© Colin Boyd 2002Strategic Analysis
SWOT analysis
Industry, Economic and Technical Opportunities
and Threats
Company Strengths and
Weaknesses
© Colin Boyd 2002Strategic Analysis
SWOT analysis for Wendy’s
Strengths and weaknesses are specific to Wendy’s – they are internal characteristics
Inside Wendy’s Outside Wendy’s= the external environment
© Colin Boyd 2002Strategic Analysis
SWOT analysis for Wendy’s
Opportunities and threats apply to all the members of the industry that Wendy’s is in –
they are external characteristics
Outside Wendy’s= the external environment,
which is the same for all members of the fast food
industry
© Colin Boyd 2002Strategic Analysis
The PEST model of the external environment
PEST = the Political, Economic, Social and
Technological environments that interact with business.
© Colin Boyd 2002Strategic Analysis
Environmental Threats and OpportunitiesPolitical, Economic and Social Dimension
•International and National Economic Policies•Traditional Government Regulation•Government Restrictions•Recent Political and Social Developments•Consumer Pressure•Economic Developments•Population Change•Wealth Changes•Leisure Trends
© Colin Boyd 2002Strategic Analysis
Environmental Threats and Opportunities
For each item on the checklist; for this industry (as defined by horizontal integration for the specific firm we are examining); what are the threats and opportunities facing all the members of this industry, both now and in the foreseeable future?
Environmental Opportunities and Threats must be the same for all members of any one industry
© Colin Boyd 2002Strategic Analysis
Environmental Threats and OpportunitiesPolitical, Economic and Social Dimension
International and National Economic Policies
Traditional Government Regulation
• taxation• regional incentives• trade agreements
• safety – employee, customer, bicycle helmets• hygiene• competition -- de-regulation
Government Restrictions• trade with Iraq, Cuba• advertising and display of tobacco products• coping with new medical technologies
© Colin Boyd 2002Strategic Analysis
Environmental Threats and OpportunitiesPolitical, Economic and Social Dimension
Recent Political and Social Developments
Consumer Pressure
• Quebec separatism• the “Green” movement• skateboarders and snowboarders• acceptability of cosmetic surgery
• telemarketing conduct• negative option pricing of cable TV• acceptability of tobacco use and advertising
© Colin Boyd 2002Strategic Analysis
Environmental Threats and OpportunitiesPolitical, Economic and Social Dimension
Economic Developments
Population Change
• the “boom and bust” economic cycle• counter-cyclical businesses• seasonality• other economic cycles• drivers of demand – direct or derived?
• large aboriginal youth population• Sask. population will be skewed• baby boomers = 1 million extra Canadians• “a python swallowing a pig”
© Colin Boyd 2002Strategic Analysis
The Thunder of the Baby Boomers
010
2030
4050
6070
80
daiper cleaningbaby food
school buildingrock’n roll
the pill universities
office buildingrings
homesfitness
health foods
travel
golfwalkingbird watching
retirement property
nursing homes
funeral parlours
A baby boomer bornin 1955 is now aged 56
school buses
…like a python swallowing a pig, the bulge moves ever onwards…
Compared to what a normal population profile would be like,
Canada has 1 million extra people in the baby boomer age range
© Colin Boyd 2002Strategic Analysis
Environmental Threats and OpportunitiesPolitical, Economic and Social Dimension
Wealth Changes
Leisure Trends
• huge changes in disposable income• holidays, gadgets, car ownership• many more people own houses = improvements• the stinking rich – 4 Season’s Hotels
• more time off work, less home work = leisure time• hedonist pursuits – skiing, windsurfing, travel• exotic foods, cooking• home cocoon – alarms, home theatre, take-out food
© Colin Boyd 2002Strategic Analysis
Environmental Threats and Opportunities
Market Factors
•Product Life Cycle•Market Demand•Market Requirements•Consumer Preferences•Pricing Structure•Distribution Requirements•New Products•New Competitors
© Colin Boyd 2002Strategic Analysis
INTRODUCTION
ACCELERATINGGROWTH
CONSTANTGROWTH
DECLININGGROWTH
DECLINE
MATURITY
SALESVOLUME
TIME
The Product Life Cycle
© Colin Boyd 2002Strategic Analysis
© Colin Boyd 2002Strategic Analysis
Porter's Generic Strategies
Niche Positioning
Product Differentiation
Cost Leadership
• it is probably easier to establish a niche position when the market is growing
• when the pie is growing, no one is fighting too hard for market share, and hence differentiation is possible in the growth stages of the life cycle = MARKETING SKILLS
• A mature market means a fight for market share via price competition, which in turns puts all the attention on product costs = MANUFACTURING SKILLS
© Colin Boyd 2002Strategic Analysis
•Market Demand
Environmental Threats and Opportunities
Market Factors
•Consumer Preferences
•Market Requirements
• consumable goods – how many per person per year?• durable goods – how long do they last?• derived demand – 1 auto = 5 tires
• utility products – coloured nails? Westjet• need for a broad range of products
• draft beer trends – dark tasty ale v light lager• organic foods
© Colin Boyd 2002Strategic Analysis
•Pricing Structure
Environmental Threats and Opportunities
Market Factors
•Distribution Requirements
• air fares – return versus single• rebate coupons preserving the retail price structure• grey market goods
• growth in 2 income families• less time to shop = catalogues + internet, not retail• IKEA = KD (KnockDown) furniture
© Colin Boyd 2002Strategic Analysis
•New Products
Environmental Threats and Opportunities
Market Factors
•New Competitors
• lonely hearts via digital phones• computers v VCRs• floppy discs v compact discs v mini-discs
• Fujifilm and Kodak versus digital photos• Canon and Kodak into photocopiers• Sony Store and Sony Entertainment
© Colin Boyd 2002Strategic Analysis
Environmental Threats and Opportunities
Product and Technology Dimension
•Raw Materials•Pricing of Raw Materials•New Ingredients or Raw Materials•Cost and Experience Curves•Process Innovation•Technological Breakthrough
© Colin Boyd 2002Strategic Analysis
•Raw Materials
Environmental Threats and Opportunities
•Pricing of Raw Materials
• general availability – new diamond sources• geographical scarcity• cost/unit vol. dictates the location of manufacturing?
• vulnerability to price increases? e.g. OPEC oil prices• Hedging strategies – Westjet v Air Canada
Product and Technology Dimension
•New Ingredients or Raw Materials• plastic kayaks• Substitute away from vulnerable raw materials
© Colin Boyd 2002Strategic Analysis
The Experience Curve
10 10 10 10 10 101 2 3 4 5 6
CostperUnit
made
Total Accumulated Production
Slope of .2 to .3, meaning a 20% to 30%reduction in unit manufacturing
costs for each doublingof production
Kingston 4GB DataTraveler Pocket USB Drive $12.99
© Colin Boyd 2002Strategic Analysis
•Process Innovation
Environmental Threats and Opportunities
•Technological Breakthrough
• multi-screen cinemas on a single-screen footprint• computers replacing secretaries in Commerce• home wine-making
• Apple Computer and Apple Corp. - no music use• insulin from GM bacteria instead of from pigs• laser eye surgery• digital photography and digital music
Product and Technology Dimension
© Colin Boyd 2002Strategic Analysis
1 STABILITY 2 and 3 RETRENCHMENT 4 and 5 GROWTH 6 COMBINATION
CENTRAL STRATEGIC ALTERNATIVES
1 Stay as you are2 Continue in current business, but in a more efficient
and streamlined way3 Get out of all or part of current business by selling,
merging or liquidating4 Expand current business5 Expand primarily in businesses other than main
current business = DIVERSIFICATION6 Choose alternatives 2 or 3, and 4 or 5.
© Colin Boyd 2002Strategic Analysis
Decision Making at the Strategic Level
…involves questions such as….
• Are we in the right kind of business?• Should we stay the same, or change in some way?• Should we become smaller, or bigger?• On which dimension(s) should we change…• ….geographical scope?• ….breadth of products offered?• ….extent of vertical integration?• ….specialization versus diversification?
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