Strategic Management Session : 8

Rationale for SWOT Analysis To determine the possible threats and opportunities in the environments To pin point weaknesses and strengths of the firm in comparison with its competitors Done at the beginning of Strategy Formulation It is the culmination of external and internal factor analysis

Threats and Opportunities PESTLE Model Environment Analysis Five forces analysis Competitor Analysis

Strength and Weaknesses Internal Resource Analysis Value Chain Analysis Total Value Chain Product Portfolio analysis Financial, Cultural & Stakeholder Analysis

What Are the Company’s Strengths, Weaknesses, Opportunities and Threats ? S W O T represents the first letter in S trengths W eaknesses O pportunities T hreats For a company’s strategy to be well-conceived, it must be Matched to its resource strengths and weaknesses Aimed at capturing its best market opportunities and erecting defenses against external threats to its well-being S W O T

Identifying Resource Strengths and Competitive Capabilities A strength is something a firm does well or an attribute that enhances its competitiveness Valuable skills, competencies, or capabilities Valuable physical assets Valuable human assets Valuable organizational assets Valuable intangible assets Important competitive capabilities An attribute placing a company in a position of market advantage Alliances or cooperative ventures with partners Resource strengths and competitive capabilities are competitive assets!

Identifying Resource Weaknesses and Competitive Deficiencies A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage Resource weaknesses relate to Inferior or unproven skills, expertise, or intellectual capital Lack of important physical, organizational, or intangible assets Missing capabilities in key areas Resource weaknesses and deficiencies are competitive liabilities!

Identifying a Company’s Market Opportunities Opportunities most relevant to a company are those offering Good match with its financial and organizational resource capabilities Best prospects for profitable long-term growth Potential for competitive advantage

Identifying External Threats Emergence of cheaper/better technologies Introduction of better products by rivals Entry of lower-cost foreign competitors Onerous regulations Rise in interest rates Potential of a hostile takeover Unfavorable demographic shifts Adverse shifts in foreign exchange rates Political upheaval in a country

Role of SWOT Analysis in Crafting a Better Strategy S W O T analysis involves more than just developing the 4 lists of strengths, weaknesses, opportunities, and threats The most important part of S W O T analysis is Using the 4 lists to draw conclusions about a company’s overall situation Acting on the conclusions to Better match a company’s strategy to its resource strengths and market opportunities Correct the important weaknesses Defend against external threats

The Three Steps of SWOT Analysis

For Discussion: Your Opinion In doing SWOT analysis, why is it not sufficient just to compile 4 lists (one each for resource strengths, resource weaknesses, market opportunities, and external threats) and then move on? The most important part of SWOT analysis is using the 4 lists to draw conclusions about a company’s overall situation and then acting on the conclusions in these lists to better match a company’s strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats.

Role and Importance of SWOT Strategy formulation must take into account Happenings around the firm Firm’s own capabilities Missions and Objectives of the organisation

Role and Importance of SWOT Intimate relationship with strategy Perceptions of Managers Conflicting perceptions of swot Process of creativity Curbing internal politics of the firm Threat to Status quo To overcome the static issue should be repeated every six months

SWOT Evaluation How to identify and classify the strengths and weaknesses How to evaluate threats and opportunities BMW-German Home Base Global warming – Automobile Industry