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SWOT Analysis

The overall evaluation of a companys strengths,weaknesses, opportunities & threats is called SWOTanalysis.

External Environment (Opportunity & Threat analysis)

A business unit has to monitor key macro environmentforces & micro environment actors.


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A marketing opportunity is an area of buyer need &interest in which there is a high probability that acompany can profitably satisfy need.

There are three main sources of market opportunities.

1 to supply something that is in short supply, it requireslittle marketing talent as the need is obvious.

2 to supply an existing product or service in a superiorway. The improvements can be found by carryingconsumer research.

3 to develop a new product or service


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Consider the examples:

1 company can make buying process more convenientor efficient.

2 company can meet the need for more information &advice

3 company can customize a product or service that wasformerly offered in a standard form.

4 company can introduce new capability

5 company may be able to deliver the product or

service faster.6 company may be able to develop the product at much

lower price.


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Market Opportunity Analysis (MOA) - is used todetermine the attractiveness & probability of success.

Opportunity matrixSuccess Probability

High Low

Attractiveness

1 2

3 4

1 Best marketing opportunities

2 & 3 these opportunitiesshould be monitored in theevent that any improvement inattractiveness & successprobability takes pace

4 opportunities too minor toconsider

High

Low


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An environmental threat is a challenge posed by anunfavorable trend or development that would lead, in theabsence of defensive marketing action, to lower sales or

profit.Threat Matrix

Probability of occurrence

High Low

Seriousness

1 2

3 4

1 Company needs contingency

plans to make changes beforeor during the threat

2 & 3 monitored carefully in theevent that they grow moreserious.

4 can be ignored

High

Low


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SWOT AnalysisStrength Weakness

Opportunity Threat

CONVERT

CONVERT

M

A

T

C

H


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Internal Environment (Strength & weakness) Analysis

Each business needs to evaluate its strength &weaknesses. It does so by looking the importance ofparticular strength/weakness & companysperformance in that.

The big question is whether the business should limititself to those opportunities where it posses requiredstrengths or whether it should consider opportunitieswhere it might have to acquire or develop certainstrengths


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The Competitive Environment


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Porters 5 Forces Framework Industry Analysis

RIVALRY AMONG FIRMS

B

UYERS

SUPPLIE

RS

NEW ENTRANTS

SUBSTITUTES


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The Tool

Analysis to assess the attractiveness of anindustry based on the strengths of fivecompetitive forces

S W O T: Company specific

THE FIVE FORCES: Industry specific

THE FIVE FORCES: Help a decision

i. To enter an industry

ii. To strengthen current position

iii. To exit an industry


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Entry Barriers

i. Economies of scale

ii. Capital costs

iii. Switching costsiv. Access to distribution channels


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Bargaining Power Of Buyers

How Buyers Can Affect An Industry:

i. Ability to force down prices

ii. Bargain for higher product quality or betterservice

iii. Play competitors against each other


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Bargaining Power Of Buyers

Buyers are powerful if:

i. Buyer purchases in large proportion

ii. Buyer integrates backward

iii. Product is standard

iv. Low cost of changing supplier


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Bargaining Power Of Suppliers

How They Do It

i. Raise prices

ii. Reduce quality


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Bargaining Power Of Suppliers

A supplier group is powerful if:

i. Supplier industry is dominated by a few,

but it sells to many

ii. Product or service is unique or it has builtup switching costs

iii. Substitutes are not readily availableiv. Suppliers are able to integrate forward


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Threat Of Substitutes

i. Competition is not only from new entrants butfrom products meeting similar needs

ii. Substitutes limit potential returns with the help of

price ceilingsiii. Customers can easily switch


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Rivalry Amongst Firms is related to many factorsincluding:

i. Numerous Or Equally Balanced Competitors

ii. Absence Of Differentiation

iii. Low Switching Costsiv. High Exit Barriers


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OTHER CONCEPTS DEVELOPED

Co-opetition

Competitive behavior that combines competition withcooperation

Strategic GroupsA group of firms in an industry, which are following thesame or similar strategy

Mobility BarriersFactors that prevent the movement of organizationsfrom one strategic group to another


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STEEP Analysis is technique used for externalenvironmental analysis. It includes factor:

Socio-cultural

Technological

Economic

EcologicalPolitical-legal


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PESTEL Analysis

Political

Economic

Sociocultural

Technological

EcologicalLegal


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The Internal Environment


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Internal Scanning

often referred to as organizational analysis, isconcerned with identifying and developing anorganizations resources & competencies.

Resources

i. are an organizations assets & are thus buildingblock of the organization.

ii. They may be tangible or intangible.


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Capabilities

i. refer to a corporations ability to exploit itsresources.

ii. They consists of business processes routines thatmanage the interaction among the resources to turninputs into outputs.

iii. A capability is functionally based & is resident in a

particular function.


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Competency is a cross-functional integration &coordination of capabilities.

Core competency is a collection of competencies thatcrosses divisional boundaries, is widespread withinthe corporation, & is something that the corporationcan do exceeding well.

Distinctive competency is core competency superior tothat of competition.


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VRIO framework to evaluate a firms competencies.

Value Does it provide customer value & competitiveadvantage

Rareness Do no other competitors possess it

Imitability Is it costly for others to imitate

Organization Is the firm organized to exploit theresource


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Determining the sustainability of an Advantage

Two characteristics determine sustainability of a firmsdistinctive competencies:

i. Durability

ii.

Imitability


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Porters value chain -


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Scanning Functional Resources & Capabilities

Basic Organizational Structure

i. Simple structure

ii. Functional structure

iii. Divisional structureiv. SBUs


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Scanning Functional Resources & Capabilities

Corporate Culture: The company way

It is the collection of beliefs, expectations, and valueslearned and shared by a corporations members andtransmitted from one generation of employees toanother.

The culture includes the dominant orientation of thecompany such as, R&D at HP, innovation at Google,or product quality at BMW.


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Strategic Marketing Issues

i. Segmentation & positioning

ii. Marketing mix

iii. Brand & corporate reputation

Strategic Financial Issues

i. Financial leverage

ii. Capital budgeting


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Strategic HRM Issues

Increasing use of teams

Quality of work life & human diversity

Synthesis of Internal Factors

IFAS (Internal Factor Analysis Summary)


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Strategy Formulation


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Corporate Level Strategy


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Corporate strategy deals with three key issues facingthe corporation as a whole

i. The firms overall orientation toward growth,stability or retrenchment (directional strategy)

ii. The industries or markets in which the firmcompetes through its products or business units

(portfolio analysis)iii. The manner in which management coordinates

activities and transfer resources and cultivatescapabilities among product lines & business units

(parenting strategy)


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Directional strategy A corporations directionalstrategy is composed of three general orientations(also called grand strategies):

i. Growth strategies expand the company activities

ii. Stability strategies make no change to companyscorporate activities

iii. Retrenchment strategies reduce the companyslevel of activities


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Growth Strategies

Three options are available

1 identify opportunities within current business intensive opportunities

2 identify opportunities to build or acquire businessesrelated to current businesses integrative

3 identify opportunities unrelated to current business -diversification


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Growth Strategies

Intensive Growth Integrative Growth Diversification Growth

Conglomerate

Synergistic

Concentric Horizontal

MarketPenetration

MarketDevelopment

ProductDevelopment

BackwardIntegration

ForwardIntegration

HorizontalIntegration


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Ansoff Growth Matrix (Product market Expansion Grid)

Current Products New Products

Current

Markets

MarketPenetration

ProductDevelopment

NewMarkets

MarketDevelopment

Diversification


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Intensive Growth

Market Penetration Increase sales to the current customers Convert non-users into users

Market Development By adding new channels of distribution expanding

consumer reach By entering new market segments By entering new geographical markets

Product Development Expand product mix for the existing

market/customers


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SBU Level Strategy


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Porters Generic Strategies

Cost LeadershipAppeals to broad targetmarket, produce products inlarge volumes, and keepprices low

DifferentiationOffer products that have abroad appeal and also haveunique features to justifyhigher prices

Focus (Costbased): Serves narrowmarket segment (s) and keepthe prices low

Focus(Differentiationbased): Targets narrowmarket segment (s) and offerproducts that have uniqueappeal

COMPETITIVE ADVANTAGE

Lower cost Differentiation

COMPETITIVE

SCOPE

BroadTarget

NarrowTarget


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Portfolio Analysis


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Resource Allocation to SBUs andStrategic Models

BCG Matrix

GE Multifactor Portfolio Matrix

Arthur D Little Model


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BCG MatrixSTARS

Modest + or Cash Flow

QUESTION MARKS(Problem Children)

Large Negative Cash Flow

(Usually new SBUs)

CASH COWS

Large Positive Cash Flow

DOGS(Cash Traps)

Modest + or Cash Flow

MARKET

GROWT

H

RATE

RELATIVE MARKET SHARE

10 1 0.1

0

10

20

High

Low

High Low


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BCGs Strategic OptionsSBUClassification SBU Characteristics Strategy ExampleDogs

(Low share, lowgrowth)

Generates low profits or losses.Consumes more management time.

Divest selloff, liquidate

Sahara Airlines

Question Marks(Low share,high growth)

Requires lot of cash for fastgrowth. Continue investing in theSBU or withdraw from market.

Build /Harvest /Divest

Sabeer Batiasold Hotmailto Microsoft

Stars

High share,high growth)

Generates large amount of cash.Competitors attack on SBU.

BuildIncreasemarket share

Intel investsheavily inPentium

Cash Cows

(High share,low growth)

Generates considerable amount ofcash. Enjoy economies of scale &higher profit margins

Hold /HarvestPreservemarket share

Roohafza,

Vicks,

Lux


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GE Multi Factor Portfolio MatrixProtect position/ Invest heavily

Invest to Build Buildselectively /Protect

Build selectively Selectivelymanage forEarnings

Limitedexpansion /Harvest

Protect and

Refocus

Manage for

Earnings

Divest

BUSINESS STRENGTH

Strong Medium Weak

High

Medium

Low

MARKETATTRACTIVENESS


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Arthur D. Little (ADL) Model

EMBRYONIC GROWTH MATURE AGEING

DOMINANT Grow fast. Buildbarriers. Actoffensively

Grow fast. Aim forcost leadership.Defend position. Actoffensively

Defend position.Increase theimportance ofcost.

Defend position.Focus. Considerwithdrawal

STRONG Grow fast.Differentiate

Lower costs.Differentiate. Attacksmall firms

Lower costs.Differentiate.Focus

Harvest

FAVOURABLE Grow fast.Differentiate

Focus.Defend.Differentiate.

Focus.Differentiate. Hitsmaller firms

Harvest

TENABLE Grow with theindustry. Focus Hold on or withdraw.Niche. Aim forgrowth

Niche. Hold on.Withdraw Withdraw

WEAK Search for aniche. Attemptto catch othermarkets

Niche or withdraw Withdraw Withdraw

Stage of Industry Maturity

Competitive

Position


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Profit Impact of Market Strategy (PIMS)

Developed by Strategic Planning Institute (SPI) Maintains data about industry characteristics,

competitive position, resource allocation, strategic movesand operating results

The data are analyzed considering most likely changes

in future and then options can be assessed regardingpresent strategies and other alternatives. PIMS shows strong relation between market share &

profitability: high market share companies earn higherROI.

Also data shows that higher quality products tend to bemore profitable than competitors. PIMS also suggests that lower costs have a positive

impact on profitability.


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3 Core Elements of BusinessStrategy

Business

Strategy

Product-marketInvestmentDecisions

Product-market scope

Investment intensity

Resource allocationover business units

Functional AreaStrategies

Product

Price

Place

Promotion, etc.

Basis ofSustainableCompetitive

AdvantageAssets /Competencies

Synergies

Date post:	05-Apr-2018
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