S W O T Analysis

1. S W O T Analysis Internal Analysis of: • Strengths and Weaknesses • Resources and Capabilities • Competitive Competencies

2. The Aim of Strategy is .... to find a position in the industry where the company can best defend itself against competitive forces or can influence them in its favour. Porter 1980

3. Fit between Firm Strategy and its Environment Creates a New Environment where there is a New Fit between Strategy and the Environment Re-shape Environment by Choice of Strategy Competitive Success Requires The Degree of Fit of the Strategy with the Existing Environment

4. Internal Analysis • The SW part of the SWOT analysis that often forms the first part of any strategic assessment of a company. This analysis feeds into the development of strategic options that a company is considering • The internal analysis is related to how the firm develops and leverages its competitive advantage.

5. Internal Analysis When we conduct an Internal Analysis we are trying to assess: • The competitive strengths of the firm • The competitive weaknesses of the firm • Its resources • Its capabilities

6. Internal Analysis • The firm must build on its strengths and use them to leverage any competitive advantage it has • Minimise or neutralise any weaknesses and ensure that the firm does not rely on these elements to build its strategy around

7. Strategy built around SW • Identify - Key Success Factors (KSFs) ie what factors are necessary to create success in an industry • Identify - Resources & Capabilities (R&C) the firm can call upon • Analyse & Evaluate - the gap between the KSFs and the R&C

8. Key Success Factors Key Success YES - High Factors Performance Technology & MATCH ? Market Context Resources & NO - Poor Capabilities Performance of the Firm

9. Typically we • Define the Strengths and Weaknesses • Assign the priorities to close the gap • Develop a strategy to enhance the strengths and reduce the weaknesses This assumes that we can identify such KSFs and make sense of what is happening. Frequently we can’t, and when we can it is probably too late as the game has moved on.

10. Analysing Resources Providing the Data Base Identify the attributes Measure its effectiveness Measure its efficiency Drawing Comparisons Assessing the Balance Historical analysis Company portfolio Industry norms Internal skills Normative criteria Key success factors Costs... etc Identification of Capabilities Distinctive competencies Resource assessment Evaluation of gap between success factors & SW profile

11. Typical SW Items • Financial Aspects • Marketing Aspects • Production Aspects • Personnel Aspects • Cost Base

12. SW Profile • Identify Strengths and Weaknesses • Rank them in importance in leveraging Competitive Advantage • Score them against desired criteria • Total and assess

13. Quest for Competitiveness in the 1990s Restructuring/ Process Re-inventing Downsizing Re-engineering the Business Re-evaluating Continual the Portfolio Improvement Smaller Better Different Hamel & Prahalad 1994

14. T O W S Matrix Internal Factors Strengths Weaknesses Opportunities LeverageConstraint OS OW External Factors Vulnerability Problematic TS TW Threats Source: adapted from- Weihrich, H (1982)

15. SWOT Profile and Possible Strategies O Reconfiguration Strategy Aggressive Strategy S W Turnaround Strategy Diversification Strategy T

16. Resources & Skills Resources and skills can erode over time • Need to continually invest • Need to continue to be innovative • Need to continue to renew the skills base Examples of firms that “took their eye off the ball “

17. Resources as the basis for corporate profitability Conventional approaches to competitive advantage focus upon the “generic” sources (cost, differentiation) Resource-based view concentrates upon the resources and capabilities that underlie these advantages.

18. RBV approach to strategy analysis - (R M Grant) Strategy Competitive Advantage Capabilities Resources Identify Gaps Invest and Augment Resource Base We see this later in this presentation

19. The Role of Resources and Capabilities in Strategy Formulation

20. Two Important Points: • Individual resources; items of capital equipment, the skills of individual employees, patents, brand names, etc. • How the resources work together to create capabilities and competitive advantage

21. Link between R&C and Strategy Shape Build Resources & Capabilities Strategies (Competencies)

22. Elements in Distinctive Competencies Superior Efficiency Superior Quality Superior Innovation Superior Customer Responsiveness Distinctive Competencies

23. Competitive Advantage Simplified Superior Quality Competitive Advantage Low-cost Differentiation Superior Customer Responsiveness Superior Efficiency Superior Innovation

24. Day & Wenley’s Model of Comp Adv Superior Resources Superior Skills • Positional Advantage • Differentiation • Low-cost • Niche • Performance • Outcomes • Satisfactory • Premium Invest to maintain comp adv Day & Wensley 1988

25. Durability of Comp Advantage Durability of a Firm’s Competitive Advantage Barriers to Capability Industry Imitation of Competitors Dynamism Lets expand on this a little more

26. Sustainability of Com Adv depends on: • Durability • Transparency • Replicability • Transferability

27. Resources & Skills of a Firm • Are central when considering strategy • They are primary constructs around which the firm can • establish its identity • frame its strategy • Fundamental to leveraging advantage • Primary sources of the firm’s profitability.

28. Resources as the Basis of Superior Profitability Patents Brands Retaliatory capacity Barriers to Entry Industry Attractiveness Market share Monopoly Firm size Financial Resources Vertical Bargaining Power Rate of Profit in Excess of the Competitive Level Process Tech Size of plants Access to low-cost inputs Cost Advantage Competitive Advantage Brands Product technology Marketing, distribution, service capabilities Differentiation Advantage Source: R M Grant(1991)

29. Issues surrounding Resources &Capabilities Resources and Capabilities can be often be: • Transferable • Replicable • Transparent If so, then sustaining comp adv is difficult, but firms can use these factors to their own advantage in their own strategies Examples ...

30. Examples Industries where Resources & Skills are easily transferable or imitated: • Retailing • Financial services • Fashion • Toys Firms have brief windows of opportunity to exploit their strengths before imitators erode it away.

31. However Firm can exploit these issues in developing their own strategies when they expand or diversify their interests: • Geographic expansion • Product expansion • Mergers • Alliances

32. BUT • Can success in the home market lead to success in the foreign market ? • Marks & Spencer Plc • Sainsburys • Bass • Dixons • Laura Ashley etc.. • The evidence is mixed for these firms

33. WHY is this difficult ?Barriers. • Barriers to Transferability • Barriers to Replicability • Barriers to Durability • Transparency

34. But can we actually ‘see’ into other firms ? • Success factors are ‘difficult to identify never mind observe • Firms are entrepreneurial and change is a way of life • The game moves on • Identify the success factors now and act, may be too late, firm need ‘foresight’ Entrepreneurial view of Strategy …. Austrian School

35. And Finally A Model to show how Resources & Capabilities are Linked to Strategy Formulation

36. INDUSTRY KEY SUCCESS FACTORS COMPETITIVE ADVANTAGE STRATEGY ORGANIZATIONAL CAPABILITIES RESOURCES TangibleIntangibleHuman