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

• S W O TS W O T represents the first letter in

– SS trengths

– WW eaknesses

– OO pportunities

– TT 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

What Are the Company’s Strengths, Weaknesses, Opportunities and Threats ?

• 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 competitivecapabilities are competitive assets!

Identifying Resource Strengthsand Competitive Capabilities

Identifying Resource Weaknessesand 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 deficienciesare competitive liabilities!

Identifying a Company’sMarket Opportunities

• Opportunities most relevant to acompany are those offering

– Good match with its financial andorganizational 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

• S W O TS 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 TS W O T analysis is

– Using the 4 lists to draw conclusionsabout a company’s overall situation

– Acting on the conclusions to

• Better match a company’s strategy to itsresource strengths and market opportunities

• Correct the important weaknesses

• Defend against external threats

Role of SWOT Analysis inCrafting a Better Strategy

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?

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