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It examines:
- The companys internal strengths and weaknesses with
respect to the environment,
- The competition and looks at external opportunities and
threats.
Opportunities may help to define a target market or identify
new product opportunities, while threats are areas of exposure .
SWOT Analysis
trengths
ASK yourself:
What advantages does your company have?
What do you do better than anyone else?
What unique or lowest-cost resources do you
have access to?
What do people in your market see as your
strengths?
What factors mean that you "get the sale"?
eaknesses
ASK yourself:
What could you improve?
What should you avoid?
What are people in your market likely to see as
weaknesses?
What factors lose you sales?
pportunities
ASK yourself:
hreats
ASK yourself:
What obstacles do you face?
What is your competitor doing that you should be
worried about?
Are the required specifications for your job, products or
services changing?
Is changing technology threatening your position?
Do you have bad debt or cash-flow problems?
Could any of your weaknesses seriously threaten your
business?
Example
The Amazon story
Strength
Weakness
No experience in:
-Selling books
-Processing credit card transactions
-Boxing books for shipment
Opportunity
To sell online.
Threat
Example: Nike
Strengths
- Nike is a very competitive
organization. Phil Knight (Founder and
CEO) is often quoted as saying that
'Business is war without bullets. The
organization have a diversified range
of sports products.
Weaknesses
Opportunities
Product development offers Nike many
opportunities.
Threats
Nike is exposed to the international
nature of trade.
Case Study
Highly Brill Leisure Center has hired you to help them with their marketing
decision making. Perform a SWOT analysis on Highly Brill Leisure Center,
based upon the following issues:
1.The Center is located within a two-minute walk of the main bus station, and is a fifteen-minute
ride away from the local railway station.
2.There is a competition standard swimming pool; although it has no wave machines or whirlpool
equipment as do competing local facilities.
3.It is located next to one of the largest shopping centers in Britain.
4.It is one of the oldest centers in the area and needs some cosmetic attention.
5.Due to an increase in disposable income over the last six years, local residents have more money
to spend on leisure activities.
6.There has been a substantial decrease in the birth rate over the last ten years.
7.In general people are living longer and there are more local residents aged over fifty-five now than
ever before.
8.After a heated argument with the manager of a competing leisure center, the leader of a respected
local scuba club is looking for a new venue.
9.The local authority is considering privatizing all local leisure centers by the year 2000.
10.Press releases have just been issued to confirm that Highly Brill Leisure Center is the first center
in the area to be awarded quality assurance standard BS EN ISO 9002.
11.A private joke between staff states that if you want a day-off from work that you should order a
curry from the Center's canteen, which has never made a profit.
12.The Center has been offered the latest sporting craze.
13.Highly Brill Leisure Center has received a grant to fit special ramps and changing rooms to
accommodate the local disabled.
14.It is widely acknowledged that Highly Brill has the best-trained and most respected staff of all of
the centres in the locality
Answers
Strengths
1, 13, 14 (maybe 2,
10)
Weaknesses
4, 11 (maybe 2)
Opportunities
3, 5, 8, 9, 12 (maybe
10)
Threats
6, 7
As you can see my answer does not completely agree with yours. This does
not mean that you are wrong. It simply means that the results of your analysis
are represented in a different way. Points 2 and 10 are difficult to place. Point
2 depends on whether or not wave machines or a whirlpool have a distinct
competitive advantage over a competition standard pool. Point 10 is an
internal strength and an external opportunity.
TOWS Matrix
Energy shortages,
competition and other
areas like conditions
mentioned above
Strengths in internal
departments like
management, R&D,
Finance, marketing,
OD etc
Eg weaknesses in
internal
departments
Developmental
strategy: to
overcome internal
weaknesses to take
adv of opportunities
Use of strengths to
cope up with threats
or to avoid threats
Retrenchment,
liquidation, joint
ventures etc to
minimize
weaknesses &
threats
TOWS Matrix
Structure
Corporate
SBU
Strategy
Corporate Level
Corporate Office
SBU - A
SBU - B
SBU - C
Functional
Finance
Personnel
Marketing
Operations
Information
Business level
Functional Level
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Corporate Strategy
Corporate Strategy: The companywide game plan for managing a set of businesses.
The levels involved are CEO and other Senior Executives.
Business & Corporate Strategy
Business strategy, which refers to the aggregated operational strategies of single
business firm or that of an SBU in a diversified corporation, refers to the way in which a
firm competes in its chosen areas.
Corporate strategy, then, refers to the overarching strategy of the diversified firm.
Such corporate strategy answers the questions of "in which businesses should we
compete?" and "how does being in one business add to the competitive advantage of
another portfolio firm, as well as the competitive advantage of the corporation as a
whole
Business Strategy for Strategic Business Units: One for each business, the
company has diversified into. Actions to build competitive capabilities and strengthen
market position. Executed by General Managers, Plant Heads, Division heads of each
business with inputs from Corporate and Functional levels.
Many companies feel that a functional organizational structure is not an efficient way to
organize activities so they have re engineered according to processes or strategic
business units (called SBUs). A Strategic Business Unit is a semi-autonomous unit
within an organization. It is usually responsible for its own budgeting, new product
decisions, hiring decisions, and price setting. An SBU is treated as an internal profit
centre by corporate headquarters. Each SBU is responsible for developing its business
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strategies, strategies that must be in tune with broader corporate strategies
Functional Strategies
Functional strategies include Marketing Strategies, new product development
strategies, human resource strategies, financial strategies, legal strategies, supplychain strategies, and information technology management strategies. The emphasis
is on short and medium term plans and is limited to the domain of each
departments functional responsibility and is executed by Functional heads. Each
functional department attempts to do its part in meeting overall corporate
objectives, and hence to some extent their strategies are derived from broader
Corporate & Business strategies.
Operational Strategy
The lowest level of strategy is operational strategy. At this level, detailing is
done to add completeness to Business & Functional Strategies. It is very narrow in
focus and deals with day-to-day operational activities such as scheduling criteria. It
must operate within a budget but is not at liberty to adjust or create that budget.
Operational level strategy was encouraged by Peter Drucker in his theory of
Management By Objectives (MBO). Operational level strategies are informed to
business level strategies which, in turn, are informed to corporate level strategies.
These strategies are executed by Brand Managers, Operating Managers, Plant
managers. Important activities like Advertising, Web site operations, distributions
are involved at this level.
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1. Stability Strategies:
1.a) No-Change Policy: It is a conscious decision of not
doing anything new and continue with present business
definition. When environment is stable and predictable with no
new significant threats & opportunities in the environment, it
may not be worthwhile to alter strategy in present situation.
Also no new strengths have been generated and no new
weaknesses have been developed.
No new threat of substitutes and new entrants. However, this
should be a conscious decision and should not arise out of inactivity and owing to inertia. It is dangerous to be complacent.
1.b)Profit Strategy: No change policy cannot sustain for long and
situations keep changing. However if company believes that
the changes like economic recession, govt. rules, industry
downturn, competitive pressures are temporary and will turn
favourable after some time,
Contd..
then firm opts for maintain profit policy by artificial measures
like cut costs, hold investments / replacements, raise prices,
increase productivity and some such measures to tide over the
difficult days. However, if the problems are not temporary, the
company position deteriorates.
Pause / Proceed with caution Strategy is a temporary
strategy like profit strategy and is used for consolidation. It is
used to test the ground before going ahead with full-fledged
Grand Strategy. Sometimes after a major expansion firms need
to stabilise, allow strategic change to percolate through
organisation structure and allowing existing systems to adopt
the strategy and the move for further expansions. It is also
used to bide the time for more opportune time and move on
with rapid strides again.
2. Expansion Strategies
If organisation is not moving ahead, it is actually going
backwards. Companies aim for substantial growth to take
advantage of Growing economy, liberalisation, rapidly
increasing markets, globalisation, Emerging technologies
etc.
Expansion Strategies are of 5 types.
Contd..
2.d) Expansion through Co-operation:
1. Mergers Strategy
2. Takeovers or Acquisitions Strategy.
3. Joint Ventures Strategy.
4. Strategic Alliances Strategy
3. Retrenchment Strategies.
Combination Strategies
Definition of Strategy/Strategic
planning
1.
2.
3.
Data
External Situation
Internal Situation
Capabilities and
competencies
4.
Analysis
5. Strategic assessment
Strategic Issues
6.
7.
Direction
Strategies
Commitment
Mission Statement
Goals
Objectives
Implementation
8. Action Plans
9. Budgets
10. Schedules
Ideas
Assumptions
Monitor Developments
and
Progress
Execution
Stages of corporate
development
Stage I: Simple Structure (Entrepreneur)
Flexible and dynamic
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Stage II: Functional Structure
Functional specialization
Delegation of decision making
Concentration/specialization in industry
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Contd
Stage III: Divisional Structure (SBU)
Diverse product lines
Decentralized decision making
Stage IV: Beyond SBUs: Matrix, Network, and Cellular
Increasing environmental uncertainty & Tech
advances
More emphasis on Teams
4. Structural Implementation
Entrepreneurial:
Owner
Owner- -Manager
Manager
Employees
Functional
Public
Relations
CEO
Production
Finance
Divisional / Product
Corporate
Division
Finance
Product DIV. A
Marktg.
Personnel
Legal
CEO
Legal / PR
Product- Div. B
Contd..
SBU Based
CEO
Head SBU 1
Head SBU 2
Div. A,B,C
Div. D,E,F
Head SBU 3
Div. G,H,K
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Matrix
Corporate
CEO
Finance
Operations
Personnel
Marketing
Head A
Location /
Product /
Plant
Head B
Location /
Product /
Plant
Head C
Location /
Product /
Plant
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Network
Region
A
Project
M
Function
X
Corporate
Headquarter
Region
B
Project
N
Function
Y
45
Advantages of Alliance:
Alliance is basically between equals, but alliances are also
done with suppliers, distributors as partners by many big
business houses. These alliances are mostly done with Value
chain contributors.
It is now common for companies to pursue their strategies in
collaboration with suppliers, distributors, makers of
complimentary product and some select companies. e.g. IBM
& DELL.
Advantages of Alliance:
Get into critical country markets quickly.
Gain, in-side information & knowledge about unknown /
unfamiliar markets & cultures.
Access valuable skills & competencies.
Get a handle to participate in target technology or industry.
Master new technology; build new expertise & competencies
faster.
Open up broader opportunities.
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Stability of Alliances:
2.
3.
4.
5.
6.
Examples of Portfolios:
Gillette: batteries, Shaving products
ITC : Tobacco, Soaps, Cigarettes
54
1.
2.
3.
56
1.
2.
1.
2.
3.
4.
5.
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18
STARS
QUESTION
MARKS
CASH COWS
DOGS
16
Business 14
Growth 12
rate %
10
8
6
4
2
10
X
4X
1.5
X
1X
0.5
X
0.1
59
X
Hold Strategy - Cash Cows are the businesses with low growth
rate and high market share. High market share leads to high
generation of cash and profits. Cash Cow is a business that
generates cash flows over & above its internal needs. Cows can be
milked to provide a corporate parent with funds for investing in star
/ cash dog businesses, financing new acquisitions or paying
dividends.
Cash cows provide the financial base for the company.
A strong cash flow resulting out of relatively high market share /
low market growth rate Cash Cow opportunities should be able to
maintain market share at or around existing levels.
In this state of business, Corporate can adopt mainly Stability
Strategies. Expansions & investments can be thought only if the
long term prospects are exceptionally bright.
These are generally mature businesses reaping benefits of
experience and expertise. Funds generated are to be used for
Question Mark or Star businesses as Cash Cow's are destined
to slow down. A phased retirement need to be planned.
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Cash
Cash
Source Use
COW
More
Less
STAR
More
More
DOG
Less
Less
QUESTION Less
More
64
I
n
d
u
s
t
r
y
A
t
t
r
a
c
t
i
v
e
n
e
s
s
Strong
Medium
Weak
High
Invest
Selective Up or Out
Growth
Medium
Low
Up or Out Harvest
Divest
67
Winners
A
Winners
B
High
Question
Marks
D
Winners
E
Average
Businesses
F
Medium
Losers
Losers
G
Low
Profit
Producers
Strong
Losers
Average
Weak
Contd.
The pie slices within the circles represent each SBUs market
share.
1.
2.
3.
4.
5.
6.
7.
8.
70
1.
2.
3.
4.
5.
6.
7.
Contd..
In this model market growth is replaced by market attractiveness.
The strategic planning approach in this model is based on analogy of traffic
lights at street crossing:
Green(G0)
Yellow( Caution)
Red(Stop)
GREEN
INVEST/EXPAND
YELLOW
RED
SELECT/EARN
HARVEST/DIVEST
Contd
Contd.
The following steps are taken to plot SBUs on the GE portfolio
matrix.
Step 1 Specify the typical factors that determine the industry
attractiveness. For each product line or SBU, overall industry
attractiveness is assessed and rated in a 5-point scale ranging
from 5 to 1.(Very attractive to very unattractive).
Step 2 The typical factors that characterize business strength of
each product line or SBU are assessed and measured on a 5point scale ranging from 1 to 5.(Very week to very strong).
Step 3 Determine the weight of each factor. The company must
assign relative importance weights to factors.
Step 4 Multiply the weights with scores of each factor of industry
attractiveness and ascertain the overall weighted score of
industry attractiveness.
Contd..
Step 5 Multiply the weights with scores of each factor of business
strength and ascertain the overall weighted score of business
strength.
Step 6 plot each product line or SBU current position on matrix.
Step 7 View resulting graph and interpret it.
Step 8 Perform a review analysis using adjusted weights and
scores.
Limitations of GE matrix
It is complicated.
Aggregation of the indicators is difficult.
Core competencies are not represented.
It does not depict the position of new products or business
units in developing industries.
It does not provide specific strategy to use or how to
implement that strategy.
The process of selecting factors, assigning weights, rating and
computing values, in reality is based on subjective
judgements.
Strategic Choice
What Options
are available?
Options about
products, markets
and services
Choice Criteria
-Assessment
-Intent
Who should be
involved in
the Choice?
Options to improve
resources &
capabilities
Options of
method on
how to progress
Chosen Strategy
Theoretical
Frameworks for
making
strategic choice
Contd..
Contd..
Contd..
Contd..
B
M
T
CO ED AC
P
M
I
IN
E
M
N
R
E
V NT
O
G
BI
M
CO ED AC
N P
IM T
CH
CE
N
Contd.
Demand Conditions
Contd..
Contd.
Contd