Why strategic plans fail
Document Sample
SWOT analysis is a framework for generating strategic alternatives from a situation analysis.
SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. The SWOT framework was
described in the late 1960's by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in Business Policy, Text
and Cases (Homewood, IL: Irwin, 1969).
Benefits of SWOT Analysis
Concentrates on the issues that potentially have the most impact.
Useful when a very limited amount of time is available to address a complex strategic situation.
Simple, in that it requires no extensive training
Flexible, it can enhance strategic planning in the absence of extensive marketing information systems.
Helps integrate and synthesize diverse information, both of a quantitative and qualitative nature.
Can foster collaboration between managers of different functional areas.
RIGORIOUS SWOT ANYLYSIS STRATEGIC PLANNNING APPROACH
C.R. Marshall - University of Wisconsin Stevens Point
Gary Mullins - University of Wisconsin Stevens Point
Robert E. Allen - Robert Morris College
The steps are as follows:
I - List Strengths, Weaknesses, Opportunities, and Threats.
1. Basic internal on axis analysis
2. Basic external on axis analysis
3. Cross axis analysis
II - Use the list to Determine Your Competitive Position.
4. Quadrant identification
III- Based on competitive position, select an appropriate strategy
5. Current strategy analysis
6. New strategy candidate list development
7. Analysis and selection of candidate strategy
List Strengths, Weaknesses, Opportunities, and Threats.
1. Internal on axis analysis
Internal analysis deals with company strengths and weaknesses. For the purpose of list making, the two basic questions are:
What are the organization’s Strengths?
What are the organization’s Weaknesses?
Note weights:
-NOT JUST - Do the strengths outweigh the weaknesses
-Not all strengths and weaknesses are equal. - assign weights to the factors
Note Interaction and substitution effects:
-Interaction between factors
For example, an organizational strength, such as having a marketing department with the ability to correctly identify changing
customer needs, could be completely undermined by the inability to shift production to the newly desired services, products or
product features. On a personal rather than an organizational level, an individual’s skill with computers may be a reasonable
substitute for a weakness in mathematics. A computer whiz with moderate but less than stellar math skills may still be successful.
2. External on axis analysis
In list-making for external analysis the questions are:
What Opportunities does the organization have?
What Threats burden the organization?
Common mistakes in steps 1 and 2
-Not Separating internal versus external nature of SWOT analysis.
-Counting list items or to weigh the factors without considering interaction and substitution effects.
The goal at this point is still the determination of overall company position, Strength versus Weakness and Opportunity versus Threat.
Strengths Weaknesses
1. your specialist marketing expertise. 1. lack of marketing expertise
2. a new, innovative product or service 2. undifferentiated products and service (i.e. in relation to your
3. location of your business competitors)
4. quality processes and procedures 3. location of your business
5. state-of-the-art equipment 4. poor quality goods or services
6. any other aspect of your business that adds value to your 5. damaged reputation
product or service 6. problems managing inventories
7. poorly motivated or untrained staff
8. inefficient or obsolete production methods
Opportunities Threats
1. a developing market such as the Internet. 1. a new competitor in your home market
2. mergers, joint ventures or strategic alliances 2. price wars with competitors
3. moving into new market segments that offer improved 3. a competitor has a new, innovative product or service
profits 4. competitors have superior access to channels of distribution
4. a new international market 5. taxation is introduced on your product or service
5. a market vacated by an ineffective competitor
Questions to help you determine SWOTs
Strengths Weaknesses
What is golden about your company? What looks a bit rusty inside your company?
What do you do well (in sales, marketing, operations, management)? What do you need (customer service, marketing,
What are your assets? accounting, planning)?
What are your core competencies? (I.e., what are essential business operations Where do you lack resources?
you do very well?_ What can you do better?
What are the most profitable products/services? Where are you losing money?
What experience do you have?
Opportunities Threats
Where is the blue sky in your environment? Where are the red alerts in your environment?
What new needs of customers could you meet? What are the negative economic trends?
What are the economic trends that benefit you? What are the negative political and social trends?
What are the emerging political and social opportunities? Where are competitors about to bite you?
What are the technological breakthroughs? Where are you vulnerable?
Where niches have your competitors missed?
Simple rules for successful SWOT analysis
Search Extensively for Competitors
-The key is not to overlook any competitor, whether it be a current rival or one on the horizon.
• Brand competitors
• Product competitors
• Generic competitors
• Total budget competitors.
-Examine Issues from the Customers' Perspective
-Separate Internal Issues from External Issues
• The key test to differentiate a strength or weakness from an opportunity or threat is to ask, "Would this issue exist if the
firm did not exist?" If the answer is yes, the issue should be classified as external.
• Failure to understand the difference between internal and external issues is one of the major reasons for a poorly conducted
SWOT analysis.
3. Cross axis analysis
Cross axis analysis is comparing internal and external factors and reevaluating your position on each axis.
This relationship is shown in figure 1.
Opportunities
Turnaround Aggressive
Weaknesses Strengths
Defensive Diversificatio
n
Threats
Threats Figure 2. SWOT Graphic (adapted from Pierce and Robinson 2004)
Placing a firm both vertically and horizontally on figure 1;
Look at whether or not weaknesses undermined strengths and threats undermined opportunities.
Looking at our organization as it relates to our environment.
Determining Competitive Position
4. Quadrant identification
Strengths and weaknesses can be compared to determine where the company stands internally. Opportunities and threats can be
compared to summarize the external environment.
In the previous step we refined our assessment of the competitive position of the firm. With this revised assessment we can properly place
the firm in one of the four quadrants in figure 2, which adds the competitive position information..
Table 1 : Linking SWOT Elements of Competitive Position (adapted from Pierce and Robinson 2004)
SWOT Elements Present Competitive Position
Aggressive
Strengths and Opportunities
Strengths and Threats Diversification
Weaknesses and Opportunities Turnaround
Weaknesses and Threats Liquidation
Aggressive - Can aggressively use your
strengths
to take advantage of those opportunities.
Diversification - Enter into an
environment that provides you with
opportunities to use your strengths.
Turnaround - Eliminate the weaknesses
and replace them with strengths.
Liquidation - With no hope and no
chance, you are unlikely to succeed.
Table 2. Generic Strategies (adapted from Pierce and Robinson 2004)
Selecting the Appropriate Strategy
5. Current strategy analysis
Analyze Current strategy; placing your current strategy on the list of possible candidates.
6. New strategy candidate list development
Based on your firm’s position in figure 2, candidate strategies can be identified from table 3.
Competitive Rationale Candidate Generic Strategies
Position
Aggressive Take advantage of Concentrated Growth
Strengths and Market Development
Opportunities
Product Development
Innovation
Diversification Take advantage of Concentric Diversification
Strengths, acquire Conglomerate Diversification
Opportunities, move
Corporate Combinations
away from Threats
Turnaround Eliminate Weaknesses Horizontal Integration
and acquire the Vertical Integration
Strengths necessary to
Turnaround
take advantage of existing
Opportunities Corporate Combinations
Defensive Exit or protect yourself until Divesture
you can recover Liquidation
Bankruptcy
Table 3. Generic Strategies by Competitive Position
Generic Strategy Description
Concentrated Growth Producing more of your current product for distribution in your current markets
Market Development Offering current products in new markets or through new channels
Product Development Substantial modification of existing product or new related product offered to current customers
Innovation Ongoing introduction of new products
Horizontal Integration Growth through acquisition of similar firms operating at the same stage of the production / marketing stage
Vertical Integration Acquisition of firms that supply inputs or purchase output.
Concentric Diversification Acquisition or internal generation of separate businesses with synergistic possibilities
Conglomerate Diversification Acquisition of unrelated businesses that represent promising investment opportunities
Turnaround Retrenchment through cost and/or asset reduction
Divesture Sale of major components of a firm
Liquidation Firm is sold off in whole or in parts (includes liquidation bankruptcy)
Bankruptcy In reorganization, the firm seeks protection from creditors and reorganizes in hopes of survival
Corporate Combinations Joint ventures, strategic alliances and consortia
7. Analysis and selection of candidate strategy
Being in the aggressive quadrant suggests an aggressive strategy. Four aggressive strategies are listed. Which choice is best? That depends
on the situation of the particular firm. In a fashion similar to the example in step six, each potential candidate must be evaluated relative to
the particular strengths, weaknesses, opportunities and threats present in the firm and their environment.
Where to Find Information for SWOT Analysis
Company’s business reports , Annual reviews, Published performance data on financial resources, marketing and operations, Current
suppliers, Key stakeholders groups, Journals on marketing, strategy, human
