SWOT Analysis and Internal Analysis Tools

Strategic Management

• Strategic management is the process of setting objectives, developing plans, and allocating resources to achieve a sustainable competitive advantage.
• It involves analyzing internal and external environments of an organization and is a continuous process that adapts to changing market conditions.

Importance of Strategic Management

• Provides direction and focus for an organization
• Improves decision-making by considering long-term goals
• Increases efficiency and resource allocation
• Enhances the organization's competitive advantage
• Fosters a culture of innovation and continuous improvement

Strategic Management Process

Analysis

• Internal Environment:
  • Strengths: resources, capabilities, competitive advantage
  • Weaknesses: limitations, disadvantages, areas for improvement
  • Tools: SWOT Analysis, VRIO Framework
  • Internal factors: employee mix, management values, stakeholder goals, strategy success, corporate culture, resources, and capabilities
• External Environment:
  • Opportunities: favorable market conditions, trends
  • Threats: negative market forces, competition
  • Tools: PESTEL Analysis, Porter's Five Forces
  • External factors: economic, global, social, technological, competitive

Strategy Formulation

• Setting up goals and objectives (SMART Goals)
• Developing strategic alternatives
• Choosing the best alternative (considering feasibility, resource allocation, and risk)

Strategy Implementation

• Developing action plans
• Resource Allocation
• Assigning Responsibilities
• Monitoring and Communication

Strategy Evaluation and Control

• Monitoring Performance
• Making adjustments
• Performance Measurement Tools (e.g. Porter's Five Forces)

Porter's Five Forces

• Competitive Rivalry
• Supplier Power
• Buyer Power
• Threat of Substitution
• Threat of New Entry

Analyzing the Task Environment

• Threat of New Entrants
• Economies of Scale
• Product Differentiation
• Capital Requirements
• Switching Costs
• Access to Distribution Channels
• Cost Disadvantages independent of Size
• Government Policy
• Rivalry among Existing Firms
• Number of Competitors
• Rate of Industry Growth
• Product or Service Characteristics
• Amount of Fixed Costs
• Capacity
• Height of Exit Barriers
• Diversity of Rivals

Bargaining Power of Buyers and Suppliers

• Buyers: affect an industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other.
• Suppliers: affect an industry through their ability to raise prices or reduce the quality of purchased goods and services.

Weaknesses

• Operational Inefficiencies (slow production processes)
• Lack of innovation (struggling to keep up with industry trends)
• Limited resources (financial constraints, lack of skilled workforce)
• High employee turnover (demotivated workforce, loss of valuable knowledge)

Tools for Internal Analysis

• Value Chain Analysis: breaks down the company's activities into primary and support activities to identify areas for improvement.
• SWOT Analysis: identifies a company's strengths, weaknesses, opportunities, and threats.
• VRIO Framework: analyzes a company's resources to determine if they are valuable, rare, inimitable, and organized, leading to a sustainable competitive advantage.

External Analysis

• Opportunities and Threats
• Environmental Scanning: collects, evaluates, and delivers information for a strategic purpose.
• PESTLE Analysis: examines external market factors – such as Political, Economic, Social, Technological, Legal, and Environmental – and market trends.
• Societal Environment: variables such as demographics, culture, lifestyle, and values.

Industry Analysis

• It is a market assessment tool used by businesses and analysts to understand the competitive dynamics of an industry.
• It provides a comprehensive idea about the complex nature of a specific industry.