Patrick J. Kidd - SWOT Analysis -

SWOT Analysis
TOWS

Intro to SWOT
Strategies
Corporate-level strategies
- Portfolio analysis - BCG Matrix
- Market-Product Analysis Matrix
Business-level strategies
Functional-level strategies
Levels of Plans
SWOT Models for SWOT analysis
References

SWOT Analysis (SWOT = TOWS) = situation analysis
- Purpose of SWOT = Why we do SWOT = to develop appropriate strategies
- SWOT Analysis = Assessing organizational strengths and weaknesses (internal) and environmental opportunities and threats (external) in order to develop appropriate strategies.
  SWOT is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project
- situation analysis = taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization's plans and the external factors and trends affecting it.
  - industry trends, competitors, the firm itself, present & prospective customers
  - sharing this information across departments
  - using this information to create "customer value"
  - purpose is to develop appropriate strategies and a plan of action
- Analysis
  1. Analysis at the level of:
    1. the entire organization
    2. the business unit
    3. the product line
    4. the specific product
  2. Detailed analysis
    1. Internal (marketing mix) factors = Controllable factors
      - Examples: site, image, product/service mix, people and expertise, financial position, contracts, intellectual property, methods, systems, etc.
      - the firm itself = internal company information
        
        4Ps = Controllable factors
      - Strengths
        
        S = attempt to capitalize on organizational strengths (brand name recognition, surplus cash, dedicated workforce, managerial talent, technical expertise, weak competition, etc.)
      - Weaknesses
        
        W = attempt to overcome organizational weaknesses (lack of experience or knowledge about ecommerce, etc.)
    2. External company information = environmental factors = Uncontrollable factors
      - Examples: legislation, demographics, competition, technology, changes in social patterns, fashion, the economy, government foreign policy, climate, disease patterns, population, lifestyle, etc.
        
        PEST analysis = SLEPT = PESTEL/PESTLE = SPELIT = STEEPLE = STEEPLED
        
        Political, Economic, Social, Technological, Legal, Intercultural, Ethics, Demographic
      - Marketing Environment is determined by Environmental Scanning
        
        Firms cannot control these five factors. (Uncontrollable factors
      - Marketing Environment is determined by Environmental Scanning
        
        Firms cannot control these external factors. (Uncontrollable factors)
        
        industry trends
        
        competitors
        
        present & prospective customers
  3. Identify the critical factors
  4. Translate the SWOT analysis results into specific actions (strategies) to help the firm grow and succeed. (see Strategies)
    - build on strengths
    - correct weaknesses
    - exploit opportunities
    - avoid threats

Strategies = the methods (actions) that a company uses to meet its stated goals - See also Goals & Objectives
- Setting strategic goals = long-term goals (derived directly from the mission statement)
- Analyzing the organization and its environment
  - Environmental analysis = scanning the environment for Threats and Opportunities = external factors
  - Organizational analysis = understanding the company's Strengths and Weaknesses = internal factors
  - SWOT Analysis = Assessing organizational strengths and weaknesses (internal) and environmental opportunities and threats (external)
- Matching the organization and its environment = the final step in strategy formulation
- Levels of Strategies (hierarchy)

Business Portfolio= the collection of businesses and products that make up the company
- identify the businesses that the company will be in and how these businesses will relate to each other
- top management directs overall strategy for the entire organization = overall strategy formulation
- manage a portfolio of businesses (see business units, below) = portfolio analysis
- Based on the Goals & Objectives
- The best business portfolio is the one that best fits the company's strengths and weaknesses to opportunities in the environment.
  - Focus on products and businesses that fit closely with the firm's core philosophy and competencies.
  - Fits the company's strengths and weaknesses to opportunities in the environment
- Analyze and adjust the current business portfolio and develop growth and downsizing strategies for adjusting the future portfolio.
  - Current portfolio - Decide which businesses and products should receive more or fewer resources (investment)
  - Future portfolio - Strategies for growth or downsizing
References
- Griffin 8ce, p.199, Ch.06
- Armstrong 5ce, p.50, Ch.02
- Keegan 8e, --
Business Portfolio Analysis (of business units, or product lines, or individual products, or individual brands)

growth-share matrix - Boston Consulting Group (= BCG)

BCG Matrix	Relative Market Share (cash generation)
Market growth rate (cash usage)	Star high share, high growth	Question mark = problem child low share, high growth requires lots of cash just to maintain market share
Market growth rate (cash usage)	Cash cow dominant share, slow growth	Dog low share, low growth

See also: PowerPoint presentation Chapter 02 Figure 2.2 for 401-201-DW

SBU = strategic business unit
- a company division, a group of similar products or customers, or sometimes a single product or brand
- SBU is a unit of the company that has its own mission and objectives and that can be planned independently from other SBUs.
Market growth rate (y-axis)
- Attractiveness of the SBU's market or industry
Relative market share (x-axis)
- Strength of the SBU's position in that market or industry
- Relative Market Share = (Sales by that SBU) / (Sales by industry leader)
  - = (Sales by SBUs) / (Sales by the entire industry) (Is this a valid measure????)
BCG Matrix
- Stars - need heavy investment to finance their rapid growth - will eventually turn into cash cows
- Cash cows- need less investment to hold their market share - produce cash to support other SBUs
- Question marks- need a lot of cash to hold their market share - build into stars OR phase out
- Dogs
Alternative strategies - Alternative Corporate-level strategies (for each BU mapped on this matrix)
1. Build = invest more to build the SBU's share =build the SBU's share by investing more
  - Growth (= focus on internal activities that will result in growth)
  - Product/Market Expansion Grid = A portfolio planning tool for identifying company growth opportunities
    1. market penetration = focusing efforts on increasing sales of that product in order to capture market share
      - Concentration strategy = focusing on one product or product line
      - market penetration = boosting sales of present products
    2. product development = offering modified or new products to current market segments
      - product development = developing improved products for current markets
    3. market development = identifying and developing new market segments for current company products
      - geographic expansion = expanding to new geographic areas
      - International = Global - (see page 60)
        
        Pro - counterattack global competitors, foreign profit opportunities, shrinking domestic markets, need larger customer base to achieve economies of scale, reduce dependence on any one market, customers require international servicing, need additional markets for overcapacity
        
        Con - risks, able to operate globally, able to understand foreign preferences and buying behaviour, able to offer competitive products, able to adapt to cultures, have the necessary international experience, regulations and political environments
        
        Considerations - company's marketing objective and policies, how many countries, types of countries
    4. diversification = starting up or acquiring businesses outside the company's current products and markets
      Focus - Companies should not be too diversified. They should get back to the basics of serving one or a few industries that they know best.
      - Diversification = expanding into related or unrelated products or market segments
        
        Related diversification = adding new, but related products or services to an existing business
        
        Conglomerate diversification = diversifying into products or markets that are not related to the firm's present businesse
    5. Integration (= focus on external activities that will result in growth)
      - horizontal integration
        
        acquiring control of competitors in the same or similar markets with the same or similar products
      - vertical integration
        
        owning or controlling the inputs to the firm's processes and/or
        owning or controlling the channels through which the products or services are distributed.
2. Hold = invest just enough to keep the SBU at the current level
  - hold the SBU's share at about its current level by investing just enough
3. Harvest = milking the short-term cash flow
4. Divest = sell the SBU or phase out the SBU
  - divest = phase out the SBU or sell the SBU for cash
  - Downsizing = reducing the business portfolio by eliminating products or businesses that are not profitable or that no longer fit the company's overall strategy
    - Divest = prune = In finance and economics, divestment or divestiture is the reduction of some kind of asset, for either financial or social goals. A divestment is the opposite of an investment.
    - Focus on promising growth opportunities, not wasting resources trying to salvage fading SBUs.
  - Investment reduction
    - Retrenchment = reduction of activity or operations
    - Divestment = selling or liquidating one or more of the firm's businesses
References

Market-Product analysis matrix

Market-Product Analysis		Products
Market-Product Analysis		Current	New
Markets	Current	Market Penetration sell more	Product Development new product (danger of product cannibalism)
Markets	New	Market Development sell elsewhere	Diversification new business (related or unrelated diversification)

Market-product grid = framework to relate the segment of a market to products offered or potential marketing actions (4Ps) by the firm.
- y-axis = horizontal rows = markets or market segments
- x-axis = vertical columns = products or product lines or marketing actions (4Ps)
- size estimate for each cell in the grid (size of market, size of market-product combination) = each cell in the grid can depict the estimated market size of a given product sold to a specific market segment.
Alternative Corporate-level strategies (for the SBUs)
1. Concentration strategy = focusing on one product or product line
2. Growth opportunities (= focus on internal activities that will result in growth)
  1. Penetration = marketing penetration = market share expansion = boosting sales of present products
    - Examples: increased personal selling, a more aggressive sales approach, sales promotion and publicity activities, increased advertising, etc. Lowering prices is dangerous and could trigger a price war. Predataor pricing is illegal. Be careful not to gain market share beyond 100% of your capacity (to provide product).
  2. Product development = product expansion = developing improved products for current markets
    - Modified products - materials, features, size, packaging, etc.
    - Depth vs. Breadth of the product mix.
  3. Market development = geographic expansion = market segment expansion = expanding to new geographic areas
    - New distribution channels, New ordering modes (in-store, phone, mail-in, online, etc.), New delivery modes (pick-up, delivery, post-office, courier, etc.).
  4. Diversification = expanding into related or unrelated products or market segments
    - Related diversification = adding new, but related products or services to an existing business
    - Conglomerate diversification = diversifying into products or markets that are not related to the firm's present businesses
    - Acquisition strategy = buying other businesses in the same field and incorporating them into your firm.
3. Integration (= focus on external activities that will result in growth)
  - horizontal integration
    - acquiring control of competitors in the same or similar markets with the same or similar products
  - vertical integration
    - owning or controlling the inputs to the firm's processes and/or
      owning or controlling the channels through which the products or services are distributed.
4. Investment reduction
  - Retrenchment = reduction of activity or operations
  - Divestment = selling or liquidating one or more of the firm's businesses
    In finance and economics, divestment or divestiture is the reduction of some kind of asset, for either financial or social goals. A divestment is the opposite of an investment.

SBU strategies = Competitive strategies = identify the ways a business will compete in its chosen line of products or services = a plan to establish a profitable and sustainable competitive position against the forces that determine industry competition.
business units = operating groups = strategic business segments = product-marketing units (PMUs) = strategic business unit (SBU)
business unit = an organization that markets a set of related products to a clearly defined group of customers.
Business unit managers set the direction for their products and markets = specific strategy formulation

Competitive strategies (by Michael Porter):
1. cost leadership = becoming the low cost leader in an industry = Price
2. differentiation = seeking to be unique in its industry along some dimension that is valued by buyers (e.g. durability, safety, user-friendly-ness, quality, etc.) = Product
3. focus = selecting a market segment and serving the customers in that market niche better than competitors = market nich

Functional Strategies = identify the basic courses of action that each department in the firm will pursue so that it contributes to the attainment of the business's overall goals
- Departments = specialized functions = (e.g. information systems, finance, R&D, marketing, manufacturing, HR)
- Groups of specialists actually create value for the organization.
- strategy implementation = very specific strategy formulation - hierarchy of strategic directions = they make things happen
- Cross-functional teams = a small number of people from different departments (employees, suppliers, customers) in an organization who are mutually accountable to a common set of performance goals.

Levels of Plans (hierarchy) - Managerial responsibilities are defined at each level - See also Goals & Objectives
1. Strategic plans
  - set by the board of directors and top management
  - long-range
  - decisions about resource allocations, company priorities, steps needed to meet strategic goals
2. Tactical plans
  - set by upper and middle management
  - shorter-range
  - decisions about implementing specific aspects of the company's strategic plans
3. Operational plans
  - set by middle and lower-level managers
  - short-range
  - decisions about targets for daily, weekly, or monthly performance
4. Contingency plans
  - developing alternative plans in case things go awry = dealing with the unknown and unforeseen = hedging against changes that might occur = planning for change
5. Crisis management plans
  - crisis = unexpected emergency requiring immediate organizational response
  - crisis management = an organization's methods for dealing with emergencies
    - who will be in charge, how the organization will respond, etc

Please use both of these models together.

Use this first model to list all the SWOT items.

SWOT - Table 01	Positive	Negative
Internal	Strengths	Weaknesses
External	Opportunities	Threats

Use the following model to list the Strategies for each combination of SW and OT. (see Strategies)
Note that the colours match in both these models.

The part in yellow is the same as the part in yellow of the model shown above.
Many of the possible strategies may be found elsewhere on this page.


SWOT - Table 02 Strategies		Internal
SWOT - Table 02 Strategies		Strengths	Weaknesses
External	Opportunities	SO Strategies	WO Strategies
External	Threats	ST Strategies	WT Strategies

Use a spreadsheet (MS-Excel or MS-Word) to create a list in each cell of this table
- It isn't complicated to use Word to create the tables.
  
  Word 2010 > Insert (menu/ribbon) > Insert > Table
Please use both of these models together.

The Case Method ...
Dummies: Performing a SWOT Analysis
Marketing Teacher Search Results - SWOT
- SWOT analysis lessons, articles and case studies.Marketing Teacher
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