The Strategy Clock: Bowman's Competitive Strategy Options

How did you get on? Bowman's Strategy Clock is a useful tool for deciding upon corporate strategy.

Critical Success Factors

What are the success factors behind imminent critical achievement or probable failure and how do we understand and manipulate the key factors in our favor?


Every achievement starts with a select grouping of actions that in turn create the the correct environment for either accomplishment or defeat, the real secret is to start with the right tools and avoid the pitfalls that those who fail - fail to do.


To excel there are things you must have or obtain and of course conversely there are things that your either avoid or rid yourself of. There are exceptions, but the majority of successes are achieved by adherence to very key critical success factors, either knowingly or otherwise.



Planning

There will always be people who by good fortune, inadvertently stumble upon success. Most people however, will not.


The core of most successful people's accomplishments revolve around a great plan, the type of plan that has all the details including the likely hood of succeeding.


They evaluate from the start the likely hood of success and they Are Not afraid to realize that something may be beyond their capabilities. Chasing a dream is ok, but chasing one blindly when good planning would have told you that even your best efforts would likely be in vain is not.


There is no doubt about it - Failure to plan is tantamount to failure itself.

You can can follow your dream and succeed if the odds are long, but knowing when it's just not viable is part art and part good sense.



Passion


Succeeding without passion is a rarity. If you want to win you must be more than just interested, you must be deeply passionate about accomplishing your ambitions.


Passion gives you drive and that gives you energy that makes the hard work and effort needed to win bearable. Successful people more often than not, are extremely involved in what they do, this results in a natural connection between their ambition and themselves.


This is why successful sports people excel, they have the passion to train through injury and adversity, as well as the intensity needed at the highest levels.


Attempting to succeed at something of which you have no passion is not the action of regularly successful people.




Time And Effort

High achievers are prepared to do what it takes to fulfill ambitions, whereas those who aren't prepared don't achieve.

Time and effort are almost certain requirements, so those who think success is obtainable without these key factors are the one's who chase get rich quick schemes and fail.

Achievement requires considerable time and effort, this automatically separates many from their goals. Your ability to put in the "hard yards" says as much about your personality as it does your likely hood of fruition.

Often time and effort will include an element of persistence and while that is almost a success factor in itself, persistence is also a reason for some people failures. Many people persist too long in the face of obvious defeat, increasing their losses and missing out on lost opportunities while they follow the wrong path.

Putting in time and effort are no guarantees of success but without there is a guarantee of failure.




Sacrifice


For everything you aim to achieve there is an inevitable price and that is what ever you are willing to sacrifice. A really interesting critical success factor as it relies heavily upon you giving something up in order to make a gain. It means your priorities will be tested.


Whether it be money, effort or family time, every single successful person has been willing to forgo some degree of this to mount their challenge towards victory.


Your own personal justification is required and if your can't reach it then your self doubts may very well hamper your best efforts.


You may never be entirely comfortable sacrificing family time or hard earned savings but if you find it entirely justifiable then it will be far easier to commit to.

Sacrifice is the price you must pay for reward, so you must be sure of your self.




Attitude


Wrong attitude = Failure.



I'm not talking about a "bad" attitude, that will also be a burden, but the wrong attitude for your personal project will be ultimately disastrous.

Not all successful people have golden personalities, in fact they are usually as flawed as ordinary folk, but the one thing they possess it the the right attitude specifically for their ambitions.

Different ambitions and differing levels of achievement require select mindsets. If you aim to be a international recording artist but you are shy and meek then automatically a problem exists. If on the other and you have great people skills and you want to become highly successful in sales then you have an automatic advantage.


Sometimes you may have to develop yourself beyond your comfort zone to obtain the right personality and attitude to tackle your goals. A critical success factor that makes you question your mindset and outlook on life.



The Solution


In the end there are certain Critical Success Factors that must be learned to maximize potential and turn ambition into achievement.


What have we learned so far?


Successful people have the following:

*Good, well thought out plans.

*The passion for their ambitions.

*Willingness to extend time and effort.

*A willingness to sacrifice in order to achieve.

*The right attitude or the willingness to get the right attitude.


These Critical Success Factors are the most important keys that help to make up the arsenal of your average (or less than average) high achiever.

Some people are lucky that they inherently possess these traits, but even if you don't you can obtain and possess them for yourself.



In Conclusion

The solution to succeeding lies in many variables, but there are some that are ever present that account for the majority of accomplishments. By seeking to develop your own key factors you can proceed to emulate the feats of the successful or better yet overtake them altogether.

These examples of critical success factors should highlight to you the very things that are needed to succeed and make valuable achievements, but they should also make you value the effort that must be exerted in order to accomplish your goals.

Critical Success Factors By Stephen G

Porter's Five Forces Analysis

If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantages. Company's with a strong competitive advantage have large moats, and therefore higher profit margins. And investors should always be concerned with profit margins.

This article looks at a methodology called the Porter's Five Forces Analysis. In his book Competitive Strategy, Harvard professor Michael Porter describes five forces affecting the profitability of companies. These are the five forces he noted:

1. Intensity of rivalry amongst existing competitors
2. Threat of entry by new competitors
3. Pressure from substitute products
4. Bargaining power of buyers (customers)
5. Bargaining power of suppliers

These five forces, taken together, give us insight into a company's competitive position, and its profitability.

Rivals

Rivals are competitors within an industry. Rivalry in the industry can be weak, with few competitors that don't compete very aggressively. Or it can be intense, with many competitors fighting in a cut-throat environment.

Factors affecting the intensity of rivalry are:

• Number of firms - more firms will lead to increased competition.
• Fixed costs - with high fixed costs as a percentage of total cost, companies must sell more products to cover those costs, increasing market competition.
• Product differentiation - Products that are relatively the same will compete based on price. Brand identification can reduce rivalry.

New Entrants

One of the defining characteristics of competitive advantage is the industry's barrier to entry. Industries with high barriers to entry are usually too expensive for new firms to enter. Industries with low barriers to entry, are relatively cheap for new firms to enter.

The threat of new entrants rises as the barrier to entry is reduced in a marketplace. As more firms enter a market, you will see rivalry increase, and profitability will fall (theoretically) to the point where there is no incentive for new firms to enter the industry.

Here are some common barriers to entry:

• Patents - patented technology can be a huge barrier preventing other firms from joining the market.
• High cost of entry - the more it will cost to get started in an industry, the higher the barrier to entry.
• Brand loyalty - when brand loyalty is strong within an industry, it can be difficult and expensive to enter the market with a new product.

Substitute Products

This is probably the most overlooked, and therefore most damaging, element of strategic decision making. It's imperative that business owners (us) not only look at what the company's direct competitors are doing, but what other types of products people could buy instead.

When switching costs (the costs a customer incurs to switch to a new product) are low the threat of substitutes is high. As is the case when dealing with new entrants, companies may aggressively price their products to keep people from switching. When the threat of substitutes is high, profit margins will tend to be low.

Buyer Power

There are two types of buyer power. The first is related to the customer's price sensitivity. If each brand of a product is similar to all the others, then the buyer will base the purchase decision mainly on price. This will increase the competitive rivalry, resulting in lower prices, and lower profitability.

The other type of buyer power relates to negotiating power. Larger buyers tend to have more leverage with the firm, and can negotiate lower prices. When there are many small buyers of a product, all other things remaining equal, the company supplying the product will have higher prices and higher margins. Conversely, if a company sells to a few large buyers, those buyers will have significant leverage to negotiate better pricing.

Some factors affecting buyer power are:

• Size of buyer - larger buyers will have more power over suppliers.
• Number of buyers - when there are a small number of buyers, they will tend to have more power over suppliers. The Department of Defense is an example of a single buyer with a lot of power over suppliers.
• Purchase quantity - When a customer purchases a large quantity of a suppliers output, it will exercise more power over the supplier.

Supplier Power

Buyer power looks at the relative power a company's customers has over it. When multiple suppliers are producing a commoditized product, the company will make its purchase decision based mainly on price, which tends to lower costs. On the other hand, if a single supplier is producing something the company has to have, the company will have little leverage to negotiate a better price.

Size plays a factor here as well. If the company is much larger than its suppliers, and purchases in large quantities, then the supplier will have very little power to negotiate. Using Wal-Mart as an example, we find that suppliers have no power because Wal-Mart purchases in such large quantities.

A few factors that determine supplier power include:

• Supplier concentration - The fewer the number of suppliers for a given product, the more power they will have over the company.
• Switching costs - suppliers become more powerful as the cost to change to another supplier increases.
• Uniqueness of product - suppliers that produce products specifically for a company will have more power than commodity suppliers.

It's important to analyze these five forces and their affect on companies we want to invest in. The Porter Five Forces Analysis will give you a good explanation for the profitability of an industry, and the firms within it. If you want to know why a company is able, or unable, to make a decent profit, this is the first analysis you should do.

Analyzing the environment - Five Forces Analysis

Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. For example, Dell would analyse the market for Business Computers i.e. one of its SBUs.

SWOT analysis of Inditex

COMPANY OVERVIEW

The Inditex Group is engaged in textile design, manufacturing and distribution.The company operates

approximately 3,113 stores in 64 countries.The company primarily operates in Europe.The company

is headquartered in La Coruna, Spain and employs about 69,240 people.

The company recorded revenues of E8,196 million (approximately $11,145 million) during the fiscal

year ended January 2007, an increase of 22% over 2006. The operating profit of the company was

E1,356 million (approximately $1,843 million) during fiscal year 2007, an increase of 24% over 2006.

The net profit was E1,002 million (approximately $1,362 million) in fiscal year 2007, an increase of

25% over 2006.

*The results mentioned above are unaudited. The company has not declared the audited results for

the fiscal year ended January 2007 at the time of the publication of the profile.

KEY FACTS

Head Office Inditex

Edificio Inditex

Avenida de la Diputacion

Arteixo

La Coruna

15142

ESP

Phone 34 981 18 54 00

Fax 34 981 18 54 54

Web Address http://www.inditex.com

Revenue / turnover 8,196.0

(EUR Mn)

Financial Year End January

Employees 69,240

Madrid Ticker ITX

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Inditex

Company Overview

SWOT ANALYSIS

Inditex specializes in fashion retailing. The company has a broad geographical presence. The group

is well established and has diverse offerings in its portfolio for retail spenders which help the group

to carve a niche for itself in the global retail market but it faces the threat of reduction in revenue

from price deflation in the Spanish clothing and footwear market due to opening of new stores.

Strengths Weaknesses

Weak international presence of other brand

concepts

Well established group with diverse

offerings

Zara's competitive advantage Over dependence on the European market

Increasing revenues and net income

Opportunities Threats

Expansion in the Italian market New avenues being utilized by competitors

Growth in online retail spending Increasing labor costs in Europe

Continual growth in the retail apparel Counterfeit goods

industry

Growth in Asian retail sector

Strengths

Well established group with diverse offerings

The Inditex group is a leading fashion distributor, comprising more than 100 associate companies.

Established in 1975, the group now operates in over 400 cities located around the world. The group

operates eight different sales concepts including Zara, Pull & Bear, Massimo Dutti, Bershka,

Stradivarius, Oysho, Zara Home, and Kiddy's Class.

Zara is an international fashion retailing division. While Pull & Bear's clothing and accessories are

targeted at the young, Massimo Dutti offers urban fashions and casual wear to grown up men and

women. Bershka offers music, art and street fashion to youths. Stradivarius offerings include the

latest international fashion trends in the fabrics, design and accessories. Oysho offers a wide range

of women's undergarments and lingerie, casual outerwear and informal clothes. Zara Home is

engaged in home furnishings and also offers cutlery, tableware, decorative items and glassware.

Kiddy's Class offers fashion products including apparel, cosmetics, fragrances, necklaces and

bracelets for children.

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Inditex

SWOT Analysis

This diverse product offering has enabled the Inditex group to carve a niche for itself and emerge

as one of the largest fashion distributor globally.

Zara's competitive advantage

Zara is a unique retail proposition, and is Inditex's strongest concept. Zara's philosophy is to

under-produce inexpensive high fashion apparel, thereby encouraging frequent purchases and

limiting its own markdowns. While the Zara concept has some similarities to H&M, Mango or Topshop,

it offers a higher degree of fashion more quickly and frequently than its competitors.

Zara accounted for 65.9% and 70% of the net sales and earnings before interest & taxes, respectively,

for the fiscal year 2006. As of January 2006, Zara operated 852 stores, which includes 129 new

openings from last fiscal year, having a total selling area of 1,000,000 square meters. Zara achieved

a 41% Return on Capital Employed, during fiscal 2005. Zara has mastered a mixture of attractive,

traditional styles and fashion which appeals to its customers and also has a higher flexibility in

sourcing than most of its competitors, which gives it an edge over the others. It can also protect its

gross margin better than its competitors which have longer lead times. This provides Zara a

competitive advantage.

Increasing revenues and net income

The company's net income for 2005 was E803.2 million ($971.5 million), increasing at a CAGR of

25% from E259 million in 2000. Inditex recorded revenues of E6,740.8 million (approximately $8,152.9

million) during the fiscal year ended January 2005, an increase of 21.1% over 2004. Revenues have

increased at a CAGR of 20% for the period 2002-2006.

The consistent increase in revenues over the years will provide the company with a strong base and

enable it to undertake new ventures going forward.This would further lead to good investor confidence

and would therefore, enhance the shareholder's value.

Weaknesses

Weak international presence of other brand concepts

In 2005, the Zara chain contributed 65.9% to the total sales, while all the other concepts put together

amounted to only 34.1% of the total sales. While Zara generated 68.9% of its revenues from the

international market during fiscal 2005, the other concepts focused mainly on the Spanish market.

Kiddy's Class generated only 14% of its revenues from the international markets; Pull and Bear

33.2%; Massimo Dutti 45.6%; Bershaka 41.5%; Stradivarius 17.4%; Oysho 31.8%; and Zara Home

23%. Apart from Zara, the company's other brand concepts including Kiddy's Class, Pull & Bear,

Massimo Dutti, Bershka, Stradivarius, and Oysho do not have a global appeal.

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Inditex

SWOT Analysis

The company has not been laying stress on opening the other stores apart from Zara in other

locations, because of which the revenue generation is highest from Zara stores as compared to

other stores. The revenues of the group might see an increase in the near term if equal attention is

paid to other outlets in other regions. Dependence on a single brand limits the company's revenues

and growth.

Overdependence on the European market

As of January 2006, Inditex operated 3,113 stores in 64 countries across the globe. The company

operated 1,461 stores (including 31 franchises) in Spain alone and another 724 stores (including

124 franchises) in the other European regions. Spain contributed to 43.1% of the company's revenues

during fiscal 2006 and the other European regions accounted for 38.7% of the total revenues.

The company is heavily dependent on Spain and the European markets for its revenues, thus making

it highly vulnerable to economic, political or social change taking place in these markets (especially

Spain).

Opportunities

Expansion in the Italian market

Zara has been expanding in Italy and plans to open roughly 15 stores every year. It is gaining

recognition amongst Italian consumers, who are highly fashion conscious.The company is expected

to operate more Zara stores in Italy by 2013 than in France or the UK. The untapped Italian market

presents strong growth potential for the company.

Growth in online retail spending

Online retail spending is expected to increase from $102.1 billion in 2006 to $144 billion in 2010, a

CAGR of 10%. By 2010, 71% of online users are likely to shop over the internet as compared to

65% in 2006. By 2010, the internet will influence about half of total retail sales, compared to 27% in

2006. The company doesn't sell it products online. Growth in online retail spending would enable

the company to earn more revenues from its online websites. US online retail sales are expected

to grow annually by 17% through 2008. Inditex markets its products through www.inditex.com. A

positive outlook in the US online and catalogue retail market would boost the company's revenues.

Continual growth in the retail apparel industry

Women's retail clothing sales in the US are forecast to expand 2.1% per year during 2004-2009 to

reach $ 137.5 billion. In addition, the intimates and sleepwear segments is expected to advance at

an above-average pace through 2009. The sales are primarily expected as a result of a shift towards

dressier apparel, sports clothes and premium fabrics. The positive outlook for the apparel sector is

likely to increase the demand for the company's offerings and help boost its topline growth.

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Inditex

SWOT Analysis

Growth in the Asian retail sector

Countries such as China offer a large and growing market for consumer goods. Rising income levels

and sustained economic growth is expected to improve the purchasing power of consumers in these

countries. In the period 2006-10, retail clothing sales are forecast to grow at a CAGR of 11.9% in

China. Inditex forayed into the Chinese market by opening Zara store for the first time in Shanghai

and Beijing in 2007.

Entering China offers the company an opportunity to diversify its revenues, which are heavily

concentrated in Europe.

Threats

New avenues being utilized by competitors

The company's competitors are determined to seek out cheaper manufacturing locations in order

to offer consumers lower prices. This is resulting in a shift in apparel manufacturing from Turkey to

Eastern Europe. The main advantage of Zara's vertical integration is not its internal production, but

the frequent feedback from store staff to design. Only if this feedback is truly effective, will Zara be

able to sustain higher manufacturing costs than its competition, in the future. Furthermore, the

competitors are reducing their lead-time, and if the competitors overtake Zara in this regard, then

Inditex would face a reduction in revenues and loss of market share.

Increasing labor costs in Europe

Europe is the primary market for Inditex, accounting for nearly 84% of the company's revenues.The

region has been witnessing an increase in labor costs. For example, the UK government increased

the adult minimum wage rate from £5.05 to £5.35 per hour in October 2005. The rate for those aged

18 to 21 years will be increased from £4.25 to £4.45 per hour and the rate for workers aged 16-17

years would increase from £3 to £3.3 per hour. An increase in labor costs could adversely impact

the company's margins.

Counterfeit goods

The proliferation of counterfeit goods and accessories is adversely affecting the sales of branded

accessories. According to Global Congress on Combating Counterfeiting, more than 5,000 incidents

of counterfeiting and piracy activities worldwide were recorded across the globe. In total, seizure of

more than 1.41 billion counterfeit items valued at more than $4.13 trillion. Counterfeiting is more

prevalent in fashion accessories such as watches, shoes, and handbags and these goods are

increasingly finding place in various retail shops. Low quality counterfeits reduce consumer confidence

in the products of the company. More importantly, what differentiates the products of companies

such as Inditex from competitors is exclusivity. Widespread counterfeits reduce the exclusiveness

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Inditex

SWOT Analysis

of the company's brands. Counterfeits not only deprive the company of revenues, but also dilute its

brand image.

SWOT analysis of FLIR Systems, Inc.

COMPANY OVERVIEW

FLIR Systems (FLIR) is engaged in the design, manufacture and marketing of thermal imaging

systems. The company operates in the US and Europe. It is headquartered in Wilsonville, Oregon

and employs 2,079 people.

The company recorded revenues of $1,147.1 million in the financial year ended December 2009

(FY2009), an increase of 6.5% over FY2008.The operating profit of the company was $347.3 million

in FY2009, an increase of 22.1% over FY2008. The net profit was $230.2 million in FY2009, an

increase of 14.6% over FY2008.

KEY FACTS

FLIR Systems, Inc.Head Office

27700 SW Parkway Avenue

Wilsonville

Oregon 97070

USA

1 503 498 3547Phone

Fax

http://www.flir.comWeb Address

1,147.1Revenue / turnover

(USD Mn)

DecemberFinancial Year End

2,079Employees

FLIRNASDAQ National

Market Ticker

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FLIR Systems, Inc.

Company OverviewSWOT ANALYSIS

FLIR Systems (FLIR) is engaged in the design, manufacture and marketing of thermal imaging

systems.The company has been able to expand its business through a number of acquisitions over

the years. However, intense competition across all the operating divisions of the company could

reduce its market share.

WeaknessesStrengths

Customer concentrationInorganic growth

Legal proceedingsBackward vertical integration

Dependence on sole source and limited

source suppliers of components

Robust financial performance

Strong liquidity position

ThreatsOpportunities

Intense competitionRising defense spending in the US

Rapid changes in technologyGrowth in automotive electronics market

Stringent US government contractual and

regulatory requirements

Agreement to acquire ICx Technologies

Strengths

Inorganic growth

FLIR has been able to expand its business through a number of acquisitions over the years. The

company acquired Cedip Infrared Systems, a provider of infrared imaging cameras and systems;

and Ifara Tecnologias, a developer of software, hardware and developer tools for security and

surveillance, force protection, exploration, and maritime purposes, in 2008. The company also

acquired Salvador Imaging, a leading provider of high-performance visible and low light imaging

systems, in June 2009. Further, it also acquired OmniTech Partners, a company engaged in the

development and manufacturing of image intensified and fused image intensified/thermal imagers,

in October 2009, and Directed Perception, a leading provider of pan-tilt motion control systems for

commercial and military markets, in December 2009. Moreover in May 2010, the company acquired

Raymarine Holdings Limited, a wholly owned subsidiary of Raymarine.

The Cedip Infrared Systems acquisition significantly improved FLIR's international distribution network

and added new products and technology, including infrared cameras. It also provided a strong

manufacturing and technology base for the company in Europe. The Ifara Tecnologias acquisition

provided the company with access to software and middleware solutions including video analytics,

networking and multi-sensor integration. OmniTech added image intensified capability to FLIR's

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FLIR Systems, Inc.

SWOT Analysisproduct line, and created the opportunity to leverage the capabilities of both companies to expand

in the growing market for fused image intensified / thermal imagers. The acquisition of Directed

Perception enhanced and differentiated FLIR's pan-tilt-zoom camera systems for both commercial

and military markets. Raymarine Holdings’ acquisition further strengthened FLIR's foothold in the

marine market by increasing its maritime distribution network with the addition of Raymarine's 1,000

dealer outlets and more than 400 marine OEMs, nearly all of which are additive to FLIR's existing

distribution. FLIR also planned to expand Raymarine's product line breadth by integrating thermal

imaging cameras with Raymarine's display, radar and autopilot product lines to create the broadest,

most effective, and easiest to use suite of products in the marine electronics industry.

Through these acquisitions, the company enhanced its market share, increased its access to a

broader range of customers and extended its product portfolio.

Backward vertical integration

The company focuses on backward vertical integration primarily to reduce the manufacturing costs.

FLIR manufactures many of the critical components for its products, including infrared detectors,

gimbals, optics and coatings, laser subsystems and micro-coolers. It also develops much of the

necessary software and middleware for the systems. In addition, the company purchases other parts

(pre-assembled), including certain detectors, certain coolers and optics, circuit boards, cables and

wire harnesses.These purchased components are then assembled into finished systems and tested

at one of the company’s primary production facilities located in Wilsonville, Oregon; North Billerica,

Massachusetts; Goleta, California; Danderyd, Sweden; Croissy-Beauborg, France; Tallinn, Estonia;

and Bozeman, Montana; Colorado Springs, Colorado; Freeport, Pennsylvania; and Burlingame,

California. This vertical integration minimizes lead times and facilitates prompt delivery of FLIR’s

products. In addition, it also controls costs and ensures that these components satisfy the company’s

quality standards.

Robust financial performance

FLIR has reported consistent increase in its revenues and profitability since FY2009.The company's

revenues have grown at a compound annual growth rate (CAGR) (2005-09) of 23%. In FY2009, the

company recorded revenues of $1,147.1 million, an increase of 6.5% over FY2008. The increase

was primarily due to an increase in unit sales of the company’s large-gimbaled systems.

The company's profitability has also increased since FY2005. Its operating profit increased at a

CAGR (2005-09) of 29%, from $126 million in FY2005 to $347.3 million in FY2009. The operating

margin of the company increased to 30.8% in FY2009 from 24.8% in FY2005. Similarly, the net profit

of the company also increased at a CAGR (2005-09) of 27%. The net profit margin of the company

increased to 20.1% in FY2009 from 17.3% in FY2005. Robust financial performance provides financial

stability to the company which could be leveraged to seek more growth avenues in the future.

Strong liquidity position

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FLIR Systems, Inc.

SWOT AnalysisFLIR has a strong liquidity position in FY2009 compared to previous years. For instance, the

company’s cash and cash equivalents at the end of FY2009 were $422.0 million compared to $289.4

million in FY2008. The increase in cash and cash equivalents was primarily due to cash provided

from operations and the cash proceeds and tax benefits generated from FLIR’s stock-based

compensation programs, offset by business acquisitions, capital expenditures, and the repurchase

of FLIR’s common stock. Similarly, the cash provided by operating activities in FY2009 totaled $271.8

million compared to $218.3 million in 2008. The increase in cash provided from operating activities

was primarily due to an increase in net earnings and a lower level of net cash used in FY2009

compared to FY2008 for operating assets and liabilities, principally accounts receivable, inventories

and accrued payroll.

A strong liquidity positions enhances the shareholders confidence in the company and helps in

investing in other profitable businesses in the future.

Weaknesses

Customer concentration

A substantial portion of FLIR’s revenue is derived from sales to the US and foreign government

agencies. The company's business will continue to be substantially dependent upon such sales.

Aggregate sales to the US government agencies accounted for 43% of FLIR’s revenues in FY2009,

41% of its revenues in FY2008 and 39% in FY2007.The funding of contracts awarded to the company

depends on the overall US government budget and appropriation process, which is beyond the

company’s control. The US government programs are subject to uncertain future funding levels

which can result in termination of various programs. A very small part of the company's US sales

come from non-government agencies. Also, being the single largest customer of the company, the

US government has immense bargaining power. Therefore, a significant reduction in the purchase

of the company’s products by these agencies could have an adverse effect on FLIR’s business.

Legal proceedings

The company is subject to various legal proceedings, claims and litigation arising in the ordinary

course of business. In FY2007, FLIR and its subsidiary, Indigo Systems have been named in a

lawsuit filed by Raytheon in the US District Court for the Eastern District of Texas. In August 2008,

Raytheon was granted leave to file a second amended complaint. The complaint, as amended,

asserts claims for tortious interference, patent infringement, trade secret misappropriation, unfair

competition, breach of contract and fraudulent concealment.

In August 2009, the court entered an order granting the FLIR Parties’ motion for summary judgment

on Raytheon’s trade secret misappropriation claim based on the FLIR Parties’ statute of limitations

defense. Raytheon has abandoned all of its other claims except its patent claims which were set for

trial to commence in April 2010. FLIR is also subject to other legal proceedings, claims and litigation

arising in the ordinary course of business. Such contingencies may increase the operating costs of

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FLIR Systems, Inc.

SWOT Analysisthe company which may inturn impact the profitability. Legal proceedings may have a material

adverse effect on the company’s market image and on its financial position.

Dependence on sole source and limited source suppliers of components

FLIR is currently dependent on a number of sole source and limited source suppliers to provide

certain key components for its products. The company has increased its internal sources of supply

for certain critical components, in particular, cooled and uncooled infrared detectors, optics and

optical coatings, and laser components, but it relies on sole or limited source third-party suppliers

for other key components including laser rangefinders, certain machined parts, optics, motors and

electronic components. Many of these suppliers are small and the company is often one of their

most important customers.

FLIR’s business, financial condition and results of operations could be materially and adversely

impacted in the event that the company is unable to source certain of these components on a timely

basis or if such components are defective or they do not otherwise meet the company’s performance

standards.

Moreover, if critical components provided by any significant supplier become unavailable, the

company’s manufacturing operations could be disrupted. Any extended interruption in the supply of

sole or limited source components could have a material adverse influence on FLIR’s business,

financial condition and results of operations.

Opportunities

Rising defense spending in the US

The global defense spending is rising consistently over the past few years due to increasing threats

to the security. It is expected to rise further in the future. The total global military expenditure in

FY2009 is estimated to have been $1,531 billion. This represented an increase of 6% in real terms

compared to FY2008, and of 49% since FY2000. The Americas represents 43% of global defense

spending. The US government signed a bill that authorizes $712.9 billion in defense spending for

FY2010. For FY2011, the government has submitted a defense budget of $658.7 billion.The increase

in defense spending by the US government could provide additional opportunities for FLIR to enhance

its revenue base through new contracts.

Growth in automotive electronics market

The automotive electronics market has witnessed a strong growth in recent years. The worldwide

automotive electronics market is predicted to grow at 9% from $125 billion in FY2009 to $244 billion

in FY2017. The biggest demand is expected from the emerging markets in Asia and Europe. The

navigation market will be one of the fastest growing sections of the auto electronics market. The

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SWOT Analysisdriver supporting systems, like night vision, collision avoidance and lane departure warning is also

expected to show strong growth.

In addition to the economic recovery, demand is being fueled by advanced powertrain systems, as

vehicle manufacturers seek to improve the fuel efficiency of their vehicles to meet increasing legislative

and consumer demand. It is estimated that the value of powertrain electronic control units (ECUs)

installed in light vehicles grow at a compound average annual growth rate of 14% over the period

2009 to 2014, outpacing the overall market growth of 11%. Moreover, demand for electronics for

hybrid and electric vehicles would grow to around 20% of the demand for powertrain electronics by

2014.This strong growth in demand is due to the much higher electronics content in these vehicles.

Hence, the growing automotive electronics market would boost demand for the company’s products

and services.

Agreement to acquire ICx Technologies

FLIR is enhancing the operational capabilities of its various by acquiring many technologies through

new acquisitions. In this context, in August 2010, the company entered into a definitive merger

agreement to acquire ICx Technologies (ICx). ICx is a provider of integrated advanced sensing

technologies for homeland security, force protection and critical infrastructure applications. ICx has

established a technology leadership position across a wide spectrum of detection and surveillance

technologies, supported by a robust intellectual property portfolio.

The acquisition expands FLIR's capabilities into advanced sensors for chemical, biological,

radiological, nuclear, and explosives (CBNRE) detection for defense and homeland security markets.

The acquisition also enhances FLIR's existing intelligence surveillance and reconnaissance product

suite through the addition of ICx's advanced radars and integrated platforms. Upon closing of the

transaction, ICx's operations will be integrated into FLIR's Government Systems segment.

Upon completion, this transaction will enhance the FLIR's product portfolio and will leverage its

global infrastructure to reduce costs and drive growth.

Threats

Intense competition

Competition in the markets for FLIR’s products is intense. The principal competitive factors are

product performance, price, customer service and training, product reputation, and effective marketing

and sales efforts. In the thermography market, FLIR competes with Fluke (a division of Danaher)

and NEC San-Ei.The company faces competition with L-3 Communications, ULIS, Axsys

Technologies, ICx Technologies and other smaller companies in the CVS market. In the government

systems market, FLIR’s competitors include Raytheon, BAE Systems, L-3 Communications, DRS

(a Finmecanica Company), Lockheed Martin, El-Op, Sagem, Tamam and Thales. Many of these

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SWOT Analysiscompetitors have substantially greater financial, technical and marketing resources than the company.

All of these factors, as well as the potential for increased competition from new competitors, require

FLIR to continue to invest in, and focus on, research and development and new product innovation.

Intense competition may negatively impact the FLIR's operations and its financial condition.

Rapid changes in technology

The market for thermal imaging equipment is characterized by rapid technological developments

and frequent new product introductions. A company's success is highly dependent on its ability to

develop new technologies that anticipate changing customer requirements.This might require FLIR

to make substantial capital expenditures and incur significant research and development costs to

improve manufacturing capability, reduce costs, and to develop and introduce new products and

enhancements. Moreover, the company has limited financial resources as compared to its peers

like Raytheon, BAE Systems, Lockheed Martin and L-3 Communications Holdings. This might fail

to match up to their product development efforts limiting its ability to launch new products in a timely

manner. This could have an adverse effect on the company's market share.

Stringent US government contractual and regulatory requirements

As a US government contractor, FLIR is subject to a number of procurement rules and regulations.

The company is obliged to comply with, and is affected by the laws and regulations relating to the

formation, administration and performance of the government contracts.These laws and regulations

require certification and disclosure of all cost and pricing data in connection with contract negotiations,

and could impose accounting rules that define allowable and unallowable costs for certain cost-based

government contracts in the US. Any default on these regulations could lead to termination or

modification of contracts and transactions and reductions in the value of contracts.This in turn could

have an adverse effect on the company’s profit margins.

Applying the PESTEL Framework to the University of Worcester Business School

Political

• The Business School operates in a partially controlled market. The

Higher Education Funding Council for England (HEFCE) allocates

student numbers, and their attendant funding, to Higher Education

Institutions on an annual basis. Significantly, the University of

Worcester has secured a substantial increase in funding to support

a 50% increase in student numbers by 2010. A proportion of these

additional student numbers will have to be attracted to the

University by courses offered by Worcester Business School. It is this

requirement to deliver growth that led to the strategies for growth

discussed in the Summer issue of Student Advisor article (Richardson

& Evans, 2007).

• The UK Government’s now re-stated intention to move to

40% participation in Higher Education by 2020 (Tysome, 2007)

indicates significant and sustainable medium term growth potential

for our core offer – undergraduate business courses.

• The introduction of a £3,000 top-up fee made these additional

student numbers more attractive to the Business School and,

alongside HEFCE funding, made UK students more-or-less as

profitable to the Business School as the traditionally more lucrative

international student market. Whilst UK student numbers are

regulated, international student numbers are not, and therefore

continue to represent a valuable opportunity for growth.

Economic

• The introduction of the £3,000 top-up fee appears to be having

limited impact upon the total number of students wishing to study

at University. Demand amongst our core 18 to 21 year old target

audience is therefore forecast to remain stable.

• Top-up fees do appear to be having some impact upon the market.

Firstly, the trend for students to study closer to home appears to be

accelerating. Secondly, there appears to be an increasing tendency

for students to consider vocational courses, such as Business and

Management, which may benefit their future employability.

• Economic growth in key international markets, notably India and

China, offers significant revenue potential, with numbers intending

to study in the UK anticipated to grow significantly over the

medium-term.

Social

• The proposed growth of the University of Worcester is largely

predicated upon the fact that its local geography, centred on

Herefordshire and Worcestershire, is under-provided for in Higher

Education – a helpful factor, bearing in mind students’ increasing

propensity to study from home.

• The demographic trends – a growth in the 18-21 age group – also

support growth in the short term.

Technological

• The strategic direction of the University of Worcester is based around

“inspirational teaching & learning” in a face-to-face context. Potential

growth in distance learning, facilitated by new web-based technologies,

is therefore not core to the strategic development of Worcester

Business School.

Environmental

• Whilst the University is determined to champion environmental

sustainability, this is not driving the course portfolio or affecting the

nature of the student population.

Legal

• Whilst legislative changes do not solely have an effect on the Business

School, we have to be mindful of general legal requirements affecting

staff and students, such as health and safety legislation, employment

law and equality and diversity policies.

Facing the Competition

The market environment is becoming increasingly competitive.

University Business Schools are enhancing their market offer

through a combination of product proliferation (and increasing

the range and diversity of attractively titled courses) and enhanced

marketing communications activities.

Put together, the political, economic and social trends outlined above

highlight a relatively benign market environment in which to operate,

with growth in both UK and overseas markets. Furthermore, the

University has secured a substantial proportion of the available growth

in UK student numbers.

Despite this relatively settled environment, an attractive market

proposition will clearly be important if Worcester Business School is to

thrive in an increasingly competitive market. Senior managers within

Worcester Business School will need to constantly monitor the

environment in which we operate and develop increasingly sophisticated

responses to changes which are, in some cases unpredictable, and, in

many cases, uncontrollable.

Johnson et. al. (2006, p. 69) are keen to emphasize that managers

should not merely list the environmental factors, but more importantly

recognize the key drivers of change that could structurally affect the

industry or market. For this, David (2003) recommends some form of

ranking or scoring system, which could entail managers simply scoring

each factor (out of 10), with a high score indicating a key driver of change

or most important factor.

Managers can obtain data on environmental factors from a variety

of sources (refer to Figure 2). The important thing is to gather as much

as possible – it can be filtered down and evaluated by management

teams afterwards.

A Continuous Process Figure 2

Given the increasingly complex and dynamic environment within

which most organisations operate, the assessment of the environment

and subsequent strategic actions will ultimately affect corporate

success. Consequently, the importance of scanning the environment

cannot be underestimated. Nor should it occur once a year as part

of the business planning/budget planning process, but be a

continuous process of gathering and evaluating environmental data.

The PESTEL framework, when combined with a competitor analysis,

provides a useful structure to assess the environment.

Assessing the environment should naturally lead on to the

identification of potential opportunities and threats. Here, Johnson

et al. (2006) highlight the importance of recognising opportunities

and threats, especially when considering strategic choice.

Consequently the challenge to readers is to apply the PESTEL

framework in order to identify the environmental factors that are

affecting, or could affect, your organization. Consider the implications

of these factors and what actions you need to take in order to seize

opportunities or nullify threats.

Also consider where you are going to get this environmental data

from; how effective and reliable are your existing sources? Who will

you involve in the assessment of the gathered data? How will the

subsequent actions be rolled out to teams? Be aware – the process

of assessing the environment now