SWOT: The Analysis of Strengths, Weaknesses, Opportunities, & Threats Chapter 3 SWOT: The Analysis of Strengths, Weaknesses, Opportunities, & Threats

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Search Extensively for Competitors Do not overlook any competitor (current or future) Consider: Product competitors Generic competitors Total budget competitors COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 -Inventory control Production -Quality control Advertising -Research & development Finance Customer service COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Customer Segment Evaluations Should be Benchmarked Consider internal customers (employees) Consider all relevant stakeholders: Investors & stockholders Suppliers Customers Governmental Societal COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Concerns Beyond External Issues Internal issues (strengths & weaknesses) Biggest problem with SWOTS failure to understand the difference between internal & external issues COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

SWOT-Driven Strategic Planning Utilizing a SWOT for strategic planning requires: Looking beyond the firm’s 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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

How to Achieve a Competitive Advantage Operational excellence-efficiency Product leadership-research & development, technology, products Customer intimacy-relationship marketing COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Matching Strengths to Opportunities (Johnson & Murphy) 2 key strengths: reputation for quality & personal service 2 key opportunities: demand for high quality products & good service J & M uses a product leadership strategy & customer intimacy strategy J & M stresses convenience of locations & catalog services (overnight delivery options) COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Considerations in Developing Marketing Goals Attainability Consistency Comprehensiveness Intangibility COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Considerations in Developing Marketing Objectives Attainability Continuity Timeframe Assignment of responsibility COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Strategies Converting Strengths or Threats into Opportunities Find new markets for a firm’s products (conversion strategy) May require significant financial resources Must identify major liabilities that continue to occur COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

How would you react to the idea that a SWOT analysis is unnecessary? COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

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 everyone’s needs COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.

Identify some opportunities & threats in the following industries… Commercial aviation Health care Television Pet supplies Education Transportation COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved.