SWOT

SWOT and Transformation: Re-Thinking Operations

Daniel F. DuranWhittier College

BSAD 333: Managing Multinationals

Introduction

All companies face competition– For resources, customers, sales revenues, and profitsAll

companies face uncertain industry environments– Managers must position the organizations strategically in

order to compete successfully• This is what we call business definition• Requires that managers understand the dynamics of their

firms’ markets before formulating strategies

Introduction (cont.)

Rapidly growing markets (emerging industries) tend to be less competitive & often attract new entrants– Usually provide sufficient room in competitive space for

making some mistakesMature, concentrated markets provide firms with

very little breathing room– Mistakes by one firm can significantly impact entire industry

• One firm’s price reductions can set off industry-wide price war

SWOT Analysis

Acronym derived from Strengths, Weaknesses, Opportunities, and Threats

– Used for analyzing industry environments and firms’ internal strengths and weaknesses

Performed in a 2-step process:1. Managers thoroughly evaluate their firm’s internal strengths

and weaknesses and its environmental (external) opportunities and threats

2. Managers use the evaluation developed in the first step to place the firm in one of the quadrants of the SWOT matrix

Stimulates communication outside normal channelsResult is varied information from diverse sourcesProvides an ‘outsiders’ perspective in the SWOT– Sales -Inventory control– Production -Quality control– Advertising -Research & development– Finance– Customer service

Benefits of the SWOT Analysis…

Simple process which lowers costsNo extensive training requiredFlexible-enhances strategic planningIntegration-synthesizes qualitative & quantitative

informationCollaboration-encourages interdepartmental

coordination

SWOT Analysis (cont.)

Advantages of SWOT Analysis:– Easy to use– Can be helpful framework for getting managers to

think constructively about their firms’ external environments and internal strengths and weaknesses

SWOT Analysis

Strengths (based onanalysis of): Strategies R&C’s Performance

Opportunities (based onanalysis of): General Environment Industry Environment Main Competitors

Weaknesses (based onanalysis of): Strategies R&C’s Performance

Threats (based onanalysis of): General Environment Industry Environment Main Competitors

Objective of SWOT

SWOT Analysis

OvercomeWeakness Grow

DiversifyRestructure

Numerous EnvironmentalOpportunities

Major EnvironmentalThreats

SubstantialInternal

Strengths

CriticalInternal

Weaknesses

SWOT Analysis (cont.)

Drawbacks of SWOT Analysis:– Subjective– Biased by managers’ perceptions of their firms’

strengths and weaknesses• For example, managers of strong firms will likely view

environmental phenomena as opportunities, while his counterpart in a weak company will likely view them as threats

– The use of SWOT Analysis is likely to yield few clear-cut recommendations

SWOT-Driven Strategic Planning

Utilizing a SWOT for strategic planning requires:– Looking beyond the firm’s current products– Matching strengths with opportunities (translate

strengths into capabilities)– Investing in key areas: customer support, R&D,

promotion, employee training)– Converting weaknesses into strengths– Understanding that weaknesses that cannot be

converted into strengths become limitations

Directives for a Productive SWOT Analysis…

Stay focusedSearch extensively for competitorsCollaborate with other functional areasExamine issues from the customers’ perspectivesSeparate internal issues from external issues

Keys to Staying Focused

Focus on specific products & marketsAdapt the marketing mix to address environmental issuesExamine overall strategic business unitsMake certain you have 1 SWOT analysis for each product/market combination

Search Extensively for Competitors

Do not overlook any competitor (current or future)Consider:– Product competitors– Generic competitors– Total budget competitors

Collaborate with Other Functional Areas

Stimulates communication outside normal channelsResult is varied information from diverse sourcesProvides an ‘outsiders’ perspective in the SWOT– Sales -Inventory control– Production -Quality control– Advertising -Research & development– Finance– Customer service

Examine Issues from the Customers’ Perspectives in the SWOT

What do our customers believe about us as a company?What are their perceptions of:– Product quality– Customer service– Price/value– Convenience– Promotional

Customer Segment Evaluations Should be Benchmarked

Consider internal customers (employees)Consider all relevant stakeholders:– Investors & stockholders– Suppliers– Customers– Governmental– Societal

Concerns Beyond External Issues

Internal issues (strengths & weaknesses)Biggest problem with SWOTS– failure to understand the difference between internal

& external issues

The Elements of the SWOT Analysis

Strengths & Weaknesses:– A strength is meaningful only when it addresses

customer needs– A customer-focused SWOT can uncover potential

weaknesses– Weaknesses associated with customer needs should

be minimized– Determine where resources are available & lacking– Match strengths with market opportunities– Strengthen weaknesses or minimize their negatives

The Elements of the SWOT Analysis

Opportunities & Threats:– Changes in the external environment can impede the

ability to deliver value to customers– Changes can occur in:

• market growth• competition• overall economy• political/legal environment• technology• sociocultural issues

One Way to Conduct a SWOT Analysis-SWOT Matrix

4 cells categorizing the SWOT:strengths, weaknesses, opportunities & threatsAssess magnitude and importance of each– Based on customer perceptions, not managers

Developing Sustainable Competitive Advantages

Capabilities allow the firm to better serve customer needs (competitive advantage)Sources of competitive advantage:– customer loyalty -brand equity -distribution– patents & trademarks -salesforce -culture

Capabilities that do not solve customer needs are of little value– Must have a core competency

How to Achieve a Competitive Advantage

Operational excellence-efficiencyProduct leadership-research & development, technology, productsCustomer intimacy-relationship marketing

Strategies Converting Strengths or Threats into Opportunities

Find new markets for a firm’s products (conversion strategy)– May require significant financial resources– Must identify major liabilities that continue to occur

Minimize or Avoid Weaknesses or Threats Which Cannot Be Converted

Become a niche marketerReposition the productRealize your limitations– Diversify to minimize risks of operating in a

single market

How could each of the following be a strength or weakness?

Highest quality product in the industrySignificant excess production capacityExcellent relationship with a single supplierSizable amount of cash on handOffering a product that is designed to suit everyone’s needs