Key Success Factors

Introduction

Key success factors are resources, skills and attributes of an organisation that are essential to deliver success in the market place. They are related to the industry and are unlikely to provide differentiation between organisations in the industry. Key success factors can be used to identify elements of the environment that are particularly worth exploring.

Key success factors are common to all the major organisations in the industry and do not differentiate one company from another. For example, factors such as low labour cost, a range of specialised steel products are common to many steel companies. Such factors will vary from one industry to another. For example, by contrast, in the perfume and cosmetics industry the factors will include branding, product distribution and product performance, but they are unlikely to include low labour costs.

Identifying Key factors of success in the industry

Key factors concern not only the resources of organisations in the industry but also the competitive environment in which the organisation operates. There are 3 principal areas that need to be analysed which are customers, competition and corporation

 

Customers

It refers to who is your present and potential customers, segmentations and who they purchase from are examined.

1)    Price – market segmented by high, medium and economy pricing.

      2)    Service – customer value the service more than the purchase of a product.

3)    Product or service reliability – customer views product performance and reliability more important than other factors.

 

4)    Quality – customers willingly to pay higher prices for actual or perceived quality differences.

    5)    Technical specifications – technical details providing major attractions to some customers.

 

6)    Branding – Customer is more into branding.

Competition

It refers to the main competitors, main factors in the market that influence competition, the intensity of competition, achieving market superiority and resources required.

 

1)    Cost comparison – which companies have the lowest cost.

2)    Price comparison – which companies have high prices.

3)    Quality issues – Which, why and how companies have the highest quality?

4)    Market dominance – Which companies dominate in the market.

5)    Service – Companies offering superior service levels.

6)    Distributors – Companies having the best distribution networks, lowest costs and fastest delivery.

Corporation

It refers to examining concentration of industry costs, the organisation and competitors’ resources.

 

            1)    Low cost operations

2)    Economies of scale

3)    Labour costs

4)    Production output levels

5)    Quality operations

6)    Innovative ability

7)    Labour/management relations

8)    Technologies and copyright

9)    Skills

 

Limitations

There are 4 issues

 

1)    Identification

Difficult to pick out the important factors

2)    Causality of relationships

The causality of relationship has been identified, it may not be clear how they operate or interact.

3)    Dangers of generalising

The competitive advantage of a single organisation by definition cannot be obtained by seeking what is commonly accepted as bringing success to all organisations in an industry.

4)    Disregard of emergent perspectives

Success may come from change in an industry rather than the identification of the current key factors for success.

Conclusion

In a strategic analysis of the environment, there is an immense range of issues that can potentially be explored, creating a problem for most organisations, which have neither the time nor resources to cope with such an open-ended task. The analysis can be narrowed down by identifying the key factors of success in the industry and then using these to focus the analysis on particularly important environmental matters.

The key factors of success are consistent with Porter’s view that there are factors that determine the relative competitive positions of companies within an industry. Thus, it is important to identify the KFS for a particular industry as there are many elements relate not only to the environment but also to the resources of organisations in the industry. The limitations suggest that key factors for success should be explored with caution as it is a starting point in strategy analysis. In order to make KFS effective, it requires a thorough exploration of the resources and skills of an industry before they can be applied to the environment.

 

 

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