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SWOT and Transformation: ReThinking Operations

Daniel F. Duran Whittier College BSAD 333: Managing Multinationals

Introduction
All companies face competition
For resources, customers, sales revenues, and profitsAll companies face uncertain industry environments Managers must position the organizations strategically in order to compete successfully
This is what we call business definition Requires that managers understand the dynamics of their firms markets before formulating strategies

Introduction (cont.)
Rapidly growing markets (emerging industries) tend to be less competitive & often attract new entrants
Usually provide sufficient room in competitive space for making some mistakes

Mature, concentrated markets provide firms with very little breathing room
Mistakes by one firm can significantly impact entire industry
One firms price reductions can set off industry-wide price war

SWOT Analysis
Acronym derived from Strengths, Weaknesses, Opportunities, and Threats
Used for analyzing industry environments and firms internal strengths and weaknesses
Managers thoroughly evaluate their firms internal strengths and weaknesses and its environmental (external) opportunities and threats Managers use the evaluation developed in the first step to place the firm in one of the quadrants of the SWOT matrix

Performed in a 2-step process:


1. 2.

Stimulates communication outside normal channels Result is varied information from diverse sources Provides an outsiders perspective in the SWOT Sales -Inventory control Production -Quality control Advertising -Research & development Finance Customer service

Benefits of the SWOT Analysis


Simple process which lowers costs No extensive training required Flexible-enhances strategic planning Integration-synthesizes qualitative & quantitative information Collaboration-encourages interdepartmental coordination

SWOT Analysis (cont.)


Advantages of SWOT Analysis:
Easy to use Can be helpful framework for getting managers to think constructively about their firms external environments and internal strengths and weaknesses

SWOT Analysis
Objective of SWOT
Strengths (based on analysis of): Strategies R&Cs Performance Weaknesses (based on analysis of): Strategies R&Cs Performance Opportunities (based on analysis of): General Environment Industry Environment Main Competitors Threats (based on analysis of): General Environment Industry Environment Main Competitors

SWOT Analysis
Numerous Environmental Opportunities

Critical Internal Weaknesses

Overcome Weakness Restructure

Grow
Diversify

Substantial Internal Strengths

Major Environmental Threats

SWOT Analysis (cont.)


Drawbacks of SWOT Analysis:
Subjective Biased by managers perceptions of their firms strengths and weaknesses
For example, managers of strong firms will likely view environmental phenomena as opportunities, while his counterpart in a weak company will likely view them as threats

The use of SWOT Analysis is likely to yield few clearcut recommendations

SWOT-Driven Strategic Planning


Utilizing a SWOT for strategic planning requires:
Looking beyond the firms current products Matching strengths with opportunities (translate strengths into capabilities) Investing in key areas: customer support, R&D, promotion, employee training) Converting weaknesses into strengths Understanding that weaknesses that cannot be converted into strengths become limitations

Directives for a Productive SWOT Analysis


Stay focused Search extensively for competitors Collaborate with other functional areas Examine issues from the customers perspectives Separate internal issues from external issues

Keys to Staying Focused


Focus on specific products & markets Adapt the marketing mix to address environmental issues Examine overall strategic business units Make certain you have 1 SWOT analysis for each product/market combination

Search Extensively for Competitors


Do not overlook any competitor (current or future) Consider:
Product competitors Generic competitors Total budget competitors

Collaborate with Other Functional Areas


Stimulates communication outside normal channels Result is varied information from diverse sources Provides an outsiders perspective in the SWOT
Sales Production Advertising Finance Customer service -Inventory control -Quality control -Research & development

Examine Issues from the Customers Perspectives in the SWOT


What do our customers believe about us as a company? What are their perceptions of:
Product quality Customer service Price/value Convenience Promotional

Customer Segment Evaluations Should be Benchmarked


Consider internal customers (employees) Consider all relevant stakeholders:
Investors & stockholders Suppliers Customers Governmental Societal

Concerns Beyond External Issues


Internal issues (strengths & weaknesses) Biggest problem with SWOTS
failure to understand the difference between internal & external issues

The Elements of the SWOT Analysis


Strengths & Weaknesses:
A strength is meaningful only when it addresses customer needs A customer-focused SWOT can uncover potential weaknesses Weaknesses associated with customer needs should be minimized Determine where resources are available & lacking Match strengths with market opportunities Strengthen weaknesses or minimize their negatives

The Elements of the SWOT Analysis


Opportunities & Threats:
Changes in the external environment can impede the ability to deliver value to customers Changes can occur in:
market growth competition overall economy political/legal environment technology sociocultural issues

One Way to Conduct a SWOT Analysis-SWOT Matrix


4 cells categorizing the SWOT:strengths, weaknesses, opportunities & threats Assess magnitude and importance of each
Based on customer perceptions, not managers

Developing Sustainable Competitive Advantages


Capabilities allow the firm to better serve customer needs (competitive advantage) Sources of competitive advantage:
customer loyalty -brand equity -distribution patents & trademarks -salesforce -culture

Capabilities that do not solve customer needs are of little value


Must have a core competency

How to Achieve a Competitive Advantage


Operational excellence-efficiency Product leadership-research & development, technology, products Customer intimacy-relationship marketing

Strategies Converting Strengths or Threats into Opportunities


Find new markets for a firms products (conversion strategy)
May require significant financial resources Must identify major liabilities that continue to occur

Minimize or Avoid Weaknesses or Threats Which Cannot Be Converted


Become a niche marketer Reposition the product Realize your limitations
Diversify to minimize risks of operating in a single market

How could each of the following be a strength or weakness?


Highest quality product in the industry Significant excess production capacity Excellent relationship with a single supplier Sizable amount of cash on hand Offering a product that is designed to suit everyones needs

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