SWOT Analysis

1 A 3 ring model to explain the role of the environment 2 Dynamics of the external environment 3 Doing a SWOT analysis.

1. The 3 ring model

External Environment The Goal Structure The Internal Environment

A 3 ring model of the environment

Goal Structure External Environment

Internal Environment

External Environment

Customers, Competition, Competitive Environment Trends in the environment external to the industry Power relationships Tells us what we should do

Goal Structure Visions Goals Objectives Strategies

Indicates what we would like to do

Infrastructure Quality People Leadership

The Internal Environment

Organization Design Decision Making Processes

Tells us what we can do

Reinforcement Systems

Policies and Practices

Then we reconcile between The external environment SHOULD The desired goals WANT The internal environment CAN

GOALS OBJECTIVES STRATEGIES

WHICH IS EASIER TO CHANGE?

EXTERNAL ENVIRONMENT GOAL STRUCTURE INTERNAL ENVIRONMENT

2. Dynamics of the External Environment

Elements of the external environment Their dynamics Making sense of the environment

General environment Economic Social Cultural Task environment Suppliers Competitors Employees Customers the org & its culture Creditors Shareholders Managers Political/legal Technological

Ecological

Elements of the External Environment

Customers, Competition, Competitive Environment Trends in the environment external to the industry The power of elements

The main focus should be on customers ...and competitors Trends are important and general conditions
Tells us what we should do

An additional element by Porter

3. The SWOT Analysis

A means to formally assess the external environment and the internal environment. An excellent tool to assess where the product line is and where it is going.

External Environment

Customers, Competition, Competitive Environment Trends in the environment external to the industry Power relationships

The O and T part of the SWOT analysis is a concise assessment of external environment opportunities and threats

Tells us what we should do

Customers, Competition, Competitive Environment Trends Power relationships

What should we look at in each of these areas?

5 key areas The following is an outline for an external analysis From this analysis we come up with a concise statement of external environment opportunities and threats.. 1. Customers...
-major segments and their relative sizes -major segments want & needs -trends in what customers demand or shifts in preferences (perhaps based on demographics or psychographic changes).

2.The competition Why are competitors so important? Because our success will be predicated in knowing what we are good at, what they are, and our ability to do better than our competitors

3. Trends in the environment external to the industry - what are the major trends in the external environment that will influence the success of the product line and how? -here consider economic, political/legal,
sociocultural, technological, and global.

4. Structure of the industry - What is the nature of the competitive market that this industry faces? - e.g. the rate of change, -market share of major players and is this industry dominated by a few companies or it is a rather open market? - What are the historical and expected profit margins and growth rates of the industry? - What trends within the industry are occurring which will affect the demand for this product or product line? -What are the factors important for success in this industry -How cyclical is demand for this product?

5. Power relationships - trends and levels of power of... -customers -suppliers -between competitors -threat of new entrants -substitute products
apply Porters model here

From the analysis of the 5 key areas. - a concise statement of Opportunities and Threats evolve.

The S & W part of the equation

focuses on internal analysis (within a specific organization) It is assessing the what can we do question. Looks at operational and strategic S & W. This is called the competitive comparison

TE

This analysis is then translated into a statement of strengths and weaknesses for this product/product line for the external environment specified.

We now combine the SW portion with the OT portion in the strategic match.

Strategic Match
Matches
S with O This is called using leverage S with T This is called maintenance

Miss-match
W with O This is called constraint W with T This is called vulnerability The goal in the strategic match is to articulate how to improve the organizations fit with its environment, better improve its competitive ability.

We end the S/W portion with a statement about company under analysis. That statement should reflect what was learned in the O/T, S/W, and strategic match portions of the SWOT analysis.

The SWOT analysis gives us an an analysis of the external and internal environments. From this analysis a better choice can be made as to the appropriate goals, objectives, and strategies.