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DevelopingCompetitiveAdvantageandStrategicFocus5CHAPTERSWOTAnalysis

(Strengths,Weaknesses,Opportunities,Threats)“Awidelyusedframeworkfororganizingandutilizingthepiecesofdataandinformationgainedfromthesituationanalysis…”EncompassesbothinternalandexternalenvironmentsOneofthemosteffectivetoolsintheanalysisofenvironmentaldataandinformation2EffectivenessofAnalysisToolsExhibit5.13MajorBenefitsofSWOTAnalysisSimplicityLowerCostsFlexibilityIntegrationandSynthesisCollaborationFromExhibit5.24CommonCriticisms

ofSWOTAnalysisAllowsfirmstocreatelistswithoutseriousconsiderationoftheissuesOftenbecomesasterileacademicexerciseofclassifyingdataandinformation5MakingSWOTAnalysisProductiveStayFocusedSearchExtensivelyforCompetitorsCollaboratewithotherFunctionalAreasExamineIssuesfromtheCustomers’PerspectiveLookforCauses,NotCharacteristicsSeparateInternalIssuesfromExternalIssuesFromExhibit5.36StayFocusedItisamistaketocompleteonegenericSWOTanalysisfortheentireorganizationorbusinessunit.WhenwesaySWOTanalysis,wemeanSWOTanalyses.7SearchExtensivelyforCompetitorsInformationoncompetitorsisanimportantaspectofaSWOTanalysis.Lookforallfourtypesofcompetition:BrandcompetitorsProductcompetitorsGenericcompetitorsTotalbudgetcompetitors8CollaboratewithOtherFunctionalAreasInformationgeneratedfromtheSWOTanalysiscanbesharedacrossfunctionalareas.SWOTanalysiscangeneratecommunicationbetweenmanagersthatordinarilywouldnotcommunicate.Createsandenvironmentforcreativityandinnovation.9ExamineIssuesfrom

theCustomers’PerspectiveTodothis,theanalystshouldask:Whatdocustomers(andnoncustomers)believeaboutusasacompany?Whatdocustomers(andnoncustomers)thinkofourproductquality,customerservice,price,overallvalue,convenience,andpromotionalmessagesincomparisontoourcompetitors?Whatistherelativeimportanceoftheseissuesascustomersseethem?Takingthecustomers’perspectiveisthecornerstoneofawelldoneSWOTanalysis.10BreakingDownManagerialClichésintoCustomer-OrientedStrengthsandWeaknessesExhibit5.411LookforCauses,NotCharacteristicsCausesforeachissueinaSWOTanalysiscanoftenbefoundinthefirm’sandcompetitors’resources.Majortypesofresources:

Financial-Organizational-Intellectual-Informational

Legal-Relational

Human-Reputational12SeparateInternalfromExternalIssuesFailuretounderstandthedifferencebetweeninternalandexternalissuesisoneofthemajorreasonsforapoorlyconductedSWOTanalysis.SocraticAdvice:“Knowthyself”“Knowthycustomer”“Knowthycompetitors”“Knowthyenvironment”13TheElementsofaSWOTAnalysisStrengthsandWeaknessesScaleandCostEconomiesSizeandFinancialResourcesIntellectual,LegalandReputationalResourcesOpportunitiesandThreatsTrendsintheCompetitiveEnvironmentTrendsintheTechnologicalEnvironmentTrendsintheSocioculturalEnvironment14SWOT-DrivenStrategicPlanningFourissuesthemarketingmanagermustrecognize:TheassesAchievinggoalsandobjectivesdependsontransformingstrengthsintocapabilitiesbymatchingthemwithopportunities.Weaknessescanbeconvertedintostrengthswithstrategicinvestment.Threatscanbeconvertedintoopportunitieswiththerightresources.Weaknessesthatcannotbeconvertedbecomelimitationswhichmustbeminimizedifobviousormeaningfultocustomers.15SWOTMatrixAfour-cellarrayusedtocategorizeinformationattheconclusShouldbebasedoncustomerperceptions,nottheperceptionsoftheanalyst.Elementswiththehighesttotalratingsshouldhavethegreatestinfluenceinmarketingstrategy.Focusoncompetitiveadvantagesbymatchingstrengthswithopportunities.AnalysisoftheSWOTMatrixTheSWOTMatrixExhibit5.617QuantitativeAssessmentofElementsWithintheSWOTMatrixExhibit5.718Strengths,weaknesses,opportunities,andthreats:Whichisthemostimportant?Why?HowmightyourresponsechangeifyouweretheCEOofacorporation?Whatifyouwereacustomerofthefirm?Anemployee?Asupplier?DiscussionQuestion19Competitiveadvantagescanarisefrommanyexternalorinternalsources.Competitiveadvantagesrefertorealdifferencesbetweencompetingfirms.Threebasicstrategiesforcompetitiveadvantage:OperationalExcellenceProductLeadershipCustomerIntimacyDevelopingandLeveragingCompetitiveAdvantages20OperationalExcellenceFocusonefficiencyofoperationsandprocessesLowercostoperationsleadstolowerpricesforcustomersProductLeadershipExcellenceintechnologyandproductdevelopmentMostadvanced,highestqualityproductofferinginindustryCustomerIntimacyUnderstandingcustomersbetterthanthecompetitionDeveloplong-termcustomerrelationshipsCompetitiveAdvantageStrategies21CommonSourcesofCompetitiveAdvantageFromExhibit5.8·RelationalAdvantages·ProductAdvantages·LegalAdvantages·PricingAdvantages·OrganizationalAdvantages·PromotionAdvantages·HumanResourcesAdvantages·DistributionAdvantages22Supportorcontradictthisstatement:““Giventherealitiesoftoday’’seconomyandtherapidchangesoccurringinbusinesstechnology,allcompetitiveadvantagesareshortlived.ThereisnosuchthingasasustainableDiscussionQuestion23Fourmajordirectionsforstrategicefforts:Aggressive(manDiversification(manyinternalstrengths/manyexternalthreats)Turnaround(manyinternalweaknesses/manyexternalopportunities)Defensive(manyinternalweaknesses/manyexternalthreats)Thesearethemostcommon,butothercombinationsofstrengthsandweaknessesarepossible.EstablishingaStrategicFocus24StrategyCanvasIdentifiesfIdentifiestheofferinglevelreceivedbybuyersforeachfactor(capturedbytheverticalaxis)Highlevelsmeanthatacompanyinvestsmoreandoffersbuyersmoreofthatfactor.Identifiesacompany’srelativeperformanceacrossitsindustry’sfactorsofcompetition(capturedbythevaluecurve)25StrategyCanvasforSouthwestAirlinesExhibit5.1026TheFourActionsFrameworkWhichfactorsthaThesefactorsmaynolongerhavevalueforbuyersWhichfactorsshouldbereducedwellbelowtheindustry’sstandard?Haveproductsbeenoverdesignedinaracetobeatcompetition?Whichfactorsshouldberaisedwellabovetheindustry’sstandard?Hastheindustryforcedcustomerstomakecompromises?Whichfactorsshouldbecreatedthattheindustryhasneveroffered?Whatarethepotentialnewsourcesofvalueforbuyers?27WhatMakesGoodStrategy?Ultimately,goodstrategyisintheeyeofthebeInmarketing,therearenorulestofollowandnoonetoholdyourhand.Thereisonlythecoldhardtruthofcustomersandcompetition.Goodstrategyisaboutmatchingthefirm'sstrengthstotheavailableopportu