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The Situation Analysis - SWOT

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  1. The Situation Analysis - SWOT Anthony Santella Tulane University School of Public Health

  2. Past Experiences • The SWOT analysis is one of the best known marketing and strategy tools…but unfortunately one of the more poorly used in practice. • What are your experiences working with SWOT analyses?

  3. Organizational Values, Culture, Leadership External Environment Internal Environment Wants To Do Should Do Can Do SWOT Pulls the Pieces Together Integration of Should, Can, and Want into picture of situation Basis for strategy formulation

  4. SWOT Analysis Framework Environmental Scan ↓ ↓ Internal Analysis External Analysis ↓ ↓ Strengths/Weaknesses Opportunities/Threats ↓ ↓ SWOT Matrix

  5. Previous Analyses • “Strengths” and “Weaknesses” would have been identified through tools applied to internal environment • Value chain, resource evaluation, core competence • “Opportunities” and “Threats” should have been identified with tools applied to external environment • Environmental scan, industry structure analysis, competitor analysis & mapping

  6. SWOT Matrix

  7. Strengths and Weaknesses refer to matters internal to firm Focus on issues over which firm has high degree of control Opportunities and Threats refer to matters external to firm Focus on issues over which firm has minimum control Internal versus External

  8. Analyst’s Judgment • Situation analysis (SWOT) represents judgment of analyst • No one right answer • Provides basis for alternative formulation and strategy selection

  9. Goal • Match internal Strengths and Weaknesses with external Opportunities and Threats, in order to develop sustained competitive advantage

  10. Using SWOT • Source of “difference” • Firm’s unique internal resources • Combined with its mission and vision • “Difference” suggests path for sustained competitive advantage • Uniquely able to take advantage of external opportunities, avoid threats

  11. Fit Moving Target • Point of SWOT is to find fit between external environment and current internal characteristics, both of which are constantly evolving or changing • Managers need to consider their ability to change their organization’s internal characteristics to fit anticipated external environment

  12. Competitive Context SWOT includes only those key variables which • set firm apart from competitors and • assist in developing feasible alternatives

  13. Strengths and Opportunities represent positive circumstances May be viewed as resources Weaknesses and Threats represent negative circumstances May be viewed as constraints Resources v. Constraints

  14. Powerful strategy supported by good skills and expertise in key areas Strong financial condition, ample financial resources to grow business Strong brand-name, image/company reputation Ability to take advantage of economies of scale Proprietary technology, superior technological skills, important patents Cost advantages Strong advertising and promotion Product innovation skills Proven skills in improving production processes Reputation for good customer service Better product quality relative to rivals Wide geographic coverage and distribution capability Alliances/joint ventures Examples of Potential Strengths Source: Thompson , Arthur and A.J. Strickland, Strategic Management, 11th Edition, Boston: Irwin McGraw-Hill. 1999. P 107.

  15. No clear strategic direction Obsolete facilities Weak balance sheet, too much debt Higher overall unit costs relative to key competitors Missing some key skills or competencies, lack of management depth Behind on product quality Internal operating problems Falling behind in R&D Too narrow a product line relative to rivals Weak brand image Weaker dealer or distribution network than key rivals Short on financial resources to fund strategic initiatives Lots of underutilized plant capacity Examples of Potential Weaknesses Source: Thompson , Arthur and A.J. Strickland, Strategic Management, 11th Edition, Boston: Irwin McGraw-Hill. 1999. P 107.

  16. Additional customer groups or new geographic markets or product segments Expanding range of customer needs that could be met by extension of company’s product line Emerging demand for new products or businesses to which company skills or technological know-how could be transferred Conditions favoring forward or backward Integration Falling trade barriers in attractive foreign markets Openings to take market share away from rival firms Ability to grow rapidly because of strong increases in market demand Alliances that expand firm’s market coverage and competitive capability Openings to exploit emerging new technologies Market openings to extend company’s brand name or reputation into new geographic areas Rival firms in position to be acquired Examples of Potential Opportunities Source: Thompson , Arthur and A.J. Strickland, Strategic Management, 11th Edition, Boston: Irwin McGraw-Hill. 1999. P 107.

  17. Likely entry of potent new competitors Substitute products gaining market share Slowdowns in market growth Adverse shifts in foreign exchange rates and trade policies of foreign governments Costly new regulatory requirements Vulnerability to recession and business cycle Growing bargaining power of customers or suppliers Shift in buyer needs and tastes away from the industry’s product Adverse demographic changes Vulnerability to industry driving forces Examples of Potential Threats Source: Thompson , Arthur and A.J. Strickland, Strategic Management, 11th Edition, Boston: Irwin McGraw-Hill. 1999. P 107.

  18. When preparing a SWOT, we unconsciously tend to emphasize strengths at expense of weaknesses and opportunities at expense of threats These tendencies are particularly strong when analyzing an organization with which we have strong ties WARNING: Bias!

  19. WARNING: Confusion! Stay Divergent! • When you prepare your SWOT you are likely to get "OPPORTUNITIES” confused with alternatives for action • This is convergent, not divergent thinking • You may even see this in your text! • Remember, opportunities lay the foundation for developing alternatives

  20. WARNING:No Common Factors! • Remember to avoid those factors and issues which are common to firm and its competitors both internally and externally • Only include factors that are particular threat to you, or that you are uniquely positioned to use to build advantage

  21. Typical Failings • Tendency to be too general and superficial. • Ex. Strengths- our people, technology, and experience • Another failing is to use the SWOT analysis at too high a level, typically as a means of assessing the position of the whole company. • Ex. Strength- the entire hospital, as opposed to the hospital’s position in market place.

  22. The Firm and The Decision • When preparing a SWOT, remember • Focus on the firm • Purpose is to identify source of sustainable competitive advantage

  23. Now what? • After completing your SWOT analysis, ask yourself these questions: • How can I use my strengths to enable me to take advantage of the opportunities I have identified? • How can I use these strengths to overcome the threats identified? • What do I need to do to overcome the identified weaknesses in order to take advantage of the opportunities? • How will I minimize my weaknesses to overcome the identified threats?