Chapter 9 Flashcards
SWOT Analysis
Strengths (internal) Weaknesses (internal) Opportunities (external) Threats (external) Purpose of the SWOT: To organize research and perspectives into a useful framework for strategic decision-making.
Strengths and Weaknesses: Key Concepts
Gap analysis identifies the distance between a firm’s current position and its desired position with regard to an internal weakness. When possible, a firm should take action to close the gap, especially when it leaves a firm vulnerable to external threats.
The value chain helps a firm analyze its strengths and weaknesses, and understand how they might translate into competitive advantage or disadvantage.
Firm resources are translated into strengths (or weaknesses) via strategic capabilities, the mechanism through which individuals in an organization coordinates efforts along one or more resources to solve a particular problem.
Sources of Organizational Strengths and Weaknesses (3)
Human Resources: The experience, capabilities, knowledge, skills, and judgment of all the firm’s employees.
Organizational Resources: The firm’s systems and processes, including its strategies at various levels, structure, and culture.
Physical Resources: Plant and equipment, geographic locations, access to raw materials, distribution network, and technology.
Human Resources issues to consider
Issues to Consider
Board of directors: Tenure, experience (contributions), and present level of investment/ability to represent various stakeholders
Top managers, including the CEO: Background, capabilities (strengths/weaknesses), experience
Other managers & employees: Effective HR planning, expertise, training & development, turnover, effective performance appraisal (PA)
Organizational Resources
Issues to Consider
Consistency among corporate, business, and functional strategies
Consistency between organizational strategies and the firm’s mission/goals
Consistency between the firm’s strategies and its culture
Consistency between the firm’s strategies and its structure
Relative position in the industry
Product and service quality
Reputation of firm and/or brand
Physical Resources
Issues to Consider
Currency of technology
Quality and sophistication of distribution network
Production capacity
Reliable access to cost-effective sources of supplies
Favorable location(s)
VRIO Framework
Valuable: Can be employed to exploit an opportunity or neutralize a threat. If only valuable, then there is only parity with rivals. There is no competitive advantage.
Rare: Controlled by one or a few entities. If only valuable and rare, competitive advantage exists but is likely to be temporary.
Imitable: Costly for rivals to duplicate. If valuable, rare, and inimitable, the firm has the potential for long term competitive advantage.
Organization: The firm possesses the appropriate capabilities to leverage the resource. If valuable, rare and inimitable, and if the firm has the appropriate capabilities, then sustainable competitive advantage can be achieved.
Opportunities and threats
Whereas strengths and weaknesses are internal, opportunities and threats are external.
Source #1: Application of macroenvironmental forces to the organization.
Source #2: Application of industry analysis (Porter’s five-force model) to the organization
Resources vs Capabilities
The unique combination of a firm’s human, organizational, and physical resources— as transformed into capabilities—should be emphasized in its strategy
Opportunities vs Alternatives
Opportunities represent the application of forces in the external environment to a specific organization. Alternatives emanate from the SW/OT matrix (discussed later) and represent specific courses of action that the organization may choose to pursue.
Opportunities and threats. Pitfall #1 to avoid.
Don’t confuse external opportunities with internal strengths and weaknesses. Factors associated with the firm such as a poor financial position, an ineffective marketing strategy, or a strong brand image are internal factors and therefore must be classified as strengths or weaknesses. In contrast, factors outside the firm such as demographic changes, competitive threats, or recent legislation are external factors and therefore must be classified as opportunities or threats.
Opportunities and threats. Pitfall #2 to avoid.
Distinguish between opportunities and alternatives. These words are often interchanged in everyday speech, but they are not synonymous.
Opportunities represent the application of macroenvironmental forces to a specific organization. Alternatives emanate from the SW/OT matrix and represent specific courses of action that the organization may choose to pursue.
The SW/OT Matrix
The SW/OT matrix utilizes the SWOT analysis to develop strategic alternatives.
Look for combinations of internal and external factors that might lead to an alternative.
Alternatives are evaluated in the subsequent step.
SW/OT Matrix: 4 Categories of Alternatives
Strength–Opportunity: “Offensive” alternatives, utilize a strength to address an opportunity.
Weaknesses–Threat: “Defensive” alternatives, eliminate or minimize a weakness in order to minimize the effect of a threat.
Strength–Threat: Utilize a strength to minimize the effect of a threat.
Weakness–Opportunity: Shore up a weakness to enable the organization to take advantage of an opportunity.
SLSC Matrix (strategy level-strategy complexity)
The SLSC matrix compares and contrasts the alternatives on the basis of strategy level—corporate, business, or functional—and strategy complexity—the extent to which executing the strategy would require substantial change, resources, and uncertainty. All things equal, the lower the strategy level (i.e., closer to functional level) and the less complex the strategy, the easier it will be to execute. Alternatively, the higher the strategy level and the more complex the strategy, the more difficult execution is likely to be.
