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SWOT ANALYSIS
SWOT analysis has become a popular tool for doing qualitative
analysis of the potentials of business organizations particularly in
the context of assessing their competitiveness.
•A company’s strategy to be well conceived, must be matched
with the resource strengths and weaknesses as well as the best
market opportunities and external threats to its well-being.
•Strengths and weaknesses represents a company’s internal
environment.
•Opportunities and threats represents a company’s external
environment.
STRENGTH
A strength is something a firm does well or a characteristic that enhances
its competitiveness.
It consists of the following:
1. valuable competencies or know-how
2. valuable physical assets
3. valuable human assets
4. valuable organizational assets
5. valuable intangible assets
6. important competitive capabilities
7. an attribute that places a company in a position of market advantage
WEAKNESS
A weakness is something a firm lacks, does poorly or a
condition placing it at a disadvantage. It consists of
deficiencies of the firm which are considered competitive
liabilities.
It relates to the following:
1. deficiencies in know-how or expertise or competencies
2. lack of important physical, organizational, or intangible
assets
3. missing capabilities in key areas
OPPORTUNITIES
Opportunities refer to situations where there are
potentials from developing into products or
services or other business opportunities.
It is considered as options by which the business
organizations can explore or venture into to
enhance its competitive advantage or pursue the
agenda of growth and expansion.
THREATS
INTERNAL
Strength
(Apply & Sustain)
EXTERNAL THREAT
Opportunity STRATEGY
Avert
(Discover)
WEAKNESS
Overcome
BCG(BOSTON CONSULTING GROUP)
MATRIX
WHAT IS BOSTON CONSULTING GROUP MATRIX?
The BCG matrix or also called BCG model relates to
marketing.
The BCG model is a well-known portfolio management
tool used in product life cycle theory.
BCG matrix is often used to prioritize which products
within company product mix get more funding and
attention.
WHAT IS BOSTON CONSULTING GROUP MATRIX?
The BCG matrix model is a portfolio planning model
developed by Bruce Henderson of the Boston Consulting
Group in the early 1970's.
The BCG model is based on classification of products (and
implicitly also company business units) into four categories
based on combinations of market growth and market
share relative to the largest competitor.
WHEN SHOULD IT BE USED?
Each product has its product life cycle, and each stage in product's
life-cycle represents a different profile of risk and return.
In general, a company should maintain a balanced portfolio of
products. Having a balanced product portfolio includes both high-
growth products as well as low-growth products.
A high-growth product is for example a new one that we are trying
to get to some market. It takes some effort and resources to market it,
to build distribution channels, and to build sales infrastructure, but it is
a product that is expected to bring the gold in the future. An
example of this product would be newly innovated of smartphones.
WHEN SHOULD IT BE USED?
A low-growth product is for example an established
product known by the market. Characteristics of this
product do not change much, customers know what they
are getting, and the price does not change much either.
This product has only limited budget for marketing. This is
the milking cow that brings in the constant flow of cash.
An example of this product would be a regular Colgate
toothpaste.
HOW DOES BCG WORKS?
Placing products in the BCG matrix results in 4 categories in
a portfolio of a company:
BCG STARS (high growth, high market share)
- Stars are defined by having high market share in a
growing market.
- Stars are the leaders in the business but still need a lot of
support for promotion a placement.
- If market share is kept, Stars are likely to grow into cash
cows.
HOW DOES BCG WORKS?
BCG QUESTION MARKS (high growth, low market share)
- These products are in growing markets but have low market share.
- Question marks are essentially new products where buyers have yet
to discover them.
- The marketing strategy is to get markets to adopt these products.
- Question marks have high demands and low returns due to low
market share.
- These products need to increase their market share quickly or they
become dogs.
- The best way to handle Question marks is to either invest heavily in
them to gain market share or to sell them.
HOW DOES BCG WORKS?
BCG CASH COWS (low growth, high market share)
- Cash cows are in a position of high market share in a
mature market.
- If competitive advantage has been achieved, cash cows
have high profit margins and generate a lot of cash flow.
- Because of the low growth, promotion and placement
investments are low.
- Investments into supporting infrastructure can improve
efficiency and increase cash flow more.
- Cash cows are the products that businesses strive for.
HOW DOES BCG WORKS?
BCG DOGS (low growth, low market share)
- Dogs are in low growth markets and have low market
share.
- Dogs should be avoided and minimized.
- Expensive turn-around plans usually do not help.
Boston Consulting Group (BCG) Growth- Share Matrix
High Relative Market Share (Cash Generation) Low
Stars- produce large amount of cash Problem Child – are growing rapidly and
because of high market share but consume large amounts of cash. Also
Market Growth Rate (Cash Usage)
consume large amount of cash because of known as “question marks,” they have the
High
high growth. If starts maintain or extend potential to increase market share and
market share, they become cash cows. become stars. But if they do not increase
market share, they may become dogs.
Cash cows- are leaders in mature Dogs- have low market share and low
markets and produce more ash than they growth rates. They do not consume much
consume. Companies “milk” business unit cash but also do not produce any.
so they can invest cash in other products Business units are likely to be sold.
Low
• Two Internal dimensions (financial position [FP] and competitive position [CP])
• Two External dimensions (stability position [SP] and industry position [IP])
Internal Dimension FP
CP IP
SP
OUTCOME OF SPACE MATRIX ANALYSIS
The SPACE matrix is broken down to four quadrants where
each quadrant suggests a different type or a nature of a
strategy:
Aggressive
Conservative
Defensive
Competitive
SPACE MATRIX EXAMPLE
HOW TO GET DESIRED OUTCOMES IN SPACE MATRIX?
The SPACE Matrix analysis functions upon two internal and two
external strategic dimensions in order to determine the organization's
strategic posture in the industry. The SPACE matrix is based on four
areas of analysis.
Internal strategic dimensions:
Financial strength (FS)
Competitive advantage (CA)
External strategic dimensions:
Environmental stability (ES)
Industry strength (IS)
INTERNAL STRATEGIC DIMENSION
There are many SPACE matrix factors under the internal
strategic dimension. These factors analyze a business
internal strategic position.
The financial strength factors often come from company
accounting. These SPACE matrix factors can include for
example return on investment, leverage, turnover,
liquidity, working capital, cash flow, and others.
INTERNAL STRATEGIC DIMENSION
Conservative Aggressive
INDUSTRY STRENGTH
COMPETITVE STRATEGY
Defensive Competitive
ENIVRONMENT STABILITY
AGGRESSIVE QUADRANT
Excellent position to use internal strength:
CONSERVATIVE QUADRANT
Firm should stay close to its core competences and not take risks
DEFENSIVE QUADRANT
Focus on rectifying internal weakness and external threats
COMPETITIVE QUADRANT
Use Competitive strategies
Current Products New Products
Product Development – creates new or
Current Market Penetration- focuses on increasing improved products for current markets by
sales of current products in current markets adding new sizes, models with new
Markets by more intensive marketing effort. features, alternative quality version, or
creating new alternative to satisfy the
same basic needs.
Diversification- purchasing new
New Market Development- seeks to open up new business or product line, to obtain
markets for current products. ownership or control over different level of
Markets distribution.
VERTICAL INTEGRATION
To integrate means to become one, or singular.
Vertical integration
- is the process in which several steps in the production
and/or distribution of a product or service are controlled by a
single company or entity, in order to increase that company’s or
entity’s power in the marketplace.
Types of Vertical Integrations:
There are basically 3 classifications of Vertical Integration namely:
“Does this factor make a difference in our decision about which strategy
to pursue?”
HOW TO CONSTRUCT QSPM?
If the answer to the question is yes, then the strategies should be
compared relative to that key factor.
The range for Attractiveness Scores is 1 = not attractive, 2 =
somewhat attractive, 3 = reasonably attractive, and 4 = highly
attractive.
If the answer to the above question is no, then the respective key
factor has no effect on our decision. If the key factor does not
affect the choice being made at all, then the Attractiveness Score
would be 0.
HOW TO CONSTRUCT QSPM?
Step 5
Calculate the Total Attractiveness Scores (TAS) in the QSPM. Total
Attractiveness Scores are defined as the product of multiplying the
weights (step 3) by the Attractiveness Scores (step 4) in each row.
The Total Attractiveness Scores indicate the relative attractiveness of
each key factor and related individual strategy. The higher the Total
Attractiveness Score, the more attractive the strategic alternative or
critical factor.
HOW TO CONSTRUCT QSPM?
Step 6
Calculate the Sum Total Attractiveness Score by adding all Total Attractiveness
Scores in each strategy column of the QSPM.
The QSPM Sum Total Attractiveness Scores reveal which strategy is most
attractive. Higher scores point at a more attractive strategy, considering all the
relevant external and internal critical factors that could affect the strategic
decision.