Strategic Position and SWOT Analysis Lecture Notes
Introduction
Lecture from Open Tuition.
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Focus on methods for analyzing strategic position, specifically SWOT analysis.
SWOT Analysis Fundamentals
SWOT Analysis: Analyzes strengths and weaknesses (internal), opportunities and threats (external).
Strengths and Weaknesses: Internal factors such as strong marketing abilities or weak IT systems.
Opportunities and Threats: External factors such as changes in government, interest rates, exchange rates, competition challenges, or takeovers.
Example: Strong R&D but poor marketing capabilities.
Utility: Always works for appraising a company's position, but use more tools if recommended.
Exam Note: Avoid overusing SWOT; consider additional tools if suggested.
SWOT Matrix Application
Strengths and Opportunities: Combine internal strengths with external opportunities, e.g., strong finances with a competitor in bad financial state for a takeover.
Weaknesses and Opportunities: Address internal weaknesses to leverage opportunities, e.g., raising capital to buy a struggling competitor.
Strengths and Threats: Use strengths to counter threats, e.g., reducing prices to deter new market entrants.
Weaknesses and Threats: Avoid scenarios where threats attack weaknesses; may lead to company failure, as in the British car industry in the 1960s.
Example: UK car industry vs. Japanese quality cars.
Action-Oriented Analysis
Purpose: Analysis should inform action plans and not just be academic exercises.
Strategy: Match strengths to opportunities and address weaknesses to exploit opportunities or mitigate threats.
Response Examples: Using strong financials for acquisitions, recruiting skilled managers for international operations, price wars to ward off new entrants.
Organizational Objectives
Importance: Objectives help translate strategic information into actionable goals.
Definition: More concrete targets deriving from broad business aims like success and profitability.
Types: Specific, measurable, agreed, achievable, relevant, and time-limited (SMART).
Setting SMART Objectives
Specific: Clear and explicit goals, e.g., profit increase.
Measurable: Ability to track and quantify progress.
Agreed/Achievable: Consensus on objectives being attainable.
Relevant: Objectives must align with overall corporate goals.
Time-Limited: Set deadlines for achieving objectives.
Ensuring Consistency
Vertical Consistency: Align subsidiary objectives with overall corporate objectives.
Horizontal Consistency: Ensure functional goals (e.g., sales and production) are aligned.
Temporal Consistency: Logical progression of objectives over time.
Comprehensive and Balanced Objectives
Comprehensive: Cover all important performance measures to avoid neglect in other areas.
Long-term vs Short-term: Balance short-term gains with long-term sustainability.
Pitfalls: Focusing too much on short-term financial results may harm long-term objectives.