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Strategic Fit
5-1
SWOT Analysis
Internal
S1 S2 S3 S4 S5 W1 W2 W3 W4 W5 O6 (customer) T1 T2 T3
External
O1 O2 (supplier position) O3
T7
Potential Strategic Ideas (S2, S3, S4) - Basis for core competency, core capability S5 - doesnt contribute W5 - No problem
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-2
T1, T2 - Big threats T3, T7 - Not major problems (W1, W2, W3, W4) - Need to be addressed
SWOT Summary
Threats
Avoid
Search
Strengths
Weaknesses
Internal Factors
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-3
SWOT Analysis
R&D, high tech Deep pockets STRENGTHS (Internal) Infrastructure Luxury car/ truck dominance Infrastructure/ small cars Distribution network Joint Ventures Lead times WEAKNESSES (Internal) Differentiated models Platform madness Productivity, efficiency, costs Bureaucracy/ leadership Incentive system Vertical integration Worldwide presence Expansion Buy U.S. Leverage tech. and financial know-how Better segmentation Cloning Saturn Coopetition Competition Labour unrest Brand loyalty disappearance Perception, quality, reliability, durability Consumer social awareness Rising costs Supplier backlash
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-4
OPPORTUNITIES (External)
THREATS (External)
STRENGTHS (Internal) Meets change proactively Leadership Distribution Centres Standardization of stores Use of technology Corporate culture Participation of associates Financial strength Supplier support and networking Inventory control and distribution OPPORTUNITIES (External) Buy American strategy Backward expansion Catalog Shopping Product packaging Expanding store format Potential technology for home shopping
WEAKNESSES (Internal) Low margins High cost of distribution High cost of travel for executives High dependency on technology Non personalized purchasing Dependency on Sams leadership
THREATS (External) Economic environment Many discount businesses Competition from other discounters Cable home shopping
5-5
Cons
It has a tendency to oversimplify the situation by classifying the companys environmental factors into categories in which they may not always fit. It does not generate a companys strategy. It can be very subjective. It often represents a view particular to a specific point in time. It is a starting point for strategy development.
5-6
Tech-Check
(Based on SPACE Analysis)
High
Acquire Capability
Grow/Protect Capability
Wal-Mart
Technology Potential Outsource Capability Low Low Company Capability High Maintain Capability
5-7
Avoid
Potential expansion
Exploit
Search
Internal Factors
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-8
Avoid
Exploit
safety record Opportunities Strengths
Search
Weaknesses
Internal Factors
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-9
Improved Products
Product variants; imitations
New Products
Product line extension
Existing Market
Discount City
Aggressive promotion
Market Options
Expanding Market
Product Testing
Market extension Conglomerate diversification
New Market
Vendor Store
Video Shopping
5-10
Improved Products
Product variants; imitations
New Products
Product line extension
Market Options
Existing Market
CANDU 6 SPEL
Aggressive promotion
Expanding Market
PU Burn - US
PU Burn - Russia
PU Burn - Intl
New Market
5-11
Product Alternatives
Present Products
Market penetration
Improved Products
Product variants; imitations
New Products
Product line extension
Market Options
Existing Market
Expanding Market
Aggressive promotion
Vertical diversification
New Market
5-12
Product Alternatives
Present Products
Market penetration
Improved Products
Product variants; imitations
New Products
Product line extension
Market Options
Existing Market
Expanding Market
Aggressive promotion
Vertical diversification
Specialty Stores
New Market
Market development
Market extension
Conglomerate diversification
5-13
Product Alternatives
Present Products
Market penetration
Improved Products
Product variants; imitations
New Products
Product line extension
Market Options
Existing Market
Expanding Market
Aggressive promotion
Vertical diversification
New Market
- fleet services (lease and Maint.) - new car leasing (separate storefront)
Market extension
Market development
Conglomerate diversification
5-14
Market Options
Existing Market
Expanding Market
Public (telco)
ATM LAN
5-15
Cons
It does not give any indication on whether the company is doing better or worse It does not provide any comparison between the company and its competitors It assumes that the company is indeed growing and then ignores some strategic alternatives related to downsizing or withdrawal from some areas of business
5-16
Diversification
Company Capability
High
Market Segmentation
Wal-Mart
Normal
Maintain Position; Expansion; Market Product Penetration Differentiation Imitation; Phased Withdrawal
Average
Low
Cash Generation
Attractive
Unattractive
Market Potential
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-17
Checklist 1. Market Share 2. Relative Market Share 3. Product Quality 4. Market Growth 5. Vertical Integration 6. New Product Activity 7. R&D/Sales Ratio 8. Marketing/Sales Ratio 9. Productivity 10. Capacity Utilization 11. Investment/Sales Ratio 12. Inventory Level Low Low Low Low Low Low Low Low Low Low Low Low
Ratings Medium Medium Medium Medium Medium Medium Medium Medium Medium Medium Medium Medium High High High High High High High High High High High High
5-18
(Cash use)
???
? ?
$
High
High
Wal-Mart
Strength of Company
Invest, Grow
Divest, Withdraw
Low Low High
Industry Attractiveness
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-20
SPACE
Factors determining environmental stability:
Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry into market Competitive pressure/rivalry Price elasticity of demand Pressure from substitute products Many High Large Wide Few High Elastic High 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 Few Low Small Narrow Many Low Inelastic Low
5-21
SPACE
Factors determining financial strength:
Return on investment Leverage Liquidity Capital required vs available Cash flow Ease of exit from market Risk involved in business Inventory turnover Economies of scale and experience Low Unbalanced Unbalanced High Low Difficult Much Slow Low 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 High Balanced Solid Low High Easy Little Fast High
Average = 4.2
5-22
SPACE
Factors determining industry strength:
Growth potential Profit potential Financial stability Technological know-how Resource utilization Capital intensity Ease of entry into market Productivity, capacity utilization Other: Manufacturers bargaining power Low Low Low Simple Inefficient Low Easy Low Low 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 High High High Complex Efficient High Difficult High High
0 1 2 3 4 5 6
Average = 3.8
5-23
SPACE
Factors determining competitive advantage:
Market share Product quality Product life cycle Product replacement cycle Customer loyalty Competition capacity utilization Technological know-how Vertical integration Other: Speed of new product introductions Small Inferior Late Variable Low Low Low Low Slow 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 Large Superior Early Fixed High High High High Fast
0 1 2 3 4 5 6
5-24
SPACE (Wal-Mart)
Financial Strength 4.2 Conservative (Focus)
(0.7, 1.6)
Competitive Advantage
-2.2
3.8
Industry Strength
Defensive -3.5
Competitive (Differentiation)
Environmental Stability
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-25
SPACE Consequences
Aggressive (Cost Leadership) concentric diversification concentration vertical integration WIDEN COMPANY! Competitive (Differentiation) concentric merger conglomerate merger turnaround NARROW MARKET! Conservative (Focus) Status Quo Diversification for competitive skills acquisition Diversification to use cash flow financial portfolio basis WIDEN MARKET! Defensive liquidation retrenchment divestment NARROW COMPANY!
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-26
Pros
It summarizes a large number of strategic issues on a few dimensions. It clearly shows the current strategic position of the company It clearly shows the direction or type of strategy the company need to go. It is a high accuracy representation.
Cons
It is based on a survey which could appear as a lack of objectivity It may not be applicable to all kind of sectors. It can be totally misleading if factors were wrongfully weighted It requires intensive information and extensive inputs.
5-27
Strong
Unique (Differentiated)
Market Position
Niche (Focus)
Weak Focused (Protected)
Defensive (Survival)
Strategic Outlook
Growth (Competitive)
5-28
Focus
Defensive
Gamesmanship
Liquidation ES Retrenchment
Turnaround
5-29
Conservative Aggressive
2 1
Late Market Behaviour - dominant players are aggressive - rest are competitive
Aggressive Leader
1: Exit Strategy 1,2: Exit and Disappear (dog) 3: Exit to other markets
5-31