Strategy Formulation

SWOT analysis

Learning Objective
Explain the components of a SWOT Analysis.

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SWOT Analysis
Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)
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SWOT Analysis
Internal

External

S W O T

Things the company does well.

Things the company does not do well.

Conditions in the external environment that favor strengths.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness. South-Western College Publishing
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SWOT Analysis
Strengths and Weaknesses INTERNAL

Production Costs Marketing Skills Employee Capabilities Financial Resources Available Technology Company/Brand Image
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Wal- Mart SWOT Analysis

Wal-Mart is powerful Strengths retail brand. Wal-Mart has grown substantially over recent years and has experienced global expansion. Wal-Mart has a core competence involving its use of IT to support its international logistics system. A focused strategy is in place for HRM and development.

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Wal- Mart SWOT Analysis

Weaknesses
Wal- Mart is the Worlds largest grocery retailer and control of its empire, despite its IT advantages, could leave it week in some areas due to the huge span of control Since Wal-Mart sell products across many sectors, it may not have the flexibility of some of its more focused competitors. The company is global, but has a presence in relatively few countries Worldwide.

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SWOT Analysis
Opportunities and Threats EXTERNAL
Social Demographic Economic Technological Political/Legal Competitive

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Wal- Mart SWOT Analysis

Opportunities
To take over, merge with, or form strategic alliances with other global retailers. There are tremendous opportunities for future business expansion. New locations and store types offer Wal-Mart opportunities. Opportunities exist for Wal-Mart to continue with its current strategy of large, super centres.

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Wal- Mart SWOT Analysis

Threats
Being number one means that Wal-Mart is the target of competition, locally and globally. Being a global retailer means that Wal-Mart is exposed to political problems in the countries where it has operations. Intense price competition.

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Environmental Scanning & Monitoring

Environmental scanning is a concept from business
management by which businesses gather information from the environment, to better achieve a sustainable competitive advantage. To sustain competitive advantage the company must also respond to the information gathered from environmental scanning by altering its strategies and plans when the need arises.

Environmental Scanning & MonitoringTechniques SWOT

PEST QUEST

Techniques

Industry Analysis
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Competitor Analysis
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SWOT
(Strength-Weakness-Opportunity-Threat)

Identification of threats and Opportunities in the environment (External) and strengths and Weaknesses of the firm (Internal) is the cornerstone of business policy formulation; it is these factors which determine the course of action to ensure the survival and growth of the firm.
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SWOT Analysis

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 The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The Research Team were Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie. It all began with the corporate planning trend, which seemed to appear first at Du Pont in 1949. By 1960 every Fortune 500 company had a 'corporate planning manager' (or equivalent) and 'associations of long range corporate planners' had sprung up in both the USA and the UK.
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Strategic and Creative Use of S.W.O.T Analysis : Orienting to An Objective

If SWOT analysis does not start with defining a desired end state or objective, it runs the risk of being useless. A SWOT analysis may be incorporated into the strategic planning model. An example of a strategic planning technique that incorporates an objective-driven SWOT analysis is SCAN analysis.

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SWOT: Studying Internal & External Environment

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories: Internal factors The strengths and weaknesses internal to the organization. External factors The opportunities and threats presented by the external environment.
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 If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of that objective. In this case, SWOTs are:
Strengths: attributes of the organization that are helpful to achieving the objective. Weaknesses: attributes of the organization that are harmful to achieving the objective. Opportunities: external conditions that are helpful to achieving the objective. Threats: external conditions that are harmful to achieving the objective.
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Examples of SWOTs
Strengths and Weaknesses
Resources: financial, intellectual, location Cost advantages from proprietary know-how Creativity / ability to develop new products Valuable intangible assets: intellectual capital Competitive capabilities Big campus selection

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 Opportunities and Threats

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Takeovers Market Trends Economic condition Mergers Joint ventures Strategic alliances Expectations of stakeholders Technology Public expectations Competitors and competitive actions Poor Public Relations Development Criticism (Editorial) Global Markets Environmental conditions
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Uses of SWOT Analysis

Corporate planning

Set objectives defining what the organisation is intending to do Environmental scanning

Internal appraisals of the organisations SWOT, this needs to include an assessment of the present situation as well as a portfolio of products/services and an analysis of the product/service life cycle

Analysis of existing strategies, this should determine relevance from the results of an internal/external appraisal. This may include gap analysis (compare its actual performance with its potential performance which will look at environmental factors) Strategic Issues defined key factors in the development of a corporate plan which needs to be addressed by the organisation

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 Develop new/revised strategies revised analysis of strategic issues may mean the objectives need to change Establish critical success factors the achievement of objectives and strategy implementation Preparation of operational, resource, projects plans for strategy implementation Monitoring results mapping against plans, taking corrective action which may mean amending objectives/strategies.

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Also;
Use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports.

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Handling SWOTs
Strengths (maintain, build and leverage) Opportunities (prioritise and optimise) Weaknesses (remedy or exit)

Threats (counter)
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SWOT Analysis
Strengths, Weaknesses, Opportunities, and Threats

SWOT Planning and Organizing Tool

organizational strategic planning public policy development personal career planning

Helps focus on key issues

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 Strengths and weaknesses are generally internal factors. Opportunities and Threats are generally external issues.

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Strengths Consider from both the view of the firm (product) as well as from customers and competitors Realistic and not modest Ones strength is anothers weakness Questions:
What are the firms advantages over others? What does the firm do well? What makes you stand out from your competitors?

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Weaknesses Consider from internal and external viewpoint Be truthful so that weaknesses may be overcome as quickly as possible Ones strength is anothers weakness Questions.
What is done poorly? What can be improved? What should be avoided?

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Opportunities and Threats Primarily external in nature Represent characteristics of:

the research environment growth in potential markets changes in the competitive, economic, political/legal, technological, or socio-cultural environments

A threat to some is an opportunity to another.

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 Questions on opportunities:
Is there a product/service area that others have not yet covered? Are there emerging trends that fit with your company's strengths?

Questions on threats:
Are your competitors becoming stronger? Are there emerging trends that amplify one of your weaknesses?

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For a company a strength could be: marketing expertise location of your business innovative product company image any other aspect that adds value to your product or service

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For a company a weakness could be: lack of marketing expertise undifferentiated products and service (i.e. in relation to your competitors) location of your business damaged reputation

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For a company an opportunity could be: a developing market such as the Internet. mergers, joint ventures or strategic alliances a new international market a market vacated by an ineffective competitor any external factor that may create demand or the possibility for increased profitability

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For a company a threat could be: a new competitor in your market price wars with competitors a competitor has a new, innovative product or service competitors have superior access to channels of distribution

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Word of Caution:
SWOT analysis can be very subjective. Do not rely on it too much. Two people rarely come-up with the same final version of SWOT.

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SWOT for Southwest Airlines

Organizational (Internal) Strengths Highly productive pilots and ground crews Low Costs Weaknesses Inability to provide nonstop long distance travel Opportunities Ability to add scheduled flights to new cities Low prices enable market share growth Threats Difficulty securing new gates at existing airports Low cost rival Jet Blue - competition
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Suggestions for conducting SWOT Analysis: Be realistic; no need to inflate strengths or be in denial about shortcomings. Distinguish between where your technology is today, and where it could be in the future. Be specific. Avoid grey areas. Always analyze in the context of your competitive environment. Keep your SWOT short and simple.

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Using the SWOT Analysis Weaknesses should be looked at in order to convert them into strengths. Try to match your strengths with external opportunities. Threats should be converted into opportunities. Strengths and opportunities should be matched.

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Expanding Your SWOT Analysis Delve deeper into the details of the technology. Include more detailed competitor information in the analysis. Take a closer look at the business environment. Expand the reach of a SWOT analysis through surveys.

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THANK YOU