of a large,
increasingly sophisticated body of specific knowledge involving all four
parts of the Marketing Mix and the expert application of established
protocols for the application of this knowledge to the diagnosis of the
marketing needs of an organization: the prescription of product selection, market
selection, price optimization and promotion, and the implementation of the
Marketing Plan.
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Marketing Analysis: Survey Research
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Sound decision making rests on accurate current information
obtained from a variety of sources often including original survey research.
Modern survey research is a highly complex discipline in which the
practitioner needs deep knowledge of statistics, survey instrument design,
sample selection, and how to interpret data. Michael Strategic Analysis performs
local and nationwide surveys at virtually any sample size. Our Principal Consultant,
who has taught applied statistics at the graduate level, personally guides
all MSA survey research work.
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Example: A city needed to understand
consumer knowledge, attitudes and practices regarding a public service which
it made available. It also needed to measure the effectiveness of an
advertising campaign which it had launched to publicize the service. We
formulated and administered a survey to a scientifically selected cross-section
of 400 adult consumers, tabulated and statistically analyzed the results
using proprietary MSA statistical software, and interpreted the results to
the client. In the same survey, we measured the degree of recall of the
advertising campaign. Knowledge of its markets for this particular service
increased manifold for the city. As a result, the city had a much clearer
view of the competition and how to compete against it. This allowed a
strategic shift of emphasis away from promotion of some of the specific
features of the service and toward promotion of overall product recognition
and encouragement of use. The advertising campaign proved to have had much
longer lasting power than had been supposed, and reinforced the new
promotion.
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Marketing Analysis: Market Segmentation
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Just as product portfolios can hide products which are hurting
you, so can your markets if they are inefficient. Here, the tool is market
segmentation analysis which sorts out your markets for profitability and
strategic fit.
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Example: MSA
market segmentation analysis showed that 22 of the 57 customers of an MSA
bank client produced $6,777,000 in profit while the other 35 produced
$3,629,000 in loss. The resulting $3,148,000 net profit was therefore
only 46 percent of what it should have been. This client weeded out losing
markets and customers, repriced certain products, redeployed assets to
profitable products, and saw its profits leap while actually using less
resources.
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Example: Adrian Slywotzky, the brilliant
analyst and author at Mercer Management Consulting, points out in his book Profit
Patterns that, for the typical community bank, 30 percent of the customer
base generates 130 percent of the profit, another 30 percent breaks even, and
the bottom 40 percent generates losses equal to 30 percent of bank
profit. This amounts to an
overall breakeven situation with zero profitability because of the losing
markets draining off profit generated by the profitable markets.
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Example: Kanthal,
a Swedish electrical manufacturer, saw 40 percent of customers provide 150 percent
of profit and the other 60 percent generate losses equal to 50 percent of
profit. This amounted to another
zero-profitability situation.
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If you have yet to analyze your markets, how much longer do
you care to sacrifice the profits now surely drained off by your worst
markets? If you have not done this analysis, it is time to call us.
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Marketing Analysis: Pricing
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Pricing is the most overlooked marketing opportunity. For all
but the largest businesses, which usually have in-house pricing analysis
capability, pricing is usually performed by guesswork resulting in lost
profits or actual losses. Pricing is a well developed discipline which, when
used correctly, maximizes profit. In our practice, we examine whether a particular
product or service should be priced according to costs, desired profit margin
or competitor prices, and then we set pricing modifications which permit the
product or service to bring in revenues and therefore profits that it would
not otherwise be able to gain. For organizations which have never engaged in
formal pricing analysis and price determination, gains are usually great and
practically costless in doing so the first time.
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Example: When we examined the product
portfolio of an investment advisory firm, we discovered a zero-priced product
which is a product or service being offered at no charge for which charging
is feasible. Competitors of the
client all charged for this particular service. On our recommendation, the
client began charging for the service, and this single repricing accounted
for 28 percent of client profit growth the following year, with virtually no
cost or effort. This was a frequently encountered case of unseen lost profit.
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MICHAEL STRATEGIC ANALYSIS
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Litigation Support: Economic Damages
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Why does a firm which practices Strategic Planning and
Marketing Analysis also have a Litigation Support practice which engages in
calculation of economic damages? The answer is that all three disciplines
rely heavily on superior analytical ability and quantitative analysis skill.
Economic damages can occur to organizations in cases of breach of contract, illegal
competition, or injury to intellectual property rights among others; and to
individuals in cases of personal injury, fraud and defamation among others.
Our clients have never lost a case in which we calculated economic damages.
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Example: Four energy companies were each considering building very
large power plants in a small historically-important rural area of a
state. The companies were attracted
by proximity of a picturesque river which they would have used for plant
cooling, an electricity transmission grid, and a gas fuel source. Any one of the proposed plants would
have amounted to a major disruption of the area of rolling farm land where
the plants were proposed, with two of the four companies having proposed
their power plants on agriculturally-zoned land directly adjacent to homes,
farms and small businesses.
Michael Strategic Analysis calculated the economic damages, benefits
and net economic impact of each of the four plants, and found that two would
have resulted in local net economic damages of $64,000,000 and
$94,000,000. Our analysis was furnished
to the state government cabinet which then removed plant approval authority
from the pro-industry state agency which likely would have authorized one or
more plants. The cabinet then
revised state power plant siting procedures, causing the energy companies to
withdraw their applications, preserving the homes and property values of over
700 families.
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Example: The client of a law firm had
suffered permanent diminution of mental faculties as the result of a traffic
accident caused by others. This made him unable to operate his two businesses
and forced the sale of one business. We identified fifteen separate kinds of
economic loss stemming from the accident, made conservative trial-proof projections
of the amount of each kind of loss, and calculated the net present value of
total loss exceeding $2.1 million. Our work was deeply substantiated,
employed sophisticated analysis of the businesses, and brought in key
internet-sourced statistics. After our deposition, settlement discussions
commenced rapidly. This case settled handsomely in favor of the client of the
law firm.
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Litigation Support: Expert Witness Testimony
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Usually in our cases involving calculation of economic
damages, we are called on to provide expert witness testimony in deposition
and, if the case goes that far, in trial. In most of our cases, settlement
was reached soon after we presented expert witness testimony in deposition.
Following is an example of our expert witness work in an important trial.
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Example: A tenant of the State of
California sued the State on grounds of dealing in bad faith when the state
refused to change the terms of a lease. Our Principal Consultant was
appointed as Expert Witness to examine the plaintiff claim and supporting
documents, to calculate the dollar amount of damages to the plaintiff, and to
assist the Deputy State Attorney General in rebutting opposing expert
testimony. Our work showed that the plaintiff had suffered no monetary
damages, and had actually benefited economically for not having had the lease
renegotiated. Our client, the State, prevailed on all counts and had all case
costs reimbursed by the plaintiff.
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Example: The client of a law firm, a land
holding company, had been sued by a developer which had promised to develop
the parcel owned by the client, but had not. When the client sold the land,
the developer sued to recover sunk costs and would-be profits had the land
been developed. The land holding company cross-complained on grounds that the
developer had damaged it by persuading it not to sell during the good sellers
market of the early 1990s. We calculated damages caused by the delay in sale
totaling more than $3.3 million. In crucial ways, our work supported the
arguments of our client at trial that our client had not caused damages but
had suffered them. Our client prevailed on all counts in the trial, and the
developer was awarded no damages. Our economic damages analysis shown in support
of the cross complaint our client became the subject of successful settlement
talks.
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MICHAEL STRATEGIC ANALYSIS
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Transition Management: Feasibility Analysis
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The leading service in our Transition Management practice is
Feasibility Analysis which Michael Strategic Analysis has been performing for
its clients since the 1980s. Our Feasibility Analysis clientele includes
private firms, government agencies and non-profits. Feasibility Analysis is
an application of the broader field of strategic planning.
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Example: A High Sierra resort and
entertainment complex contemplated the purchase and development of an
existing resort and several coterminous parcels. Executives had identified
three main lines of business of hospitality, recreation and entertainment to
which they would devote these possible acquisitions. In addition, we
identified services and logging as two additional possible products. We
examined the product portfolio of these five sources of income; the adequacy
of venture management including skill gaps; the strengths, weaknesses,
opportunities and threats of the concept; financial requirements and
feasibility including expected return on investment and payback periods; the
effects of seasonality on cash flow; and the strategic feasibility of the
concept and its five offerings. Our work showed one of the five intended
offerings to be highly attractive, two to be feasible, one to be marginal,
one to be very risky, and the overall venture, modified to reduce or
eliminate the unattractive offerings, to be of moderate attractiveness. The
group launched the one most attractive offering, and may phase in one or two
of the other offerings in future years.
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Example: For what became the University
of California Mondavi Performing Arts Center, Lincoln Center West as it is
often called, the university needed a market feasibility analysis to
determine if sufficient demand and sentiment existed in northern California
to support a major new performing arts center, and to discern which amenities
of a new center held the most attraction to the public. Our feasibility
analysis involved formal surveying and analysis of the general public and of
subscribers of the university performing arts series; defining market
boundaries, future market size, and optimum capacity for the new Performing
Arts Center; and determining public desires for amenities at the Performing
Arts Center. Our work revealed consumer needs and tastes, market size and
expected market penetration, best target markets, and optimum seating
capacity. The University accepted our recommendations in toto including the exact recommended
seating capacity of the main hall of the Center. The Mondavi Center for the
Arts opened in August, 2002.
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Transition Management: Turnarounds
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In non-recessionary times, about 25 percent of all companies
and non-profit corporations are retrenching. There are four classical
retrenchment strategies, the most common of which is Turnaround. The four
most common causes for needing a turnaround, in order of frequency, are
failure to keep pace with changes in the marketplace, lack of operating
controls, over-expansion or excessive growth, and excessive leverage. The
four most common causes for failure to successfully complete a turnaround, in
order of frequency, are failure to reform management, inadequate planning,
failure to install adequate operating controls, and excessive leverage. All
financial turnarounds guided by Michael Strategic Analysis have been
successful.
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Example: A diversified company involved
in wood products, electronics and retail suffered central problems of no
planning, poor controls, lack of cost accounting, a weak board, and internal
strife. As results of our analysis and recommendations, the client instituted
regular cost accounting by product, contract, and division; eliminated losing
products and divisions; launched new products in new markets; and recruited
new blood to the board. These changes raised revenues by 71 percent in six
months, increased the profit rate from -2 percent to +13 percent in a year,
and finished other aspects of the turnaround in 15 months.
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Example: Two related scientific companies
experienced poor controls, no cost accounting, poor planning, cramped quarters,
a stretched staff, and indecision. The city and county in which these two
scientific firms are located were important stakeholders by having provided
financial incentives to the companies. The city and county had MSA diagnose
the lack of profitability of the firms and prescribe changes. We performed
product portfolio analysis showing that 28 of the 44 products of the firm were unprofitable, and that
operations were being propped up by three cash cows. We performed industry
comparisons which identified strengths and weaknesses of the companies. Our
recommendations to improve controls and cost accounting, prune the product
line, reprice, begin strategic planning, promote promising products, and
relocate the company were presented to the mayor and the County Commissioners
chair. The two firms merged, had management realigned, instituted our recommendations,
moved, grew and became profitable.
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Transition Management: Interim Management
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In some cases,
chief executive officer of Michael Strategic Analysis, Peter H.
Michael, serves as chief executive officer or chief operating officer of
client companies, and runs a client company directly. This can happen in
cases of clients undergoing a turnaround, or when the position of CEO is temporarily
vacant. These MSA engagements typically last three to six months, and we take
them only after careful screening of client needs at the time.
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Example: A health care company suffered
central problems of rapid growth which had outrun management ability and
financing ability; difficult creditors; failure to keep pace with new,
aggressive, low-cost competition; and unprofitable operations. Our
Principal Consultant was authorized full executive authority including all
hiring, firing, and disbursements. He shrank operations until the corporation
was profitable again, instituted controls, replaced problematical members of
the medical staff, got the cooperation of creditors, and successfully
shepherded the company through a reorganization. He also provided court
testimony. All personally pledged security, 500 patient relationships,
and 40 jobs were saved. The firm reorganized and today operates successfully.
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