Strategic Value Management: Stock Value Creation and the Management of the Firm

Chapter 7. Drivers of Growth

This chapter continues with the environmental analysis that Chapter 5 initiated, in order to identify drivers of growth. As you remember, we criticized severely the traditional strengths, weaknesses, opportunities, and threats (SWOT) analysis for its confusion and inability to produce practical recommendations. In Chapter 5 we introduced a new way to analyze the strengths and weaknesses, connected to their ability to develop market power.

This chapter proposes a brand-new approach to analyze opportunities and threats, which facilitates the development of innovation strategies (the drivers of growth), the vertical axis of the strategy-value model.

In addition to help developing innovation strategies and therefore creating stock value, a second benefit of this approach is its ability to develop organizational knowledge and intellectual capital, and to facilitate the consolidation of the knowledge and experience of all the employees.

IDENTIFYING OPPORTUNITIES AND THREATS

Why is growth (or contraction) the consequence of the existence of future business opportunities (or threats)?

Opportunities are driven by changes in the external environment, and by the internal resources of the firm, which can transform such external events into a new piece of sales. For example, a change in a regulation may be used by the firm to open a new market, a change in consumer habits ...