SWOT Analysis Lesson 3 PDF

SWOT Analysis 1  SWOT analysis Strengths (S): Internal attributes that give the organization an advantage over competitors, such as brand reputation, financial stability, or skilled workforce. Weaknesses (W): Internal challenges or limitations that hinder performance,...

SWOT Analysis 1  SWOT analysis Strengths (S): Internal attributes that give the organization an advantage over competitors, such as brand reputation, financial stability, or skilled workforce. Weaknesses (W): Internal challenges or limitations that hinder performance, such as high costs, limited resources, or outdated technology. Opportunities (O): External factors or trends that the organization can capitalize on, like market expansion, emerging technologies, or changing customer preferences. Threats (T): External risks or challenges that could harm the organization, including 2  SWOT analysis When to Use SWOT Analysis 3  SWOT analysis FOR EXAMPLE Strategic Planning: To develop long-term goals or assess a new initiative. Decision Making: To weigh options before making a major decision Competitor Analysis: To understand where your company stands in comparison to rivals. Market Entry: When considering entering a new market or launching a new product. 4  SWOT analysis Advantages of SWOT Simplicity: Easy to use and understand, making it accessible to all levels of the organization. Holistic View: Provides a comprehensive look at both internal and external factors. Actionable Insights: Helps identify actionable strategies for growth or risk mitigation. Disadvantages of SWOT Subjectivity: The analysis can be biased, depending on who conducts it. Static Nature: It may not capture rapid changes in the environment or 5  SWOT analysis Strengths Weaknesses List internal factors List internal factors 6  SWOT analysis Opportunities Threats List external factors List external factors 7 SWOT analysis Wh y? 8  SWOT analysis GET TO WORK PLEASE ! 9  SWOT analysis It is not only important to explain the concept of SWOT analysis, but also how to apply it in real situations. 10 CHAPTER 2 The Strategy Formulation, Strategy Execution Process  LEARNING OBJECTIVES 1. Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why. 2. Explain the importance of setting both strategic and financial objectives. 3. Explain why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets. 4. Recognize what a company must do to achieve operating excellence and to execute its strategy proficiently. 12  LEARNING OBJECTIVES Strategic Vision: A clear and compelling strategic vision guides the company toward its long-term goals, providing focus, unity, and a framework for decision-making. Strategic and Financial Objectives: Balancing strategic and financial objectives is critical for achieving both long-term growth and short-term profitability. Coordinated Initiatives: Coordination across corporate, business, and functional levels ensures that strategic initiatives are aligned and working toward common goals. Operating Excellence: Achieving operational excellence and executing the strategy proficiently is essential for turning strategic plans into real-world success, ensuring that the company can consistently 13  CLEAR STRATEGIC VISION Why Managers Need a Clear Strategic Vision A strategic vision is essential for guiding a company toward its long- term goals and shaping the actions of its leaders and employees. It provides a roadmap for where the company wants to be in the future, outlining its aspirations, growth opportunities, and competitive positioning. A well-defined vision helps managers make decisions that align with the company’s broader objectives and inspires employees to work toward a common purpose. 14  CLEAR STRATEGIC VISION Importance of a Clear Strategic Vision: Direction and Focus: A clear vision provides a sense of direction, helping managers and employees focus on actions that contribute to long-term success. Without a vision, the company may drift or pursue short-term gains at the expense of sustainable growth. Unified Effort: It aligns the efforts of everyone in the organization, ensuring that all departments and employees are working toward the same goals. Inspiration and Motivation: A compelling vision can inspire and motivate employees, fostering commitment and encouraging innovation as they work toward achieving the company’s aspirations. Decision-Making Framework: Managers can use the vision as a framework for evaluating opportunities, making strategic decisions, and managing resources effectively. Example: Tesla: Tesla’s storage vision solutions andofrenewable transitioning the world to sustainable energy 1  STRATEGIC AND FINANCIAL OBJECTIVES. The Importance of Setting Both Strategic and Financial Objectives Successful companies set both strategic and financial objectives because these two types of goals drive performance and ensure balanced, sustainable growth. While financial objectives focus on measurable financial outcomes, strategic objectives aim to strengthen the company’s competitive position and future prospects. 16  STRATEGIC AND FINANCIAL OBJECTIVES. Strategic Objectives: What they are: These are goals related to the company’s market position, competitive strength, innovation, and customer satisfaction. They may include increasing market share, enhancing product quality, expanding geographically, or improving brand recognition. Why they matter: Strategic objectives are essential for long-term success. Achieving them allows the company to build capabilities, improve competitive positioning, and set itself up for future financial gains. 17  STRATEGIC AND FINANCIAL OBJECTIVES. Financial Objectives: What they are: Financial objectives are measurable goals related to profitability, revenue growth, cost efficiency, and financial stability. Examples include achieving specific profit margins, revenue growth targets, return on investment (ROI), or cost reductions. Why they matter: Financial objectives ensure that the company is achieving short-term profitability and financial health, which is crucial for survival and attracting investors. 18  STRATEGIC AND FINANCIAL OBJECTIVES. Balancing Strategic and Financial Objectives: Long-term vs. Short-term: Financial objectives often reflect short-term performance, while strategic objectives address long-term growth and market competitiveness. A balance between the two ensures that the company does not focus solely on quarterly profits at the expense of future opportunities. Sustainable growth: Strategic objectives lay the foundation for achieving sustainable financial performance over time. Without solid strategic goals, financial performance may deteriorate as the company loses relevance or competitiveness. Example: Amazon: Amazon sets both strategic objectives (e.g., expanding AWS and building logistical infrastructure) and financial objectives (e.g., increasing revenue and profit 19  COORDINATING STRATEGIC INITIATIVES For a company to achieve its companywide performance targets, the strategic initiatives at various levels of the organization—corporate, business unit, and functional levels— must be tightly coordinated. Each level plays a role in implementing the overall strategy, and their efforts must align to avoid inefficiencies, Corporate-Level conflicting goals, or disjointed Strategy: execution. Involves decisions about which businesses or industries the company will operate in and how resources are allocated across them. Examples include acquisitions, divestitures, and global expansion. Business-Level Strategy: Focuses on how individual business units compete within their markets, including how they differentiate themselves, reduce costs, or grow market share. Functional-Level Strategy: Involves operational decisions within each department (e.g., 20  COORDINATING STRATEGIC INITIATIVES Why Coordination is Essential: conflicts: If strategies at different levels are not Avoiding aligned, departments or business units may pursue conflicting objectives, reducing efficiency and harming performance. Efficiency and Synergy: Tight coordination ensures that resources are used efficiently, and efforts across departments complement each other to achieve maximum impact. Unified Direction: Aligning initiatives ensures that the whole organization moves in the same direction, working toward common strategic objectives rather than siloed or disconnected goals. Example: Procter & Gamble (P&G): At P&G, corporate-level decisions about product portfolios (which brands to prioritize) are tightly coordinated with business units that focus on executing brand strategies and functional teams like R&D, marketing, and supply chain to ensure that innovations and marketing efforts are aligned with the company’s overall growth objectives. 21  ACHIEVING AND EXECUTING Achieving Operating Excellence and Executing Strategy For Proficiently a strategy to succeed, it must be executed proficiently. This means the company must achieve operating excellence —the ability to deliver high-quality products or services efficiently and consistently. Key Components of Operating Excellence: Process Efficiency: Streamlining operations, reducing waste, and maximizing productivity to lower costs and improve profitability. Quality Management: Consistently delivering products or services that meet or exceed customer expectations. Quality issues can undermine even the best strategy. Talent and Culture: Building a strong organizational culture focused on continuous improvement, innovation, and customer satisfaction is key to successful execution. Technology and Innovation: Leveraging technology and 22  ACHIEVING AND EXECUTING Why Proficient Execution Matters: Strategy is only as good as its execution: Even the most brilliant strategy will fail without the ability to implement it effectively. Successful execution involves translating plans into actions, monitoring progress, and making adjustments as necessary. Consistency and Reliability: Operating excellence ensures the company can consistently meet customer expectations, which builds trust and long-term relationships. Example: Toyota: Toyota is renowned for its operational excellence, particularly in its manufacturing process, which emphasizes efficiency, quality control, and continuous improvement (through the Toyota Production System). This operational strength enables the company to execute its global strategies effectively, ensuring success in highly competitive markets. 23  The Strategy Formulation, Strategy Execution Process 1. Develop a strategic vision. 2. Set objectives. 3. Craft a strategy. 4. Implement and execute the chosen strategy. 5. Evaluate and analyze the external environment and the firm’s internal situation and performance. 24 Figure 2.1 The Strategy Formulation, Strategy Execution Process Access the text alternative for slide images. 25  DEVELOPING A STRATEGIC VISION A strategic vision is a clear and compelling roadmap of where a company is headed over the long term. It outlines the company’s aspirations and provides a guiding framework for decision-making and resource allocation. Steps to Develop a Strategic Vision: Understand the Company’s Purpose and Values: The vision should align with the company’s core values, mission, and identity. It reflects why the company exists and what it seeks to achieve. Analyze Market Trends and Opportunities: Look at industry trends, emerging technologies, customer needs, and competitors to identify future growth opportunities. This allows the company to position itself in ways that capitalize on changes in the marketplace. 26  DEVELOPING A STRATEGIC VISION Set Long-Term Goals: A vision should describe where the company wants to be in the next 5, 10, or 15 years. It includes market position, product portfolio, and customer base. Communicate the Vision Clearly: A vision must be easy to understand and communicate across the organization. It should inspire employees and give them a sense of purpose and direction. Adapt to Change: While the vision is long-term, it should be flexible enough to adapt to significant changes in the business environment without losing focus. Example: Google: Google’s strategic vision is to "organize the world’s information and make it universally accessible and useful." This vision reflects the company's focus on data, accessibility, and innovation, guiding its long-term business strategies, including investments in search engines, AI, and cloud computing. 27  SETTING OBJECTIVES Objectives are specific, measurable goals that guide a company’s efforts toward achieving its strategic vision. Objectives should be divided into two categories: strategic objectives and financial objectives. Strategic Objectives: These objectives focus on market positioning, competitive advantage, innovation, and operational excellence. Examples include gaining market share, launching new products, or improving customer satisfaction. Financial Objectives: These objectives focus on the company’s financial performance, such as revenue growth, profitability, return on investment (ROI), and cost control. Examples include increasing profit margins or achieving specific revenue targets. 28  SETTING OBJECTIVES Importance of Setting Objectives: Clarity and Focus: Objectives break down the vision into specific, actionable goals, giving the organization clarity about what needs to be done. Measurable Progress: Setting measurable objectives allows managers to track progress, evaluate performance, and adjust strategies when needed. Motivation and Accountability: Clear objectives provide motivation for employees and hold different departments accountable for achieving their targets. Example: Apple: Apple’s strategic objectives include maintaining leadership in innovation through new product launches, while its financial objectives focus on increasing profitability and expanding revenue through its ecosystem of products and services. 29  CRAFTING A STRATEGY Once the vision is clear and objectives are set, crafting a strategy involves developing a plan of action to achieve those objectives and create a sustainable competitive advantage. Key Steps in Crafting a Strategy: Assess Market and Competition: Understand the competitive landscape and market conditions. This involves identifying competitors, analyzing their strategies, and understanding customer needs. Identify Strengths and Opportunities: Leverage the company’s internal strengths (resources, capabilities, brand reputation) to take advantage of external opportunities. 30  CRAFTING A STRATEGY Choose a Strategic Approach: Select a strategy that fits the company’s situation. This could be a low-cost leadership strategy, differentiation strategy, or focused niche strategy. Allocate Resources: Ensure that sufficient resources (capital, human resources, technology) are allocated to execute the strategy effectively. Develop Functional Strategies: Each department (marketing, finance, production, R&D) must have specific plans that support the overall business strategy. Example: Walmart: Walmart’s strategy is focused on being a low-cost provider. It achieves this through economies of scale, supply chain efficiencies, and cost-conscious operational decisions. This strategic approach allows Walmart to offer lower prices than most competitors, driving sales volume and market dominance. 31  ECONOMIES OF SCALE Economies of scale mean that a business can make things cheaper when it makes more of them. As the company produces more, the cost per unit goes down because fixed costs are spread over more units. This makes things more efficient and cheaper. A simple explanation is: The more a company produces, the cheaper each item becomes. If you bake one cake, the oven costs a lot. Baking 100 cakes makes the oven cost less per cake. 32  ECONOMIES OF SCALE Are there also economies of scale in the family? Yes, economies of scale can also exist within a family, though on a smaller and more personal scale compared to businesses. The basic concept is the same: as the "production" or use of resources increases, the cost per unit (per person or item) can decrease because fixed costs are spread over more people or activities. 33  IMPLEMENTING AND EXECUTING THE STRATEGY Implementing and Executing the Strategy a strategy is about turning plans into action, Implementing while executing it proficiently ensures that the strategy is carried out effectively across all levels of the organization. Key Steps in Implementation: Assign Responsibilities: Delegate tasks and responsibilities to teams and individuals to ensure clear ownership and accountability. Create Detailed Action Plans: Develop detailed action steps, timelines, and performance milestones to ensure smooth execution. Provide Necessary Resources: Ensure departments and teams have the financial resources, technology, and personnel to execute the strategy successfully. 34  IMPLEMENTING AND EXECUTING THE STRATEGY Build a Supportive Culture: Foster a company culture that supports the strategy. This involves motivating employees, encouraging collaboration, and promoting innovation. Use Metrics and Feedback Loops: Set up monitoring and feedback mechanisms to track progress, measure performance, and identify any needed adjustments. Example: Toyota: Toyota’s operational excellence is rooted in its ability to implement and execute its strategy proficiently. Its "Just-in-Time" inventory system ensures efficiency and cost control while maintaining high-quality standards in production. 35  JUST-IN-TIME Just-in-Time (JIT) is a system used by companies to make sure they only get the materials they need, exactly when they need them. This way, they avoid storing extra materials or products, which saves money and space. 36  JUST-IN-TIME Key Points: No extra stock: Companies don’t keep a lot of extra products or materials sitting around in storage. Materials arrive as needed: They order materials just before they are going to use them, saving money and reducing waste. Less storage space: Since they don’t store large amounts of materials, they need less space and fewer resources to manage inventory. 37  EVALUATING AND ANALYZING Evaluating and Analyzing the External Environment and Internal Performance Continual evaluation and analysis are critical to ensuring that a strategy remains effective as internal and external conditions change. External Environment Analysis: PESTEL Analysis: Evaluate the Political, Economic, Social, Technological, Environmental, and Legal factors that could impact the company. Competitive Analysis: Continuously monitor competitors’ strategies, market share, and new innovations. Market Trends: Track changes in consumer preferences, technological advancements, and industry trends that could create opportunities or threats. 38  EVALUATING AND ANALYZING Internal Performance Analysis: SWOT Analysis: Regularly assess the company’s strengths, weaknesses, opportunities, and threats. Financial Performance: Analyze financial metrics such as profitability, cash flow, and cost structure to ensure the company is meeting its financial objectives. Operational Performance: Evaluate efficiency, productivity, and quality control to ensure that operations are supporting the strategy. Capability Assessment: Determine if the company has the necessary resources and capabilities to execute the strategy effectively or if new investments are needed. 39  EVALUATING AND ANALYZING Continuous Improvement: Regular evaluation allows for adjustments to the strategy. If external conditions shift or internal weaknesses are identified, the company can adapt its strategy accordingly to stay competitive. Example: Microsoft: Microsoft continuously evaluates its external environment to stay ahead in the technology industry. The company shifted its strategy toward cloud computing as part of its analysis of future technological trends, enabling it to become a market leader with Azure. 40... To achieve business success, companies must follow a structured process: Develop a strategic vision that gives direction and inspires stakeholders. Set objectives to guide short- and long-term efforts. Craft a strategy that leverages strengths and opportunities for competitive advantage. Implement and execute the strategy by assigning roles, allocating resources, and ensuring alignment across the organization. Evaluate the external environment and internal performance regularly to make necessary adjustments and maintain strategic relevance. By mastering these steps, a company can build a sustainable advantage and achieve 41 Table 2.1 Factors Shaping Decisions in the Strategy Formulation, Strategy Execution Process External Internal Considerations Considerations Does sticking with the company’s Does the company have an appealing present strategic course present customer attractive opportunities for growth value proposition? and profitability? What kind of competitive forces are What are the company’s industry members facing and are they competitively important resources acting to enhance or weaken the and capabilities, and are they potent company’s prospects for growth and enough to produce a sustainable profitability? competitive advantage? What factors are driving industry Does the company have sufficient change, and what impact on the business and competitive strength to company’s prospects will they have? seize market opportunities and nullify external threats? How are industry rivals positioned, Are the company’s costs competitive and what strategic moves are they with those of key rivals? likely to make next? What are the key factors of future Is the company competitively competitive success, and does the stronger or weaker than key 42  Strategic Inflection Point and Strategic Plan A strategic inflection point occurs when significant changes in an industry require that management must evaluate the risks of changing the company’s future direction rather than staying on its established course. A strategic plan maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results. 43  Stage 1: Developing a Strategic Vision, a Mission, and Core Values A strategic vision: Is top-management’s view of “where we are going.” Defines the firm’s direction and its future product–market– customer– technology focus to stakeholders. Is distinctive and specific to its organization. Avoids the use of generic, innocuous, and uninspiring language that could apply to almost any firm. Definitively states how the company’s leaders intend to position the firm beyond where it is today. 44  CORE CONCEPT: Strategic Vision A strategic vision describes “where we are going”— the course and direction management has charted, and the company’s future product–customer–market– technology focus. An effectively communicated vision is a valuable management tool for enlisting the commitment of company personnel to engage in actions that move the company in the intended direction. 45