STRATEGIC

ANALYSIS

PREPARED BY:
ARSHAD BHUTTA (ACCA)
 SWOT ANALYSIS
A strategic planning tool that separates
influences on a businesss future success
into internal and external factors.
HISTORY OF SWOT ANALYSIS
Developed at Stanford Research Institute
Data of Fortune 500 companies analysed
Took 9 years to develop
Involved 5000 interviews
Technique is credited to Albert Humphrey
Research is done in 1960s and 1970s
SWOT Analysis allows businesses to
Define realistic goals

Improve capability

Overcome weaknesses with strengths

Identify threats than can be turned into

opportunities
A strength...........
Abundant financial resources

Well- known brand name

Can be a Abundant financial resources
competitive Economies of scale
advantage Lower Cost (raw material or
like .. processes)
Superior management talent
Better marketing skills
Good distribution skills
Positive tangible
and intangible Committed and motivated
attributes, employees
Internal to an Better location
organization Superior product quality
Better technology etc.
A weakness...........
Limited financial resources
Can be a Low spending on R & D
disadvantage Narrow product line
such like .. Limited distribution
High cost
Out of date products
Characteristics Untrained employees
of the firm that Poor location
places it on Limited management skills
relative Poor marketing skills
disadvantage ,
Internal to an
Weak market image
organization De-motivated employees
An opportunity...........
Rapid market growth
Can be an
Rival firm are complacent
external Changing customer needs/
attractive factor taste
like .. New use for product
discovered
Economic boom
Organization should be Government deregulation
careful in recognizing
the opportunities
Sales decline for substitute
Opportunities arises product
from market ,
competition, industry, A gap left by a failed
government and competitor
technology
Untapped markets
A threat...........
Can be an Entry of foreign competitor
external factor Introduction of new substitute
causing trouble product
for business Product life cycle in decline
like ..
Changing customer
needs/tastes
Compound the Rival firms adopt new
vulnerability when they strategies
relate to the weaknesses.
Threats are Increased government
uncontrollable . When
threats comes, the
regulations
stability and survival Economic downturn
can be on stake
Market shrinkage
BENIFITS OF SWOT ANALYSIS
KNOWING THE COMPETITION- review a company
competitors and benchmark against them to configure
strategies that will put the company in a competitive
advantage
DECISION MAKING TOOL- provides well-round
information that prompt well informed decision
FORECASTING- provides a variety of informations critical
to forecasted variable threats, for e.g., can impact a
business forecast
Helps in setting of objectives for strategic planning
Provides a framework for identifying and analyzing
strengths, weaknesses, opportunities and threats
BENIFITS OF SWOT ANALYSIS
Provide impetus to analyze a situation and develop
suitable strategies and tactics
Basis for assessing core capabilities and competencies
Evidence for , and cultural key to change
Provide a stimulus to participate in a group experience
PITFALLS OF SWOT ANALYSIS
Can be a very subjective; Two people come up with the
same final version of a SWOT is difficult, Use it as a guide
and not as a prescription
May cause organization to view circumstances as very
simple due to which certain key strategic contents may be
overlooked
To be effective; SWOT needs to be conduct regularly
The data used in analysis may be based on assumptions
that subsequently proved to be unfounded (GOOD or
BAD)
It lacks detailed structure, so key elements may be missed
 PESTEL ANALYSIS
This form of business analysis examines the external
environment and the global factors that may affect a
business. It can provide a quick and visual representation of
the external pressures facing a business, and their possible
constraints on strategy.

OR

PESTEL analysis (Political, Economic, Social ,

Technological, Environmental and Legal analysis)
describes a framework of macro-environmental factors used
in the environmental scanning component of strategic
management.
What is PESTEL?
PESTEL is shorthand for a list of macro-economic
factors that: already; or may, at some time in the
future, affect your business.

What is Macro Economic?

Macro-economic is a fancy way of describing
those external factors which will/may affect your
business but over which your business has no
control.
What is Analysis?
The analysis phase consists of a 2 step process,
being:
Evaluating the impact (both actual and likely)
that each factor may have on your business; and
Planning those actions you may wish to take
to:
minimize any threats; and
maximize any opportunities
Political factors...........
The likelihood of a change in
are concerned
with how government at an upcoming
political election
developments, The policies and
regionally, fundamental beliefs belonging
nationally and
to the political party (e.g.
internationally
might affect a Liberal, Labor, the Greens) that
businesss is in power
strategy. The level of government
interference in the market-
place
Political instability
Economic factors...........
are concerned
Interest rate movements
with the analysis
of a wide variety Exchange rate movements
of economic Inflation
factors and their Employment levels
effects on a Consumer confidence
business. They Balance of payment
include:
(Imports vs Exports)
Economic growth
Social factors...........
Aging population, reduced
discuss the birth rates, longer life expectancy
cultural Changing role of women in the
aspects .of the workplace
society and its Improved Education better
impacts on skilled workers
business Early retirement, more leisure
strategy . They time
includes: Rising divorce rates, more
single households
Job security
Immigration creating a wider
range of consumer tastes
Religious and ethnic
background
Technological factors...........
discuss the New products
impact of New business processes
technological Research and development
advancement on Automation
business strategy. Technology incentives
. They includes:
The rate of technological
change
Technology can impact Internet
on: Business Software
Cost applications
Quality Computer-aided design
Innovation (CAD)
Outsourcing decision Computer-aided
Barriers to entry manufacturing (CAM)
Environmental factors...........
discuss the Climate Change including
ecological and
environmental rising sea levels, extreme
changes and their or unusual weather patterns
impacts on (e.g. droughts, floods,
business cyclones and tsunamis).
strategy . They Energy consumption.
includes: Waste Disposal.

Environmental changes impact every business but

especially..
Tourism
Insurance
Farming
Legal factors...........
discuss the legal
Discrimination law
issues and its Consumer law
impacts on Antitrust law
business Employment law
strategy . They Health and safety law
includes:
PESTEL ANALYSIS
 PESTEL ANALYSIS
It was initially PEST analysis. It discuss the
environment in four aspects ; Political,
Economical, Social and Technological. Where
we discuss Legal factors under Political factors
and Environmental factors under Social factors.
Now it is commonly called PESTEL in UK . It is
also described as PESTLE.
There is new advancement in which we discuss
Demographic factors and Regulatory factors
separately
PORTERS FIVE FORCES MODEL
Porter five forces analysis is a
framework for industry analysis and
business strategy development.

It was developed by Michael

E. Porter of Harvard
Business School in 1979.
PORTERS FIVE FORCES MODEL
 PORTERS FIVE FORCES MODEL
Threat of New Entrants
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Barriers to Entry
Access to Distribution
channels
Cost Disadvantages
Government Policy
Expected Retaliation
Strong customer loyalty
Strong brand name
 PORTERS FIVE FORCES MODEL
Bargaining Power of Supplier
Suppliers are likely to be powerful if:
Supplier industry is dominated by a few
Supplier
Supplierexert
exertpower
power in
in firms
industry
industry by:
by: Suppliers products have few substitutes
Buyer is not an important customer to

Threatening
Threatening to
to raise
raise price
price
or
supplier
or to
toreduce
reducequality
quality
Suppliers product is an important input to
Powerful
Powerful suppliers
supplierscancan buyers product
squeeze
squeeze industry
industry Suppliers products are differentiated
profitability
profitability if
if firms
firms Suppliers products have high switching
are
areunable
unable to
torecover
recover costs
cost
cost increases
increases Supplier poses credible threat of forward
integration
Supplier concentration- competition among
firms
 PORTERS FIVE FORCES MODEL
Bargaining Power of Buyers
Buyers are likely to be powerful if:
The more concentrated the buyers
Buyers
Buyerscompete
competewith
with
the
industry relative to your industry
the supplying
supplying industry
industry by:
by:
Purchase accounts for a significant

Bargaining
Bargaining down
down prices
prices fraction of suppliers sales

Products are undifferentiated

Forcing
Forcing higher
higher quality
quality
Buyers face few switching costs

Playing
Playing firms
firms off
off of
of Buyers industry earns low profits
each
each other
other Buyer presents a credible threat of
backward integration
Product quality is not important
Buyer has full information
 PORTERS FIVE FORCES MODEL
Threat of Substitute Products
Keys to evaluate substitute products:

Products Buyer propensity (willingness) to

Products with
with similar
similar
substitute
function
function limit
limit the
the prices
prices Cost to the buyer of switching from one
firms
firms can
can charge
charge seller to another
Products with improving price or
performance trade offs relative to present
industry products

Examples:
Electronic security systems in place of security guards
Fax machines in place of overnight mail delivery
 PORTERS FIVE FORCES MODEL
Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:

Occurs when a Jockeying for strategic position

Using price competition
firm is pressured Staging advertising battles
or sees an Increasing consumer warranties or service
opportunity Making new product introductions
Cutthroat competition is more likely to occur when:
Price competition
Numerous or equally balanced competitors
often leaves the entire
Slow growth industry
industry worse off High fixed costs
Advertising battles High storage costs
may increase total Lack of differentiation or switching costs
industry demand, but Capacity added in large increments
may be costly to Diverse competitors
smaller competitors High strategic stakes
High exit barriers