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SWOT
(Strength-Weakness-Opportunity-Threat)
Identification of threats and Opportunities in the environment (External) and strengths and Weaknesses of the firm (Internal) is the cornerstone of business policy formulation; it is these factors which determine the course of action to ensure the survival and growth of the firm.
SWOT Analysis
The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The Research Team were Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie.
Examples of SWOTs
Strengths and Weaknesses
Resources: financial, intellectual, location Cost advantages from proprietary know-how Creativity / ability to develop new products Valuable intangible assets: intellectual capital Competitive capabilities Big campus selection
Analysis of existing strategies, this should determine relevance from the results of an internal/external appraisal. This may include gap analysis (compare its actual performance with its potential performance which will look at environmental factors) Strategic Issues defined key factors in the development of a corporate plan which needs to be addressed by the organisation Develop new/revised strategies revised analysis of strategic issues may mean the objectives need to change
Establish critical success factors the achievement of objectives and strategy implementation Preparation of operational, resource, projects plans for strategy implementation Monitoring results mapping against plans, taking corrective action which may mean amending objectives/strategies.
Also;
Use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports.
PEST Analysis
A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors: Political Economic Social Technological
The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macroenvironmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:
Environmental Scan / External Analysis / Macroenvironment \ Microenvironment \ Internal Analysis
| P.E.S.T.
Political Factors Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include: tax policy employment laws environmental regulations trade restrictions and tariffs political stability
Economic Factors Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy: economic growth interest rates exchange rates inflation rate
Social Factors
Social factors include the demographic and cultural aspects of the external macroenvironment. These factors affect customer needs and the size of potential markets. Some social factors include: health consciousness population growth rate age distribution career attitudes emphasis on safety
Technological Factors
Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include: R&D activity automation technology incentives rate of technological change
Industry Analysis
An industry is a group of firms producing a similar product or service An examination of the important stakeholders group in a particular corporations task environment is a part of industry analysis
Industry Competitors
Buyers
High fixed or storage costs Lack of differentiation or switching costs Capacity augmented in large increments (leading to overcapacity and price cuttings) Diverse competitors High strategic stakes High exit barriers (specialized assets, fixed costs of exit, strategic interrelationships, emotional barriers, government and social restrictions)
Shifting Rivalry
The factors that determine the intensity of competitive rivalry can and do change As an industry matures, its growth rate declines, resulting in intensified rivalry, declining profits An acquisition can introduce a different personality to an industry Focusing selling efforts on the fastest growing segments can reduce the impact of industry rivalry
3. The products it purchases from the industry are standard or undifferentiated 4. It faces few switching costs 5. It earns low profits (thus sensitive to costs) 6. Buyers pose a credible threat of backward integration 7. The industrys product is unimportant to the quality of the buyers products or services 8. The buyer has full information
5. The suppliers group products are differentiated or it has built up switching costs 6. The supplier group poses a credible threat of forward integration 7. Labor must be considered as a supplier that exerts great power in many industries
6. What do they intend to do in the future? Target your market segments? Growing? 7. How will their activities affect your strategies? Should you adjust your plans and operations? 8. How much better than your competitor do you need to be in order to win customers? 9. Will new competitors appear over the next few years? 10.If you were a customer, would you choose your product over those offered by your competitors?