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Running Head: CAPSTONE STRATEGIC AUDIT 1
Capstone Strategic Audit
Tereza Stratilova
Argosy University
December 16, 2012
CAPSTONE STRATEGIC AUDIT 2
Abstract
This paper is focused on strategies of the Coaching and Learning Institute (C&LI). The
main goal is to analyze the company’s problem, threats, and improvements from various
perspectives. Among the researching analyses are strengths, weaknesses, opportunities, and
threats analysis (SWOT) and TWOS strategic metrix, Porter’s (2008) five-force analysis, cultural
assessment and value chain analysis. The research proved that C&LI’s strategy follows the
company mission and vision and did not find any major issues that would inhabit the current
strategy. However, some recommendations were drawn which can increase the efficiency of
C&LI’s operations and assist in achieving their goals. Recommendations are from different
business areas, which include marketing, expansion, service development, alliances, and
integration.
CAPSTONE STRATEGIC AUDIT 3
TABLE OF CONTENTS
EXECUTIVE SUMMARY 4
COACHING AND LEARNING INSTITUTE (C&LI) 5
STRATEGIC ISSUES 6
SWOT ANALYSIS 6
TWOS STRATEGIC MATRIX 10
EXTERNAL ENVIRONMENTAL SCAN 12
FIVE FORCES ANALYSIS 13
ORGANIZATIONAL ASSESSMENT 15
CULTURAL ASSESSMENT 15
VALUE CHAIN ANALYSIS 16
SUMMARY AND RECOMMENDATIONS 19
CONCLUSIONS 23
REFERENCES 25
APPENDIX 29
CAPSTONE STRATEGIC AUDIT 4
Executive Summary
This report focuses on a strategic audit of the Coaching and Learning Institute (C&LI).
The strategy is tested by multiple analyses, among which are SWOT and TWOS analyses,
external environment scan, five forces analysis, organizational culture assessment, and value
chain analysis. This research did not find any major misalignments between the stated goals of
the company and the actual procedures. However, minor recommendations were drawn in order
to increase operation and the company’s success on the market. Among those recommendations
are building new website, special offers for returning customer in order to increase the retention
rate, hiring more employees to broaden the market share, or to merge with larger corporation to
gain more resources. Among suggestions are cooperation with colleges and universities,
implementation of performance measures, lowering operational cost, and starting full scale online
education.
CAPSTONE STRATEGIC AUDIT 5
Capstone Strategic Audit for C&LI
Coaching and Learning Institute (C&LI)
C&LI is a small company focused on five customer areas including organizational
training, strategy development, organizational coaching, outdoor adventure programing, and
college programming. C&LI is located in Northwest suburbs of Chicago, IL. It has nearly 20
years of experience in the educational, coaching, and development field. There are between ten to
fifteen employees in C&LI. Based on the interviews, C&LI faces two main challenges: first,
being the down economy makes it harder to get new customers; secondly, there is intense
competition in the region. With the down economy small companies like C&LI lack new-coming
customers and have to work harder in order to obtain them (Interview 1, Nov. 9, 2012).
Interviews were conducted with three employees of the company TBA, SC and RS. TBA
is the executive partner of C&LI, who established C&LI 20 years ago. SC represents the second
executive partner of C&LI who joined the company 15 years ago. The last interviewee was RS,
the marketing director, who has been with the company for 4 years. All interviews were
conducted on Friday, November 9, 2012 during a visit of the company. The outline of the
interview follows Brodie’s (2008) 10 questions you must answer in developing your business
strategy.
C&LI is a cover name for the investigated company in this strategy audit and only initials
are shown for respondents to the interview. This prevents competition from getting C&LI “know-
how.” Information provided in the interviews are for educational use and cannot be shared.
CAPSTONE STRATEGIC AUDIT 6
Strategic Issues
This section introduces and integrates couple of analyses, which were used to determine
C&LI strategic issues. Strategic issues arise from a mismatch between internal capabilities and
external trends. Among those analyses are SWOT analysis, Five Forces analysis, organizational
assessment, and external environmental assessment. These analyses detect any important
opportunities, which are not being utilized, or major external threats that are overlooked.
SWOT Analysis1
SWOT or Strengths, Weakness, Opportunities, and Threats, analysis depicts the basics for
realization of the desired alignment of organizational variables or issues. SWOT analysis grid
helps to understand how strengths can be leveraged, to realize new opportunities, and understand
how weaknesses can slow progress, or magnify organizational threats. It is possible to postulate
ways to overcome threats and weaknesses, or build future strategies, based on properly designed
SWOT analysis (Helms & Nixon, 2010).
Strengths
The largest advantage of C&LI is the highly educated staff. Both of the executive partners
have doctorate degree in education, as well as the lecturers who are conducting the training and
development services. The flexible pricing could be considered the second biggest strength of
C&LI. Pricing is established “backwards”; first, the budget is given and the services are planned
in accordance to the amount. C&LI is already using one of the potential opportunities on the
market, the college cooperation. As Hoover’s (2012) noted, that education and training programs
1 For more details, refer to the Appendix: SWOT analysis.
CAPSTONE STRATEGIC AUDIT 7
represent major opportunity to high school students who are not interested in a traditional liberal
arts education.
C&LI has good referrals; although C&LI is not running any massive propagation
campaign, its customers can still find them and request their services. In a down economy, good
referrals are one of the strongest marketing advantages, because they are believable (Kotler &
Keller, 2000). Personal approach is the last strength of the company. Based on the interviews
(Nov. 9, 2012), it is obvious that more companies value thoughtful and experimental services,
over fancy, but rigid approach. Modern society is losing faith in old and standard procedures
(Kotler & Keller, 2000).
Weaknesses
The most pressing issue in the C&LI is the confusing website. Considering the fact that
the website of C&LI is the main communication with the customer; it needs to be organized and
easy to navigate. Customers who arrive on the website have to be able to find quickly what they
are looking for and eventually place an order for needed services. Another weakness is the budget
of C&LI. This budget issue prevents C&LI from promoting itself more effectively presents
problem when obtaining a new website. The third issue is represented by low customer retention.
Based on the interviews with executive managers, only about 25 percent of the customers are in
ongoing relationship with C&LI. The remaining are new customers, even though, the loyal
customer base is one of the most important assets of any company (Kotler & Keller, 2000).
No branding or alliance is another weakness for C&LI, because it allows stronger
competition to roll over the company. As stated in Hoover’s (2012) report the training and
development market is very fragmented and the recent trend is to ally together with bigger
CAPSTONE STRATEGIC AUDIT 8
companies on the market. This is beneficial in both directions. Small company acquire bigger
budget, big company gains larger market share (Garrison et al., 2012). Last problem in C&LI has
the limited number of employees. This is again tied into the limited budget. More employees
might be able to cover more business for C&LI; however, fewer employees can cover smaller
market.
Opportunities
There are over 6 million online students enrolled in variety of mostly undergraduate
courses. Career and technical education, however, is barely using the online market. This field
represents many new opportunities for educational and training services; it allows reaching more
students faster with fewer expenses. Online education is considered one of the strongest
opportunities for the industry (“Hoover’s”, 2012).
Big corporations, who are already known on the market and have the technical resources,
are acquiring smaller companies to grow their market share (“Hoover’s”, 2012). Since the
industry is fragmented, it is suggesting that merging and acquisition will take places soon. This
can be a good time for C&LI to communicate with any larger corporation, which could provide
needed resources.
Not only are schools in the US recruiting internationally and inviting students to the
United States; a new trend is to open schools abroad and offer educational services all around the
world. Fashion institutes, language instruction, cooking schools, and business programs are just
some of the programs already opened internationally using the tool. This opportunity would be
well used in combination with the new technologies and online education (“Hoover’s”, 2012).
Consolidation of operations allows educational companies to save money on fixed cost
and improve operational efficiency. Lowering fixed costs frees new resources, which can be used
CAPSTONE STRATEGIC AUDIT 9
in any other department and therefore raise the competitive advantage (Porter, 1996). This is a
key to profitability in the educational and training services sector (“Hoover’s”, 2012).
Career and technical educators can collaborate with high school and community colleges
in order to lower high school dropout rates. Those educators guide technically minded students to
fulfilling educational and specialized opportunities. Education and training programs can help
technically minded students to succeed in their field and on the job market (“Hoover’s”, 2012).
Threats
US government heavily regulates educational and training services, related to policies and
addressing financial aid programs, classroom funding, accreditation status, and standardized
testing. Those regulations can be changed at any time, since the political climate has been
fluctuating recently. Ever-changing regulations represent one of the most serious threats to the
educational and training services industry (“Hoover’s”, 2012).
Noncertified classes, focused mostly on art and sport, depend highly on customer’s
interests, as well as their budget. In the mean of the recession, many perspective customers save
money by cutting down leisure education. Economic downtime and high unemployment affects
hobby, arts, and sports education. Dependence on personal income is also considered serious
threat in this industry (“Hoover’s”, 2012).
Most of the “career and technical education” (CTE) programs are dependent on federal
loans for their enrolment. Cutbacks might have crucial impact on the profitability of educational
and training institutions. All educational institution has to deal with defaults on loan. According
to Hoover’s (2012) any school, which goes beyond a 25 percent default rate for three consecutive
years, risks losing eligibility to be a part of multiple federal grant programs. Lastly, due to
decentralized regulations in education, schools can get away with “instant” certifications and
CAPSTONE STRATEGIC AUDIT 10
degrees. This behavior of some private entities on the market recently harmed reputation of even
legitimate institutions and bring negative publicity (“Hoover’s”, 2012).
TWOS Strategic Matrix2
Weihrich (1982) redesigned the SWOT in order to generate strategies based on the
relationship between internal and external environmental factors. His model is called the TOWS
Strategic Matrix. The analysis starts with the external environment, which might be of immediate
importance to the organization.
The Weakness/Threat (WT) strategy pointed out couple of issues C&LI has to be aware
of, among those issues are preventing negative publicity by fixing the website (T5, W1), creating
low-cost education for people with low income (T2, T3, T4, W2), and making special offers for
returning customers in order to increase customers retention rate (T2, W3). New website is one of
the suggestions for change as it is a “front door” to the company; therefore, it has to be organized
and catchy. Well-designed website can prevent negative publicity. Low-cost education might
broaden the clientele of C&LI. C&LI is already working on this issue, by providing “flexible
budgeting” to any customer. Special offers might attract some of the previous customers and
make them to come back for more education. This is easy to do and might have tremendous
effect on customer retention rate.
The Weakness/Opportunity (WO) strategy reveled option of online (international)
education to save budget (O1, O3, W2), hiring more employees to expand further market (O3,
W5), and merge with bigger company to increase the budget and other resources (O2, W2). Little
budget limits C&LI operations; online education is an option which can overcome this. The
major savings coming from online educations are savings on travel expenses and facilities for
students. At the same time, C&LI would be able to expand and bring more clients in; however,
2 For more details, refer to the Appendix: TWOS Strategic Matrix.
CAPSTONE STRATEGIC AUDIT 11
this would need more employees to cover the demand. Hiring new employees would raise the
operational cost; yet, they would be able to generate more revenue for C&LI. Last option is to
merge with bigger company on the market, which would be able to facilitate C&LI’s needed and
provide resources.
The Strength/Threat (ST) strategy suggests options helping the usage of the company’s
strengths in the unstable external environment. Among those options are pricing based on
personal income (T2, S2), college cooperation fighting negative publicity (T5, S3), and good
referrals suppressing negative publicity (T5, S4). C&LI offers flexible pricing to different
companies. As mentioned in the original interviews (Interview 1, Nov. 9, 2012), the company
sets its prices “backwards”. First, it is interested in the budget any company is willing to spend on
the education; second, it creates the curriculum based on the budget. College cooperation might
prevent the negative publicity of private sector educational companies. C&LI can present its
offers in front of students, answer their question, and prove it is a trustworthy company.
When applying the Strength/Opportunity (SO) Strategy, the main outcomes are
international online education for colleges (O1, O3, S1, S3), international expansion through
referrals (O2, S4), online education by educated staff (O1, S1), and partnership with colleges and
universities, where staff got its education (O5, S1). International online education is a
combination of multiple opportunities and strengths. Based on Hoover’s (2012) online education
is one of the biggest opportunities in educational industry on the market right now. Combining
online education with global expansion is a low-cost solution, which can broaden C&LI clientele.
Expansion can be also achieved by utilizing the referrals, which are common in C&LI; however,
C&LI might need more employees to cover the demand (mentioned in WO strategy). The highly
CAPSTONE STRATEGIC AUDIT 12
educated staff C&LI could reach the main differentiation point in online education. Lastly, C&LI
may extend its customer base by cooperating with the universities the staff attended.
Once the main outline of the position of C&LI in SWOT and TWOS matrix is clear, the
suggestions for the further initiatives, can be drawn in the balance scorecard3. Those initiatives
are focused on C&LI future and need to be specific, measurable, achievable, realistic, and in
timely manner. Based on the suggested initiatives in C&LI balance card the next steps for C&LI
might include hiring of new employees; couple of educational events; creating new website and
special offers/deals, which can be propagated in new marketing campaign; designing evaluation
survey; and writing newsletter to inform employees about the changes. All those actions should
help C&LI to reach its objectives and ultimately to become more successful on the market.
External Environmental Scan4
Based on Hoover’s (2012) the US education and training services industry includes about
50,000 companies and many more self-employed individuals. The combined annual revenue of
the whole industry is more than $35 billion. Among key companies belongs Kaplan (Washington
Post Company subsidiary); Career Education Corporation (CEC); ITT Educational Services; and
Sylvan Learning (part of Educate); (“Hoover’s”, 2012).
Based on the questionnaire provided by C&LI (Questionnaire 1, Nov. 17, 2012), it is
obvious that the economic activity is still lower than it was before 2008. However, the revenue
seems to be going up recently. Although, the numbers are rising, the situation is not the same.
Most trainings and programs are modified and run in the “low-cost mode”. The clientele changed
as well; customers used to come from all different directions before 2008, now the training
3 For more details, refer to the Appendix: Balance Scorecard.
4 For more details, refer to the Appendix: External Environmental Scan.
CAPSTONE STRATEGIC AUDIT 13
focuses mostly on corporation level and bigger companies who have budget for education. The
business strategy for upcoming years is definitely conservative (Questionnaire 1, Nov. 17, 2012).
C&LI questionnaire (Nov. 17, 2012) supported the difficulty of obtaining certification and
accreditation. This might lead to further merges and acquisitions of small companies with bigger,
which can provide the accreditation. The fragmented environment is also suggesting this trend.
There will be many changes in the educational and training services industry in the upcoming
years.
Modern technology represents great opportunity to this industry. It can be used in in-class
setting, as well as during the virtual distance learning. C&LI finds the online learning experience
as one that increases learner’s autonomy. Training professionals are responding with new user-
friendly portals, which feature highly customized content.
Five Forces Analysis 5
Business strategy serves to understand company’s competition. Porter (2008) describes
five different sources of competition: customers, suppliers, potential entrants, substitute products,
and the rivalry among competitors. The extended rivalry results from all of those forces, and
defines an industry’s structure and shapes (Porter, 2008).
Since adult education is a specialty, which requires a lot of training, it is hard to imitate.
Still, customers who are interested in education can attempt self-education with use of modern
technologies. For most of the corporation; however, it is cheaper to outsource training than have a
permanent trainer. Based on the questionnaire (Nov. 17, 2012) the most common request is the
price adjustment. Buyers are aware of the slow economy and require lower prices or special
deals.
5 For more details, refer to the Appendix: Five Forces.
CAPSTONE STRATEGIC AUDIT 14
Education and training does not necessary require stable input of goods; therefore, C&LI
can choose from variety of supplier. This gives C&LI opportunity to overcome the supplier’s
bargaining power. Supplies that are more expensive are not ordered frequently and are probably
fulfilled by solid vendor.
Although the market for professional training and development is fragmented, the
competition is always an issue. Based on the responses from the questionnaire (Nov. 17, 2012),
C&LI is mostly dealing with bigger and longer established companies. With the economy
recession, new companies have hard time to establish themselves and penetrate the market.
The educational filed is deeply threatened by substitution. In the modern innovative world
with open informational access, everybody can educate himself/herself. Among substitutes for
corporate or person training can be online or blended courses, institutional education (education
offered by college or university), or self-education (with a textbook). The advantage of
professional training is that it is time efficient and requires less effort from the customer’s side.
Adult education industry, especially corporate learning, is highly fragmented in the
Midwest area. The competition is not so intense. Based on the questionnaire (Nov. 17, 2012) it
appears that small companies are helping each other. Despite, Ehmke’s (n.d.) proposal of rivalry
growth with slow economics, it seems hard times brought small businesses together.
CAPSTONE STRATEGIC AUDIT 15
Organizational Assessment
Cultural Assessment6
Organizational culture is an important factor determining productivity of the company; the
culture is mostly given by the organization’s architecture. The most prevalent C&LI unwritten
rules are: “Over-deliver even if it kills you, 15 minutes early is on time, and follow-up is a key”
(Interview 2, Dec. 1, 2012). This shows the importance of quick environment with emphases on
quality and customer service and resemble with the company mission and vision. Employees are
asked for autonomy, mastery in their field and are given feel of purpose in return. However, this
is an environment suitable only for certain type of personality. Person who needs to contemplate
on work issues might be unhappy and eventually leave. As described by Zuckerman (2002)
problem arising from unwritten rules and shared values might be considered as an inhibitor
within the organizational culture.
Based on the Interview 2 (Dec. 1, 2012), C&LI’s organizational culture falls under group
culture in Cameron and Quinn’s typology (Cameron & Quinn, 1999). Organizational structure is
sharing, but also dynamic, which goes back to the speed of the organization itself. The executive
partners are directive leaders; however, they listen to their employees and help them grow if
needed. The management theory prevailing in the C&LI is represented by “participation fosters
commitment”, but at the same time, C&LI seems to build a hybrid of couple of managerial
theories and worked out their own. The organizational glue is definitely employees’ loyalty and
sense of achievement that can be reached together. Criterion for effectiveness is measured by
6 For more details, refer to Appendix: Cultural Assessment.
CAPSTONE STRATEGIC AUDIT 16
income, which mostly resemble with the rational culture, but this is the only match with this
particular culture.
Each company has enablers that help the culture to excel, as well as blockers, which slows
the effectiveness of the organization (Zuckerman, 2002). Based on the diagnosis of
organizational culture C&LI understands is organizational culture, because the discrepancy
between existing culture and preferred culture is very little. The diagnosis also shows that C&LI
tends to have team oriented sharing culture with emphasis on achieving goals and innovative
approach. As mentioned above, the high speed of the organization and quite a lot of freedom
might not be suitable for all employees; therefore, those aspects might be consider cultural
blockers.
Value Chain Analysis7
Porter (1985) describes value chain as chain of activities, which lead into producing
certain product. The product gains value in every stage of the process; however, the complexity
of the chain determines the price of the final product (Porter, 1985).
Figure 1 describes how Porter’s value chain model applies to C&LI. Input into C&LI are
minimal, because of the type of service the company is producing. There is not one dominant
supplier, instead the company choses where to go based on the quality and prices of each supplier
(Interview 1, Nov. 9, 2012). C&LI considers customers’ needs already in this phase; this allows
the organization not to spend extra money on its supplies. The operation phase is characterized by
working on the curriculum for training programs for each individual customer. In this period all,
the services are tested. Aside from the curriculum preparation, part of the personnel focuses on
7 For more details, refer to the Appendix: Value Chain Analyses.
CAPSTONE STRATEGIC AUDIT 17
writing technical articles about new trends in training and development. This not only increases
credibility of the company, but can be also used as effective public relations. In outputs stage the
services are developed and training programs, which are ready for implementation, tested. At the
same time articles and books describing company’s services and trends in the field are published.
Sales and marketing are done mostly through the company website. Social media, blog and
company’s radio are utilized to propagate the company. Any further services, after the purchase,
are provided mostly to the clients, which are decided to long range cooperation with the company
(Interview 2, Dec. 1, 2012 & “Company Website,” 2012).
Figure 1: Porter's Value Chain for C&LI
Source: Assembled by author based on interviews and company website.
C&LI’s infrastructure is described in the introduction of this paper. Since C&LI is
training and development company, HR activities pervade through the whole company.
Organizational culture is very receptive and open, so employees can learn from each other. One
of the main goals of the company is to be innovative; this means to keep in touch with the
technology development. C&LI is using modern approaches as social media and blogging in
CAPSTONE STRATEGIC AUDIT 18
order to attract customers. Procurement in this kind of company is not that prevalent, because of
the few suppliers C&LI needs. However, the legal department should be up to date on any
educational issues and dealing with corporations (“Interviews 1, 2”, Nov. 9 and Dec. 2, 2012 &
“Company Website,” 2012).
There are few departments, where C&LI might be in competitive disadvantage. First and
most important, is the marketing phase. Since the website is the “front door” into the
organization, it needs to be more customers friendly. Further, C&LI does not brand or cooperate
with any other bigger company. Getting their brand “out there” would bring them more business.
Another disadvantage among primary activities might be in the service stage. Interview (Nov. 9,
2012) pointed out that only about 25 percent of the C&LI customers are long-time clients. This
might be given by lack of offers in the after-purchase service area (“Interviews 1, 2”, Nov. 9 and
Dec. 2, 2012 & “Company Website,” 2012).
When focusing on the supportive tasks, C&LI is limited by it infrastructure, because of its
little budget. Some steps need to be taken in order to save on fixed cost freeing up some money
for other operations. Last, but very important is the problem with HR. Because of the limited
budget, C&LI consists of up to 10 employees. With more employees, the company would be
able to reach broader markets, therefore increase its sales (Interviews & “Company Website,”
2012).
CAPSTONE STRATEGIC AUDIT 19
Summary and Recommendations
The goal of C&LI is to broaden its market share and go global; therefore, there are needs
for changes in the service portfolio. New website is number one issue. In order to claim more
market the company’s information has to be clear, ease to access and client should have an option
to place an order from the website. Attention to online education would help to broaden service
portfolio as well. Online education was pointed out as one of the biggest opportunities in the
educational industry nowadays. It cannot only spread around the whole world without any
boundaries, but it is cost effective.
From the structure point of view, C&LI is effective; however, downtime economy slows
most of their processes. There are to position C&LI can take in order to defend its position;
merge with larger company and use its resources, or hire more employee and widen its market
share on its own. Those strategies can also overlap.
Organizational culture is very strong in C&LI; yet, the company operates at a fast pace
and focuses on time over-deleverage, this suites only a certain type of people. Although, this is
issue is prevalent in the company, employees feel happy working in the company and with each
other (Interview 1, Nov. 9, 2012). Overall, the organizational culture is group oriented with
directive approach; however, coaching and further education is always available to those who
struggle (Interview 2, Dec. 1, 2012).
C&LI’s activities are colloquial and focused on the company’s mission and vision. Minor
issues in the value chain might be visible in the marketing and services stage. As pointed earlier,
the new website has to be created in order to make marketing more responsive. Another
CAPSTONE STRATEGIC AUDIT 20
suggestion is boosting service stage is development of special deals and offers, which would raise
the percentage of returning customers.
Performance in C&LI is measured by income. This works for meeting financial standards;
however, it does not say much about other factors of the overall strategy. New measurements
focusing on customers, internal processes, and learning and growth of employees should be
developed. This set of measures would represent the basic standard of the overall operations in
the company.
Recommendations
Recommendations for C&LI are from multiple areas; among those areas are marketing,
service development, integration, expansion, mergers/acquisitions, and alliances.
Marketing Recommendations
The first recommendation is the website. The interview (Nov. 9, 2012) pointed out that
the website is the “front store” of the whole company. This approach is becoming popular in
recent years; customers prefer to look up all information online anyway. However, competition
online is even more fierce than the one “on the street,” people can leave any website with one
click. This explains why effective and clear websites are so important (Kotler & Keller, 2000).
New website should be easy to use and customer should have an opportunity to order any service
online through the website.
The second recommendation is an increase of the loyal customer base. As Kotler and
Keller (2000) point out, loyal customers count for about 75 percent of the whole income of most
companies. Increasing the loyal customer base will, therefore, lead to increase in revenue.
CAPSTONE STRATEGIC AUDIT 21
Retention rate might be enhanced by offering special deals for loyal customers, which could be
send in monthly newsletter to all of the customers in the database.
Service Development Recommendations
Another often-discussed suggestion is an online education. C&LI already offer blended
learning; however, nothing fully online. Online education can be tied to the following
recommendation, which suggest attention to the operational cost. Online education saves time for
the trainer on commute, as well as money on transportation. This also applies for the C&LI’s
customers. Online education is saving money to everyone. Other advantage of this approach is
the wide range of broadcasting. One trainer with one computer can reach people all over the
world (Kotler & Keller, 2000). C&LI would have easy start with online education at universities
its employees attended.
Integration Recommendations
A performance measurement research pointed out that only financial measurements are
used when measuring the success of the company. However, in order for smooth operations,
C&LI should set some other standards, which would measure the customers, internal processes,
and employees learning and growth. Suggestions for those measurements are drawn in the
Balanced Scorecard (see appendix).
Attention to operational cost is another recommendation. Operation cost is a combination
of cost, where some of them have common characteristics and some of them are individual. Part
of the operational cost is fixed; therefore, it can be predicted. When focusing on lowering the
operational cost, the company has to work with the fixed part of the cost (Garrison, Noreen &
Brewer, 2012). Online education would lower operational cost, because it does not require the
CAPSTONE STRATEGIC AUDIT 22
whole school/training center to be heated up, lit, and run by “operational employees”. Another
way to save on operational cost is to prevent excessive waste with sources (paper, ink),
electricity, or water.
Expansion Recommendations
Expansion might be one of the strategies to fight downtime economy. This paper already
suggested that in order to achieve C&LI’s goals the company would have to hiring more
employees to expand its market share. Among those employees should be not only new trainers,
but also sales representatives.
Mergers/Acquisitions Recommendations
One of the strategies to obtain more resources is to merge with larger company to
increase. The fragmented market in educational and training services is suggestion that merges
are going to take place soon (“Hoover’s,” 2012).
Alliances Recommendations
Last recommendation is to connect with high schools and community colleges. Hoover’s
(2012) describes situation where not all students in high school are ready or planning on
attending university. C&LI could provide those students with certification in any field those
students might be interested in. Another option for C&LI and high school cooperation is testing
and profiling students for their future job placement.
CAPSTONE STRATEGIC AUDIT 23
Conclusion
C&LI’s strategy is aligned with the mission and vision of the company. The executive
partners as well as all the employees know, where is the company going and what is expected.
This keeps C&LI on the track and running even in the slow economy. However, the details
analysis of the organization pointed out minor issues, which could make the company even more
efficient and run smoothly.
SWOT and its complementing TWOS analyses are the cornerstone of the whole research.
Highly educated staff, flexible pricing, and college cooperation were considered the strongest
assets of the company; however, the busy website, little budget, and low customer retention were
considered a problem, or weaknesses. From the external environment, online education is the
number one opportunity right now, along with expansion, and partnership with other educational
institutions. Among the most dangerous threats are compliance with government policies,
dependence on personal income, and negative publicity about private sector education.
External environmental scan showed extreme fragmentation of the training and
educational services, which foretell the future merging and building alliances with larger
corporations. Downtown economy has negatively effected small leisure-time education and
training, because it solely depends on personal income (“Hoover’s,” 2012). C&LI focuses mostly
on corporate learning; therefore, the threat of the personal income is not so severe in its case.
Based on the interviews (Nov 9. & Dec. 1, 2012) C&LI has fast-paced culture, which
focuses on time and quality delivery of its product. The whole company is aware of C&LI’s
mission and vision and employees work together in order to achieve the company goal. Fast
speed might be problem for some individuals. One of the recommendations related to the
CAPSTONE STRATEGIC AUDIT 24
organizational culture is to expand it. Hiring more employees would allow C&LI to acquire
larger market share.
Value chain analysis showed minor problems in marketing and sales, and services stage.
Marketing of C&LI is overall successful. C&LI is using modern technology and social media,
communicate with its clients through blog and radio. However, the website has an old look and it
is quite busy. Therefore, the creation of a new website is the number one recommendation for
C&LI. The service stage of value chain analyses considered the fact that only about 25 percent
are long-time returning customers. Based on Kotler and Keller (2000), who claim that the loyal
base of the customers make about 75 percent of the all sales, another suggestion is to work on this
number and put more customers into this long-time loyal base. This could be done by special
offers for returning clients, or regular newsletter, which is sent to whole customer database of
C&LI.
Overall, C&LI is doing extremely well; considering the slow economy, the fact that it is a
small company, and intense competition in the Midwest region. However, minor changes could
make this company to be the number one small consultant groups in the world by helping clients
achieve their professional goals, which is the company’s vision.
CAPSTONE STRATEGIC AUDIT 25
References
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CAPSTONE STRATEGIC AUDIT 27
Lee, S.F., Ko, A.S.O. (2000). Building balanced scorecard with SWOT analysis, and
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CAPSTONE STRATEGIC AUDIT 28
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Personal Communication
Interview 1. (Nov. 9, 2012).
Questionnaire 1. (Nov. 17, 2012).
Interview 2. (Dec. 1, 2012).
CAPSTONE STRATEGIC AUDIT 29
Appendix
TABLE OF CONTENTS
SWOT ANALYSIS 30
TWOS STRATEGIC MATRIX 32
BALANCED SCORECARD 35
EXTERNAL ENVIRONMENTAL SCAN 38
FIVE FORCES ANALYSIS 40
ORGANIZATIONAL ASSESSMENT 43
MARKET POSITION ANALYSIS 48
VAL UE PROPOSITION 51
MARKET POSITION 52
COMPETITIVE ADVANTAGE 52
INTERVIEW TRANSCRIPTS 54
QUESTIONNAIRE 69
CAPSTONE STRATEGIC AUDIT 30
SWOT Analysis for C&LI
Connotations attached to strategic issues are imposed by categories managers describe an
issue. Two categories are most likely applied to strategic issues, which are focused on threat or
opportunity. The opportunity category assumes a positive situation over which the company has a
fair amount of control. On the other hand, the threat category implies a negative situation in
which the company has relatively little control. However, both of those categories can advance
the company forward (Dutton & Jackson, 1987).
To build fit SWOT analysis for any organization researcher has to consider internal
strengths and weaknesses first. Focus needs to be given to inner structure, access to natural
resources, capacity and efficiency, and financial resources. Second step of the analysis takes
external opportunities and threats in an account. This includes customers, competitors, trends in
the market, partners and suppliers, social changes and new technology, and various
environmental economic, political and regulatory issues (Helms & Nixon, 2010).
Table 1: SWOT Analysis for C&LI
Strengths Weaknesses
Highly Educated Staff Confusing/Busy Websites
Flexible Pricing Little Budget
College Cooperation Low Customer Retention
Good Referrals No Branding or Alliances
Personal Approach Few Employees – Limited Reach
Opportunities Threats
Online Education Compliance with Government Policies
CAPSTONE STRATEGIC AUDIT 31
Acquisitions Dependence on Personal Income
International Expansion Vulnerability to Federal Funding
Increased Operational Efficiency Student Loan Defaults
Partnerships with High Schools, Community
Colleges
Negative Publicity
CAPSTONE STRATEGIC AUDIT 32
TOWS Strategic Metrix
Weihrich (1982) redesigned the SWOT in order to generate strategies based on the
relationship between internal and external environmental factors. His model is called the TOWS
Strategic Matrix. The analysis starts with the external environment by listing the threats (T),
which might be of immediate importance to the organization. Threats should be listed in box 'T'
as shown in Figure 1. Similarly, opportunities are positioned in box 'O'. The organizational
internal environment is evaluated for its strengths (S) and weaknesses (W). The TOWS Matrix,
(Figure 1), depicts four different alternative strategies (Weihrich, 1982).
1. The WT Strategy (mini-mini)
The goal of the WT strategy is to minimize both weaknesses and threats. A company
facing external threats and internal weaknesses may have to be in situation where it fights for its
survival or may even have to choose liquidation. Solution could be represented in merging with
bigger company, or by cuts in operations. The WT position is one that any company should try to
avoid.
2. The WO Strategy (mini-maxi)
The second strategy works on minimizing the weaknesses, but maximizing the
opportunities at the same time. A company can see opportunities outside of the organization;
however, its weaknesses prevent the company from taking advantage of it. One possible solution
is to cooperate with any company, which has competency in the field. Another strategy might be
to hire people with the required capabilities. The company also does not have to do anything, thus
leaving the opportunity to competitors.
3. The ST Strategy (maxi-mini)
CAPSTONE STRATEGIC AUDIT 33
This strategy consists of the organizational strengths, which can suppress the threats in the
external environment. Still, strengths must often be used with great restraint and discretion. The
main goal is to maximize what the company has; however, the organization always needs to keep
an eye on the threats possessed by others, no matter how small they might seem.
4. The SO Strategy (maxi-maxi)
This is a position where the company can maximize both, strengths and opportunities. The
strategy starts with strengths, utilizing resources to take advantage of the market. Any successful
organization will attempt to get into a situation where they can work from strengths to take
advantage of opportunities.
Figure 2: TOWS Matrix
Source: Weihrich, H. (1982). The TOWS matrix: a tool for situational analysis.
CAPSTONE STRATEGIC AUDIT 34
Table 2: TWOS Matrix of C&LI (assembled by author)
Strengths:
1. Highly Educated Staff
2. Flexible Pricing
3. College Cooperation
4. Good Referrals
5. Personal Approach
Weaknesses:
1. Confusing/Busy Websites
2. Little Budget
3. Low Customer Retention
4. No Branding or Alliances
5. Few Employees – Limited
Reach
Opportunities:
1. Online Education
2. Acquisitions
3. International Expansion
4. Increased Operational
Efficiency
5. Partnerships with High
Schools, Community
Colleges
SO (maxi-maxi)
1. International online
education for colleges
(O1, O3, S1, S3)
2. International expansion
through referrals (O2, S4)
3. Online education by
educated staff (O1, S1)
4. Partnership with colleges
and universities, where
staff got its education (O5,
S1)
WO (mini-maxi)
1. Online (international)
education to save budget
(O1, O3, W2)
2. Hiring more employees to
expand further (O3, W5)
3. Merge with bigger
company to increase the
budget (O2, W2)
Threats:
1. Compliance with
Government Policies
2. Dependence on Personal
Income
3. Vulnerability to Federal
Funding
4. Student Loan Defaults
5. Negative Publicity
ST (maxi-mini)
1. Pricing based on personal
income (T2, S2)
2. College cooperation fights
negative publicity (T5,
S3).
3. Good referrals suppress
negative publicity (T5, S4)
WT (mini-mini)
1. Prevent negative publicity
by fixing the website (T5,
W1)
2. Create low-cost education
for people with low income
(T2, T3, T4, W2)
3. Make special offers for
returning customers in
order to increase customers
retention rate (T2, W3)
CAPSTONE STRATEGIC AUDIT 35
Balance Scorecard
Lee and Ko (2000) claim that connecting the SWOT matrix with the balanced scorecard
creates a systematic strategic management system. SWOT analysis represents structural approach
in setting up the base for the balanced scorecard. The balanced scorecard is used to transform the
company’s mission and strategy into an array of performance measures and suggests the
framework for strategy evaluation (Kaplan & Norton, 2007).
The balanced scorecard is based on four key perspectives, which are financial goals,
customer perspective, internal processes, and learning and growth. Each of the perspective is
parceled into metrics, which can be easier measured. Those metrics are objectives (which the
company strives to achieve), measures (observable parameters), targets (specific values company
is trying to reach), and supporting initiatives (actions, which help the operation to meet the
objectives). The metrics have to fulfill the SMART requirements to be specific, measurable,
achievable, realistic and in timely manner. Perspectives in balance scorecard are intertwined and
improvements in just one area will not necessary bring success in the other areas (Kaplan &
Norton, 2007).
Balanced scorecard enabled companies to track financial results, monitoring progress in
building the capabilities and acquiring the intangible assets they would need for future growth.
Financial measures are one of the most common measurements of company’s success; however,
it is not a balanced view of the critical factors of any strategy. This is mostly, because financial
measurements tend to measure the past (Kaplan & Norton, 2007).
CAPSTONE STRATEGIC AUDIT 36
Table 3: Balanced Scorecard for C&LI
Objectives Measures Targets Initiatives
FIN
AN
CE
Revenue growth Sales growth by
division
10% annual growth
per division
Hiring new
employees
Cost reduction Cost reduction rate 5% annual cost
reduction
Educational event on
“How to save on
operations”
Asset utilization Output 15% annual increase
of outputs
Hiring new
employees
CU
ST
OM
ER
Customer retention Returning customers
Retain 15% of
customers for next
year
Special offers and
deals
Market share Percentage of
customers
10% annual growth
of customers Marketing campaign
Customer
Satisfaction
Customer
satisfaction
percentage
More than 75% of
customers will be
“somewhat” or
“very” satisfied next
year; based on
survey
Evaluation survey
has to be designed
INT
ER
NA
L P
RO
CE
SS
ES
Innovation – website Bounce rate Bounce rate below
25%
New website
propagation
Operations Labor efficiency
Labor will use 10%
less resources at
maintaining the
same level of
operations
Educational event on
“How not to waste
with resources”
Operations Process cost Process cost will
decrease by 10%
Starting online
education
Better outside
training scheduling
(so there is not so
much needs to
travel)
LE
AR
NI
NG
Employee
satisfaction
Overall satisfaction
with company
75% of all
employees are
satisfied working for
C&LI – based on
Evaluation survey
has to be designed
CAPSTONE STRATEGIC AUDIT 37
survey
Employee
productivity
Revenue per
employee
Revenue per
employee will grow
by 7% annually
Team competition
Employee
productivity
Training budget per
employee
Training budget
increases by 5%
annually
Newsletter telling
employees about the
increase suggesting
different educational
options
CAPSTONE STRATEGIC AUDIT 38
External environmental scan
The industry is extremely fragmented; about 50 largest companies represent 30% of total
revenue. This will probably lead into merging strategies in soon future. Merging of companies in
education will help them grow and compete with others quickly emerging markets from China
and India. Markets coming from outside of the country rely on online and distance education.
Among leading global companies, focusing on education and training services are New Oriental
Education & Technology Group of China, NIIT Limited of India, and Third Force of Ireland
(“Hoover’s”, 2012).
Hoover’s (2012) describe education and training service as a broad category that
encompasses job-specific certification, professional training, and classes emphasizing self-
fulfillment, leisure, and hobbies. Most of the industry’s programs belong under the category of
(CTE). High schools, community colleges, universities, and educational support services aren't
not considered as a part of this industry (“Hoover’s”, 2012).
Tuition or fees represent most or the revenue coming to the companies in the industry.
Qualified educational and training services can receive up to 90% of total revenue from the
federal government (the 90/10 rule). Gross margins for education and training services average
about 90%; however, net profit averages only 3%. According to Hoover’s (2012) the education
and training services industry could grow by 4.3% in 2013 compared to 2012, based on to the
latest industry forecast. Career technical education (CTE), the industry segment, should create
about 29 million middle-class jobs that require a two-year degree or less (“Hoover’s”, 2012)
CAPSTONE STRATEGIC AUDIT 39
Figure 3: Change in Consumer Prices - Bureau of Labor Statistics
Source: Hoover’s. (2012). Education & training services - industry report.
All of the educational and training services industry is highly regulated at both the state
and federal level. Schools are often audited and reviewed by the US Department of Education
(ED); the Office of Inspector General; and state, guaranty, and accrediting agencies. Only
accredited schools are eligible to receive government funds and participate in federal financial aid
programs. ED or state-certified agencies can grant accreditation to school or program based on
examination of school’s academic standards and quality. The FTC and the ED manage
complaints of false advertising, unethical recruiting, and misuse of federal funds (“Hoover’s”,
2012).
Hoover’s (2012) points out that modern technology is successfully applied thorough the
educational and training services industry. Virtual classes can be synchronous, where students
meet at certain time, or non-synchronous, which can be visited at any time, but some presence is
requested at least once a week. Private sector in education tends to respond to the innovation
faster than the public sector (“Hoover’s”, 2012).
CAPSTONE STRATEGIC AUDIT 40
Figure 4: Five Forces
Source: Porter, M. E. (2008). The five
competitive forces that shape strategy.
Five forces analysis
Many companies, do not take strategy seriously. In most of those organizations,
competition is defined too narrowly and describes only direct competitors. More intense forces
point to challenging business environment; on the other hand, week forces show fragmented and
not so cohesive business structure (Ehmke et al, n.d.).
Powerful customers, which are the
other side of powerful suppliers, can easily
bargain the price by demanding more value
for down prices, requiring better quality or
expecting more service. All those needs of
buyer drive the cost of the product up
(Porter, 2008). Customers have significant
power especially, when they are large and
purchase much of the company’s output.
The worst scenario is when company has
many suppliers, but only few buyers; or the products are expensive, but not original (Ehmke et al,
n.d.).
Based on Hoover’s the typical customers in education and training industry are
individuals who choose (or are required to by law or an employer) to take a class for career
advancement or self-fulfillment. Most of the companies offering educational services find their
customer online or via their social network. Prices of offered services vary based on the type of
the institution. Companies offering professional and management classes usually charge a
CAPSTONE STRATEGIC AUDIT 41
“corporate group rate”. Self-fulfillment classes for individuals usually charge monthly, hourly, or
per-session (“Hoover’s”, 2012).
Powerful suppliers can afford keep more value for them by charging higher prices,
limiting quality or services, or shifting costs to industry participants (Porter, 2008). Suppliers
have most of the bargaining power, when the inputs company requires are unique, expensive to
make, or are available only from limited number of supplier. If the input purchase does not
represent significant portion of suppliers business, or it is difficult to switch to another supplier,
the main supplier can dictate prices as well (Ehmke et al, n.d.).
Based on Hoover’s industry report (2012) large companies have significant advantage
compare to smaller companies, especially because they can afford marketing and offering a wide
range of classes and services. Small companies can succeed by offering effectively through
personalized service and customized instruction. Small organizations usually keep their operating
costs low and recruit perspective students. Average annual revenue per worker is about $70,000
(“Hoover’s”, 2012).
Threat of new competition is represented by the main question: How difficult is it for
business to enter market in given industry? Every new entrant takes away part of the market
share. This may force prices down; therefore, limit profit. When searching for the threat of new
entrants researcher has to consider the barriers to entry. Barriers to entry are usually the costs and
legal requirements required in order to enter a market. The threat of new entrants is higher in
certain situations. For example, when companies cannot be protected by patterns or regulations.
Alternatively, product the company is producing is not unique and can be easily imitated.
Companies, which have not established strong customers’ loyalty, might be in risk as well. Low
start-up cost also belongs among substantial threats (Ehmke et al, n.d.).
CAPSTONE STRATEGIC AUDIT 42
Porter (2012) describes substitutes as a product, which performs the same or a similar
function as an industry’s product, but by different means. The substitution can be even
downstream or indirect, when it, not willingly, replaces industry’s product. Substitutes are easy to
overlook, because they might seem very different to the producer. When looking for substitute
the company should ask what product, can our customer buy instead of ours? Products with the
highest threat of substitution are products that have no real purpose or benefit for a customer, or
customers can easily switch from one to another (groceries). Brands with low customers’ loyalty
are also in danger of substitution (Ehmke et al, n.d.).
Based on Porter (2008) rivalry among existing competitors can show in many familiar
forms, including price discounting, new product introductions, advertising campaigns, and
service improvements. High rivalry restricts the productivity of any company in given industry.
Rivalry is the most visible in the time of slow economic growth. One monopolistic corporation is
also extreme threat to small businesses. Other origins of high rivalry might be caused by high
fixed cost of production, when products are perishable and need to be sold quickly, or when
products can be easily imitated (Ehmke et al, n.d.).
CAPSTONE STRATEGIC AUDIT 43
Figure 5: CVF Model
Source: Cameron, Quinn. (1999). Diagnosing
and Changing Organizational Culture.
Organizational assessment
Culture Assessment
There are three levels of organizational culture: artifacts, the espoused values, and the
basic underlying assumptions. Artifacts refer to primarily visible, audible, and touchable
behaviors taking place in an organization. The espoused values are “ought to be” in the
organization whereas the artifacts are “what is” (Schein, 1992). Underlying assumptions are
unconscious ways of seeing the world, which are taken for granted. Strategies, goals, and
philosophies exemplify the espoused values; therefore, an effective strategy should be aligned to
the organizational culture (Roh at al., 2008).
Figure 2 presents Cameron and Quinn’s (1999) typology of the competing value
framework (CVF). It constitutes two-dimensional
space that reflects different value orientations. The
models uses two axes model, where one is the
flexibility-control axis describing the degree to
which the organization emphasizes change or
stability. The second axis is the internal-external
axis, which depicts the nature of business
strategic initiatives orientation (Cameron &
Quinn’s, 1999).
A flexibility orientation suggests adaptability and spontaneity, while a control orientation
indicates stability, control, and order. An internal orientation displays a focus on the sustenance
and enhancement of the existing organization, while an external orientation reflects an emphasis
CAPSTONE STRATEGIC AUDIT 44
on competition, interaction and growth with the external environment. The combination of these
two dimensions produces four types of culture: hierarchical, rational, group, and developmental.
Table 2 is a summary of those four patterns in organizational culture (Roh at al., 2008).
Table 2: Patterns of organizational culture
According to Zuckerman (2002) companies with the strongest cultures, where values and
norms are widely shared and strongly held, tend to outperform their peers. Any actions contrary
to behavioral norms can be easily identified and quickly corrected. Companies with highly
variable performance and cash flow usually focus less on worthwhile projects, blaming its low
results on a competitive disadvantage. Similarly, such companies tend to have fewer analysts,
lower bond ratings, and higher weighted average costs of capital than more successful
organizations (Zuckerman, 2002).
At the same time, firms with strong cultures can inherent critical limitations. Although
performance should be more reliable in such firms, positive effect of a strong culture could
disappear during times of industry volatility. A volatile business climate often requires that firms
CAPSTONE STRATEGIC AUDIT 45
develop entirely new procedures and embrace an innovative approach to survive. Firms with
strong cultures would have a harder time processing these types of activities precisely because of
the qualities that helped them excel previously. This makes them less likely to seek out
fundamentally new alternatives or even recognize the need for radical change. Moreover,
dissenting employees whose beliefs do contradict the company's dominant perspective are less
likely to remain, or much less likely be listened to (Zuckerman, 2002).
Value Chain Analysis
The effectiveness of any company depends on decisions generating value added through
efficient coordination among the supply chain agents to give what customers want, when they
want it, and at the least cost. Among the traditional strategies of creating value are lowering cost
or charging higher prices, developing niches products, and expanding markets (Porter, 1985).
As shown in the Figure 3, there are two types of activities when developing any product,
primary activities and support activities. Primary activities are responsible for creating the
product, its sales and after-sales. Support activities support primary activates by providing inputs,
human resources and procurement (Porter, 1985).
Figure 6: Porter's Value Chain Model
Source: Shahid, S. (2008) A Business-Driven Evaluation of Distributed-Computing
Models.
CAPSTONE STRATEGIC AUDIT 46
Inbound logistics consider all the processes related to receiving, storing, and distributing
inputs internally. The supplier is the key. Operations phase is where activities transform inputs
into outputs, which are further sold to customers. The operational systems create value in this
phase. Outbound logistics deliver the service to the customer. Marketing and sales are responsible
for persuading customers to purchase from the company instead of the competitors. The added
value is in the communication with the customers. Service stage consists of activities related to
maintaining the value of the service for the customers, once it has been purchased (Porter, 1985).
Although supporting activities might not seem relevant, they have high impact on any part
of the primary tasks. Procurement or purchasing is what the organization does to get the
resources it needs to operate, such of finding vendors or negotiating best prices. Human resource
management is responsible for recruiting, hiring, training, and many other activities related to the
company workers. People are a significant source of value in nowadays strategies. Technological
development relates to managing and processing information, as well as protecting a company's
knowledge base. Keeping the IT costs down, staying current on technological advances, and
being innovative are sources of value creation in this stage. Infrastructure is a company's support
CAPSTONE STRATEGIC AUDIT 47
systems, which allow it to maintain daily operations. Accounting, legal, administrative, and
general management are necessary to the infrastructure, and can be used to the company’s
advantage (Porter, 1985).
CAPSTONE STRATEGIC AUDIT 48
Market position analysis
Mission
Every organization needs to have a mission. Mission is the original purpose of being;
however, the mission can change overtime, to take advantage of new opportunities or respond to
new market conditions (Kotler & Keller, 2000). Peter Drucker (1973) establishes set of questions,
which help companies to stay on track; questions such: What is our business? Who is the
customer? What is of value to the customer? What will our business be? What should our
business be? Based on Kotler and Keller (2000) questions answering the purpose of the
company’s missions are the most difficult, but crucial to ask not only at the beginning of the
business, but also as the organization develops. Organizational mission is necessary for
company’s managers, employees and customers, because it provides a shared sense of purpose,
direction, and opportunity (Kotler & Keller, 2000).
C&LI’s mission is to provide effective training development and facilitation to clients
worldwide. Although, the company mostly operates in Midwest and New York regions, the
mission is stretching farther covering the whole world. This represents the urge of the company
to move forward and reach new markets.
Vision
Vision is the best when it sounds almost impossible or like a dream and provide direction
for next 10 to 20 years. Vision should describe the ideal future in regards of what the company
does. Vision is not as specific as mission, but they need to be consistent and reflect on each other
(Kotler & Keller, 2000).
CAPSTONE STRATEGIC AUDIT 49
C&LI vision is to be the most trusted small consultant groups in the world by helping
clients achieve their professional goals. This shows that mission and vision in C&LI are tied
closely together. The focus is on the market share and expansion of its horizons; however, C&LI
does not forget about the quality aspect. Vision is considering helping clients to achieve their
profession goals, which also demonstrates attention to customer.
Based on Drucker (1973) vision is important because it helps the organization to stay
single-minded and prevents confusion. If the vision is not clear, employees will each define
“results” in terms of their own specialty and impose its values on the organization.
Values
Key elements of an overall vision of the organization are core values measurement.
Values such as truth, trust, and respect define the moral tone of any company. However, values
and principle ought to govern organizational culture and behavior, not any personal style of
individuals (Manning, 2012)
Based on the interview, the core values of C&LI are focus on client, work as a team, keep
an eye on the future, first in wins (get to the new client before others do), over-deliver results, and
deliver on promise. Those values are known thought the whole company, because as SC
mentioned in her interview (Nov. 9, 2012): “Values are important not because we want to
persecute our employees when they are not following them, but because our employees are
encouraged to make decisions on their own. If they would not understand values of our
organization, they would not be able to make the proper decision in accordance with our
strategy.”
CAPSTONE STRATEGIC AUDIT 50
Both mission and vision were focused on increase in market share, customers and quality.
The same trend repeats in the company’s value proposition. See Table 1 for detailed description.
Table 1: Values of C&LI corresponding with mission and vision (assembled by author based on
the interview)
Mission & Vision Proposition Corresponding Core Value
Market Share Expansion
Keep your eye on the future
First in wins (get to a new client before
others do)
Customer Focus
Focus on the client
Over-deliver results
Deliver on promises
Provided Quality
Work as a team
Over-deliver results
Deliver on promises
Strategy Clarification
Based on Brian (2007) effective strategies offer value propositions that are designed to the
needs of each customer group. Weaker strategies make the same or similar offers to different
customer groups. In order to have competitive advantage organization has to consider its
customer prioritization and value propositions. Both have to be significantly different from those
made by competitors. Only weak strategies make similar offers to the same customers base
(Brian, 2007).
C&LI understand different needs of each customer. C&LI focused on five customer areas
including organizational training, strategy development, organizational coaching, outdoor
CAPSTONE STRATEGIC AUDIT 51
adventure programing, and college programming. Each of the training has different curriculum,
which is based on customers’ needs and requirements (“C&LI Website,” 2012). The interview
(Dec. 1, 2012) revealed that the values of the company are closely tied to the business strategy as
shown in Figure 1.
Value proposition
Companies address customer needs by putting forth a value proposition, which Kotler and
Keller (2000) describe as a set of benefits that satisfy customer’s needs. The intangible value
proposition is made physical by an offering products, services, information, or experiences. The
customers always choose the offer, which represents the most value to them. The value itself is
mostly combination of quality, price, and service, which Kotler and Keller (2000) call the
customer value triad.
C&LI see its value in offering different services based on the customers’ needs. From the
interview (Dec. 1, 2012), it is apparent that “by contracting with C&LI for training programs,
Figure 7: Company value in relation to the business strategy
Source: Assembled by author based on the interview
CAPSTONE STRATEGIC AUDIT 52
clients will achieve their short-term training goals. By contracting for development services
(strategic planning, teambuilding, culture assessment...), client will achieve short-mid-long range
objectives” (Interview 2, Dec. 1, 2012).
Market position
Strategic positions arise from three different sources, which can overlap. First, positioning
can be based on producing a subset of an industry's products or services. A second basis for
positioning is trying to satisfy the full needs of a particular group of customers. The third
positioning is segmenting customers who are accessible in different ways. Their needs might be
similar to those of other customers; however, there is a unique way in how to reach them.
Positioning of each company has to be unique or valuable otherwise, every other competitor
could meet those same needs (Porter, 1996).
C&LI has very broad range of services; therefore, is able to address a very diverse
audience. The main customer base would be composed of corporate level (C level) managers,
their assistants, and other decision makers in C level. All the services offered are focused on
training and development. However, based on the interview, it seems the understanding of the
market position in not exactly clear, and it might be something C&LI needs to address.
Competitive advantage
A competitive advantage comes from the way a company’s activities fit and reinforce one
another. In top companies, the strategy is to complement all activities, so it produces real
economic value. One activity's cost can be decreased because of the way other activities are
performed. Likewise, one activity's value to clients can be improved by a company's other
activity. This approach helps to create a competitive advantage and leads to higher profitability.
CAPSTONE STRATEGIC AUDIT 53
Mentioned complementarities are the most important for any business strategy. Some might fit
for all companies, some tend to be specific, because it develops positions exclusivity and
intensifies trade-offs (Porter, 1996).
Interview conducted on Nov. 9, 2012 showed thick competition in the field, especially
around Chicago area. C&LI tries to distinguish itself using couple of different strategies. The
company’s employees are known in the field, because they are published authors. Services
offered by C&LI are cost effective, because the company has already established training practice
and has about 20 years of experience in the field. Although, C&LI works in the corporate world,
the fact that it is small organization, therefore personal, can be considered as another advantage.
C&LI is overall agile company, which has strong competitive edge (Interview 1, Nov. 9, 2012).
CAPSTONE STRATEGIC AUDIT 54
Interview 1 – TBA
Interviewer(s): Tereza Stratilova (TS)
Interviewee(s): TAB
Date of interview: 11/9/2012
Section A – getting to know each other
1. What is your name (initials)?
TBA
2. What is your position in C&LI?
Partner
3. How long have you been working for C&LI?
I started it 20 years ago.
Section B1 - market position
4. Describe the targeted customer for your services.
It varies, usually based on service area:
HR, training and development, C level, C level assistants, managers, meeting
planners
5. Where do you operate/how big is your reach (Illinois, Midwest, whole United States)?
Midwest (80%), Global (20%)
6. What are your customers buying habits?
¾ Transactional, ¼ consultative
CAPSTONE STRATEGIC AUDIT 55
Section B2 - value proposition
7. What does your customer want?
Transactional – short term fix
Consultative – long term change
8. What does your customer need?
Transactional – the need to learn the importance of long-term change
Consultative - patience
9. Is there any gap in between services your offer and customers’ desires?
Depends on how they get to us. If they need technical work, we are not their source. But,
all our clients desire a fix
10. Is there any gap in between services your offer and customers’ needs?
If clients know our services, then they know how we can meet their needs
Section B3 - competitive advantage
11. Analyze your service’s position in relation to the competition (identify 3 main competitors).
1. Chicago Institute of Investment (CII)
2. Center for Creative Leadership (CCL)
3. Pryor and Associates
11b. Explain how your service differs in terms of:
Interviewee didn’t have time to fill out the table
CAPSTONE STRATEGIC AUDIT 56
CCI – event based learning
CCL – high-end leadership
Pryor – low cost training
12. Describe the source of competitive advantage for your service (name more than one).
1. Talented training and development
2. Price flexibility
3. Interaction with decision makers
4. High touch
13. Evaluate sustainability of each source of advantage.
All good
14. The 5th P of Marketing (elements of a marketing mix):
14a. What would you describe as a most successful product/service of CLI?
Personal profile assessment
14b. How do you price your products/services?
A bit higher than market price
14c. How do you get to your customers?
New – through internet
Repeats/others – thanks to previous success/references
14d. How do you propagate/market yourselves as a company?
- E-blasts, SEO, demonstration days, networking with resellers
14e. What is unique about your people/coworkers/team?
CAPSTONE STRATEGIC AUDIT 57
- can do attitude (we make it happen)
- experience, expertise, talent
- ability to relate to audience
CAPSTONE STRATEGIC AUDIT 58
Interview 1 – SC
Interviewer(s): TS
Interviewee(s): SC
Date of interview: 11/9/2012
Section A – getting to know each other
1. What is your name (initials)?
SC
2. What is your position in C&LI?
Partner
3. How long have you been working for C&LI?
15 yrs.
Section B1 - market position
4. Describe the targeted customer for your services.
We serve five customer areas –organizational training, strategy development,
organizational coaching, outdoor adventure programming and college programming.
5. Where do you operate/how big is your reach (Illinois, Midwest, whole United States)?
We operate world-wide, focused on the US market.
6. What are your customers buying habits?
This is a tight market, with training dollars very constricted at the moment. So our
customers are organizations that have enough finances to afford the above, that said,
training is the last priority on most people’s minds.
CAPSTONE STRATEGIC AUDIT 59
Section B2 - value proposition
7. What does your customer want?
Effective, high impact services, on a budget, that provides a return on investment.
8. What does your customer need?
The same
9. Is there any gap in between services your offer and customers’ desires?
If there is the time and effort needed to design and deliver an effective service and the
clients reluctance to pay for it.
10. Is there any gap in between services your offer and customers’ needs?
Yes, it is a very different market I work in than the one pre-2008. I work three times as
hard to make a low budget program successful.
Section B3 - competitive advantage
11. Analyze your service’s position in relation to the competition (identify 3 main competitors).
Well, we are a small company and the competition- are in different segments-is fierce. So
small and mid-size consulting firms like mine are all over the map. Here are three:
Mike Neiss and Associates
Crux Moves
Momentum, Inc.
11b. Explain how your service differs in terms of:
Needs of the Rate Your Rate Services Rate Services Rate Services
CAPSTONE STRATEGIC AUDIT 60
Consumer Services
(as in school*)
For Competitor 1
(as in school*)
For Competitor 2
(as in school*)
For Competitor 3
(as in school*)
Quality 4 4 5 5
Price 3 2 4 5
Availability 5 4 4 5
Features 5 2 3 5
Functions 2 5 5 5
Brand Image 4 5 5 5
Total Score 4 4 3-4 5
Comments
Training – 4
Coaching – 3
Strategy – 3
College prgms. - 4
Adventure prgm - 2
- Excellent
consultants
- Good brand
- Well known
- Effective
consultants
X limited scope of
service
- Very good range
of services
- Expert consultants
* where: 1 = fully covering and satisfying services provided - 5 = not existing services
12. Describe the source of competitive advantage for your service (name more than one).
Doctoral level staff, years of experience, creative designers, research knowledge.
13. Evaluate sustainability of each source of advantage.
All 5s
14. The 5th P of Marketing (elements of a marketing mix):
14a. What would you describe as a most successful product/service of CLI?
- Training that incorporates experiential learning into the content
14b. How do you price your products/services?
- Sliding scale.
CAPSTONE STRATEGIC AUDIT 61
- Ask client their budget, and “design backwards”, if not offered, a “shot in the dark
approach: which needs iterations of possible ideas.
14c. How do you get to your customers?
- We have a “storefront” online and use our online website to drive business.
14d. How do you propagate/market yourselves as a company?
- Monthly eblast, Twitter, monthly radio show, Facebook, direct marketing.
14e. What is unique about your people/coworkers/team?
- Right. We are different. Both doctoral partners are great sales people and great service
providers.
CAPSTONE STRATEGIC AUDIT 62
Interview 1 – RS
Interviewer(s): TS
Interviewee(s): RS
Date of interview: 11/9/2012
Section A – getting to know each other
1. What is your name (initials)?
RS
2. What is your position in C&LI?
Marketing Director
3. How long have you been working for C&LI?
4 yrs.
Section B1 - market position
4. Describe the targeted customer for your services.
C level companies with extra budget for training and development
5. Where do you operate/how big is your reach (Illinois, Midwest, whole United States)?
Mostly Chicago-land, but we do global promotion as well
6. What are your customers buying habits?
They want a lot of attention for a little bit of money, haha. Well, most of them are looking
for effective training for their employees or conflict/problem resolution. We can do all of
that.
CAPSTONE STRATEGIC AUDIT 63
Section B2 - value proposition
7. What does your customer want?
Mostly effective training, coaching or help with their overall strategy.
8. What does your customer need?
Someone who will organize their workspace, make operations smoother and very ofter
resolve conflict or “stuck situations”
9. Is there any gap in between services your offer and customers’ desires?
They would want more attention, but they are not ready to pay for it.
10. Is there any gap in between services your offer and customers’ needs?
Not really, I believe, we do god job.
Section B3 - competitive advantage
11. Analyze your service’s position in relation to the competition (identify 3 main competitors).
There is a bunch.
1. Center for Creative Leadership – they are big in Chicago area
2. Allen Communication – our next-door neighbor with bigger budget
3. Human Synergistics International - globally known, lot of referrals
11b. Explain how your service differs in terms of:
Interviewee didn’t have time to fill out the table
We have incredible people here in C&LI, which have the best education (much better than
our competitors do). We offer special payment plan for our customers. And our training is
rated one of the best one out there.
CAPSTONE STRATEGIC AUDIT 64
12. Describe the source of competitive advantage for your service (name more than one).
As stated above. Experts in the company, pricing, and personal approach.
13. Evaluate sustainability of each source of advantage.
I think that all of them are quite sustainable.
14. The 5th P of Marketing (elements of a marketing mix):
14a. What would you describe as a most successful product/service of CLI?
Our training and development program, and one-on-one coaching.
14b. How do you price your products/services?
As I said before, we have flexible pricing that allows as to assess our customer. We try to
work out their budget first.
14c. How do you get to your customers?
That’s my job here. I prepare monthly online campaign. We do social media (Facabook
and Twitter) as well as SEO. We don’t waste much time on any other propagation beside
the online strategy, to me it’s hard to track and it’s usually very ineffective.
We also have good reputation and many of our customers are word of mouth customers.
14d. How do you propagate/market yourselves as a company?
Social media, SEO, monthly pay-per-click
14e. What is unique about your people/coworkers/team?
We were talking about this as well. We have everybody educated and very hard working.
People here love what they do and trust each other. I enjoy going to work and that is what
makes this company unique and successful.
CAPSTONE STRATEGIC AUDIT 65
Interview 2 - SC
Interviewer(s): Tereza Stratilova (TS)
Interviewee(s): SC
Date of interview: 11/9/2012
Company’s mission:
To provide effective training development and facilitation to clients world-wide
Company’s vision:
To be the most trusted small consultant groups in the world by helping clients achieve
their professional goals
Company’s values:
Focus on the client Work as a team Keep your eye on the future
First in (get to a new client
before others do) Over-deliver results Deliver on promises
How do your company’s values relate to your business strategy?
CAPSTONE STRATEGIC AUDIT 66
What is your company’s value proposition?
By contracting with C&LI for training programs, clients will achieve their short-term
training goals. By contracting for development services (strategic planning, etc.), client will
achieve short-mid-long range objectives.
What is your company’s market position?
I’m not sure.
What is your company’s competitive advantage?
Published authors Agile company Cost effective
Established training practice Small/Personal
Cultural Assessment
What are the unwritten rules that govern behaviors in your organization?
CAPSTONE STRATEGIC AUDIT 67
Over-deliver even if it kills you.
15 minutes early is on time.
Follow-up is a key.
What are the shared values that shape your organization?
All stated above + need fair amount of autonomy, mastery, and purpose from owners and
stuff.
What are the main organizational characteristics (e.g. controlling, sharing, competitive,
dynamic)?
Dynamic and sharing
What are the leadership patterns in your organization (e.g. monitoring, mentoring,
producing, innovating)?
Co-leading/shared leadership
How do you assess effectiveness (e.g. timeliness, group cohesion, market share, cutting-edge
output)?
Measured by income
What is your organization’s main management theory (e.g. efficiency, commitment,
productivity, new resources)?
Efficiency High commitment
Innovation Dependable processes
CAPSTONE STRATEGIC AUDIT 68
How do you manage your employees (e.g. security, teamwork, competitiveness, freedom)?
Directive style; I tell them what they need to achieve; it is up to them how they are going
to do it. I coach them if needed.
What is your “organizational glue” (e.g. formal rules, mutual trust, goal accomplishment,
creativity)?
Sense of accomplishment
Value Chain Analysis:
Interview had to be finished early due to lack of time of my responded.
Identify the primary (direct) and support (indirect) activities that create and deliver your
product or service to your customers (where does your services start, how does it develop
and where it goes from there, please be specific).
Please, assess each activity’s contribution to competitive advantage through cost or
differentiation.
Are you aware of any areas where your business may be at a competitive disadvantage?
CAPSTONE STRATEGIC AUDIT 69
Questionnaire SC
Questionnaire prepared by: TS
Respondent: SC
Date of completion: 11/17/2012
1. Do you feel that new competition (just arriving on the market) might possess any threats
to your company? Please explain your response.
Well, at any time competition new or old is an issue. There are two types of corporate
training suppliers - large established firms and smaller independent training companies. The
technology in the landscape drives innovation that is unpredictable and disruptive. The
projections for 2013 call for slow growth in the training market. This market favors larger more
established organizations.
2. Is there any substitute service/product that could be possible threat to your company?
See above.
3. Do you feel like your customers have any bargaining power over your company? Please
explain your response.
Sure. They know this is a bear market and ask for price adjustments sometimes.
4. Do you feel like your suppliers have any bargaining power over your company? Please
explain your response.
Not really. We order materials and products from a selection of companies.
CAPSTONE STRATEGIC AUDIT 70
5. Is there intense rivalry among your competitors? Please explain your response.
Not in my world. My peers are fried and allies who talk and listen to each other.
6. Is there intense rivalry among your industry as a whole? Please explain your response.
I don’t know.
7. Please describe key factors and trends affecting your industry as follows:
Economic factors and trends
“Training Industry8 estimates the global market for training services to grow to $292
billion in 2012, of which U.S. companies will represent an estimated $132 billion, or 45%. Both
figures are still below 2008 pre-recession levels. The meager increase in training budgets
translates into a bearish outlook for job growth within the training profession. Training Industry
estimates that jobs for training professionals to increase by about 1% in 2012. The bulk of that
modest recovery will continue to be experienced by training suppliers as companies continue to
defray many of their variable costs by contracting certain training services such as content
development, back office administration and instruction. Indeed, that is a principal reason why
large and established training suppliers will again be the winners in 2012 while independent
trainers and consultants continue to persevere.”
“We all hope job growth beats those numbers, of course, and well it might. After all, the
training industry is a leading economic indicator in both bad times and good. However, because
of prevailing skepticism about the economy at the close of 2011, these estimates are necessarily
conservative. It is because of this skepticism, in fact, that businesses are spending more on
8 http://www.trainingindustry.com
CAPSTONE STRATEGIC AUDIT 71
outsourcing rather than hiring full-time staff. We are not yet witnessing a commitment to long-
term growth.”
Political factors and trends
Can’t respond. Not sure.
Regulatory and legal factors and trends
“2012 will continue to see consolidation among suppliers of training products and
services, a classic recession activity as larger companies seize opportunities to round out
portfolios and build market share. In the last couple of years, some of the largest acquisitions of
training suppliers have occurred that will forever change the landscape of training services.
Mostly driven by talent management companies, we have seen deals where smaller technology
companies were acquired to round out the larger companies portfolios. We fully expect this trend
to extend over the next few years. Our industry is an incredibly fragmented and diversified
market of training suppliers, which is always an indicator that mergers and acquisitions will be
the norm.”
Societal factors and trends
“With social learning, instructors are challenged to deliver and facilitate training in many
new ways, surely a challenge to trainers who are discovering that the potential of virtual is
everywhere, on all platforms and for all segments of training. Contrary to the myth that the
instructor is going away because of e-learning, the reality is the instructor is still with us, and they
are not going anywhere any time soon.”
Technological factors and trends
“As the training landscape shifts from a model in which the training organization defines
the learning experience to one of increased learner autonomy, training professionals are
CAPSTONE STRATEGIC AUDIT 72
responding with new user-friendly portals that feature highly customized content. Training
Industry refers to them as Personal Learning Environments (PLE). They represent the next
generation of learning management systems, and the profession’s effort to endorse learner
preferences while also fulfilling their duties to continue providing relevant and useful content.”
Geographic factors and trends
Not sure about this.
End
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