Transcript SWOT Analysis: An Introduction

SWOT Analysis: An Introduction
Arturo B. del Ayre, R.E.E., M.B.M.
05 November 2008
Cold Rolling Mills
Over-all Picture
Overview
• The strategy is to look at the organizations
current performance (strengths and
weaknesses) and factors in the external
environment (opportunities and threats) that
might affect the organizations’ future.
Purpose of SWOT Analysis
• Help decision makers share and compare ideas
• Bring a clearer common purpose and
understanding of factors for success
• Organize the important factors linked to success
and failure in the business world.
• Analyze issues that have led to failure in the past
• Provide linearity to the decision making process
allowing complex ideas to be presented
systematically.
Internal-External Analyses
Internal Analysis:
• Examine the capabilities of the organization by
analyzing the organization's strengths and
weaknesses.
External Analysis:
• Look at the main points in the environmental
analysis, and identify those points that pose
opportunities for the organization, and those that
pose threats or obstacles to performance.
Strengths: Operational Definition
• Something that we truly do well,
• Something that we excel at versus the
competition,
• Something that we can build on;
• Something that truly differentiates our business,
• A key metric that is improving, etc.
Weakness: Operational Definition
• A real gap, a deficiency, a problem, or a key
metric that is going south;
• Something we’re not doing very well and that we
should be doing better;
• Something that’s dated that no longer applies—
even though it used to;
• Something important that we really
don’t know or aren’t sure about.
Opportunity: Operational Definition
• A favorable external condition
• Something (that we haven’t acted on or taken
advantage yet) that could impact us positively.
• New things that can be done to potentially
improve the business—that turn into
recommendations and actions.
Threats: Operational Definition
• Something external to the business that can
potentially impact us negatively:
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competitors
changing conditions in the marketplace,
the overall economy,
government regulations, etc.
• Part of the playing field that can’t be ignored.
• Some internal threats, e.g. hanging onto the
status quo when change is required
Strengths: Questions
• What makes us stand out from competitors?
• What advantages do we have over other
businesses?
• What are the major sources of our revenue and
profit?
• What is our market share of our various product
lines?
Strengths: Questions, cont’d
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Do we have strong brands?
Is the marketing/advertising effective?
What is our major focus as a company?
Do we have a pool of skilled employees?
Is the morale of the employees high?
Strengths: Questions, cont’d
• Are there rewards in place to create an
atmosphere conducive to excellence?
• What is the cost of capital?
• What is the stock price track record?
• Do we harness information technology
effectively?
Strengths: Questions, cont’d
• Do we manage our inventories efficiently?
• Have we demonstrated the ability to adapt and
change?
• Are we able to innovate?
• How have we withstood international
competition?
Weakness: Questions
• What do our customers complain about?
• What are the unmet needs of our sales force?
• What are the least profitable product lines for the
company?
• In what areas is the company not able to recover
costs?
Weakness: Questions, cont’d
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Which are the weak brands?
Is the marketing/advertising effective?
Is the company not focused?
Is the company able to attract talent?
What are our biggest expenditures?
Weakness: Questions, cont’d
• Are we able to raise money when it needs to?
• Does the stock price history inspire confidence?
• Will we be able to stand price pressure from
competitors?
• Have we been able to bring new ideas and
products to the market place?
Weakness: Questions, cont’d
• Do employees feel facilitated to perform their
best?
• Do employees have faith in management?
• Are the corporate governance standards high
enough?
• Are we losing out to competitors on the
technology front?
Opportunities: Questions
• Are there emerging trends that fit with our
company's strengths?
• What are the interesting trends? Is our company
positioned to take on those trends?
• Is there a product/service area that others have
not yet covered?
• What favorable circumstances are we facing?
• Are we entering new markets?
• Are we advanced in technology?
Threats: Questions
• Are our competitors becoming stronger?
• Are there emerging trends that amplify our
weaknesses?
• Do we see other external threats to the
company's success?
• Internally, do we have financial, development, or
other problems?
Threats: Questions, cont’d
• What obstacles do we face?
• What is our competition doing?
• Are the required specifications for our products
or services changing?
• Is changing technology threatening our position?
• What policies are local and national lawmakers
backing? Do they affect our industry?
SWOT Template
SWOT Analysis
Internal
Strengths
Weaknesses
External
Opportunities
Threats
SWOT to Strategies
• Turn NEGATIVES into POSITIVES
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Opportunities  Strengths [S-O Strategies]
Weaknesses  Opportunities [S-O Strategies]
Threats  Strengths [S-T Strategies]
Threats  Weaknesses [W-T Strategies]
Objectives, Strategies, Policies
• Objectives  Specific Results that an
organization seeks to achieve in pursuing the
basic mission, usually employing SMART.
• Strategies  Action Plans to undertake in
response to or in anticipation of the environment
to accomplish the objectives.
• Policies  Implementing Guidelines to achieve
the objectives and strategies.
Objectives, Strategies, Policies
Example:
• Objective  Garner 90% market share of
Domestic Steel Market by 2009.
• Strategy  Develop new products to cater
to local steel fabricators
• Policy  Hire marketing staff with local
experience; or 10% discount on cash
purchases for local steel fabricators.
Operational Strategies
• Cost [cost reduction and waste elimination],
• Quality/Reliability [quality for products,
reliability for facilities and equipment],
• Flexibility [ability to respond to changes in
volume requirements, product or service
requirements, or changes in product mix] and
• Availability [products and services available on
short notice through inventory maintenance].
Rumelt’s Criteria for Strategies
• Consistency – a strategy should not
present inconsistent goals and policies.
“Red flags” of inconsistent strategies:
• Managerial problems continue despite personnel changes.
Problems tend to be issue-based rather than people-based.
• Success of one means failure of another department.
• Policy problems and issues brought to top for resolution.
• Consonance – a strategy must represent
an adaptive response to the external and
internal environment.
Rumelt’s Criteria for Strategies
• Feasibility – a strategy must neither
overtax available resources (abilities,
competencies, skills and talents) nor create
unsolvable problems.
• Advantage – a strategy must provide for
the creation and/or maintenance of a
competitive advantage in resources, skills
and position.
SWOT Matrix of Strategies
Prioritization
• Key points: Once the SWOT analysis has been
completed, mark each point with:
• Things that MUST be addressed immediately.
• Things that can be handled now.
• Things that should be researched further.
• Things that should be planned for the future.
Brainstorming Do’s and Don’ts
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Don't be modest - be realistic.
Respect: No criticism or ridiculing of any ideas
Encourage everyone to participate.
Avoid lengthy discussions on the pros and cons
of an idea, this will be done later during the
investigation phase.
• Problems  Results  Tasks
•Action Plan (summary of idea), a list of further
investigation requirements, responsible person and
deadline
Workshop
A. Brainstorming
• Internal – External Factors
• Strengths, Weaknesses, Opportunities, Threats
• Problems  Results  Tasks
• SWOT Template
B. SWOT to Strategies
• SWOT Matrix of Strategies
C. Prioritization [Problems  Results  Tasks]
References
• Stevenson, William J. (1992). Production /
Operations Management, 4th Edition
• Allen, Tim (2003). Strategic Management.
Prentice Hall
• Bonacorsi, Steven (2006). SWOT Analysis.
Advanced Integrated Technologies Group