Review

• Module II


  1. Deals with the basic concepts of Strategic Management and Planning

  2. Discusses topics about environment scanning internal and external
• Topics covered in Module II


  • Environmental Scanning
  • The Components of a Business Environment
  • SWOT Analysis; Competitor Analysis
  • Porter’s Five Forces Model of Competition
• By the end of the topics in the module

  1. Understand the concept and familiarize the conduct of Environmental Scanning

  2. Familiarize with components of business environment

  3. Describe the SWOT Analysis, Competitor Analysis and Porter’s Five Forces Model of Competition

  4. Understand the concepts of competitive advantage
• Module II Lesson III

  Focuses on SWOT Analysis; Competitor Analysis and Porter’s Five Forces Model of Competition
• SWOT Analysis


  An acronym for Strengths, Weaknesses, Opportunities, and Threats. Strengths and Weaknesses are internal factors, while Opportunities and Threats are external factors
• SWOT Analysis


  • Renowned tool for audit and analysis of the overall strategic position of the business and its environment
  • Identifies strategies to create a firm-specific business model aligning resources and capabilities to the environment
• SWOT Analysis


  Foundation for evaluating internal potential and limitations, probable opportunities and threats from the external environment
• Factors in SWOT Analysis

  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
• Strengths


  Qualities that enable accomplishment of the organization’s mission, basis for continued success, can be tangible or intangible
• Organizational strengths


  • Huge financial resources, broad product line, no debt, committed employees
• Weaknesses


  Qualities that prevent accomplishment of the mission and achieving full potential, factors that deteriorate influences on organizational success and growth
• Organizational weaknesses


  • Huge debts, high employee turnover, complex decision-making process
• Opportunities


  Presented by the environment within which the organization operates
• Examples of organizational weaknesses

  • Huge debts
  • High employee turnover
  • Complex decision-making process
  • Narrow product range
  • Large wastage of raw materials
• Opportunities


  1. Presented by the environment within which the organization operates

  2. Arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable

  3. Organizations can gain competitive advantage by making use of opportunities

  4. Organization should be careful and recognize the opportunities and grasp them whenever they arise

  5. Selecting the targets that will best serve the clients while getting desired results is a difficult task

  6. Opportunities may arise from market, competition, industry/government, and technology

  7. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter the telecom sector and compete with existing firms for revenue
• Threats


  1. Arise when conditions in the external environment jeopardize the reliability and profitability of the organization's business

  2. Compound the vulnerability when they relate to weaknesses

  3. Threats are uncontrollable

  4. When a threat comes, the stability and survival can be at stake

  5. Examples of threats are unrest among employees, ever-changing technology, increasing competition leading to excess capacity, price wars, and reducing industry profits
• Advantages of SWOT Analysis
• SWOT Analysis is instrumental in strategy formulation and selection
• SWOT Analysis involves a great subjective element and is best used as a guide, not as a prescription
• Successful businesses build on their strengths, correct their weaknesses, and protect against internal weaknesses and external threats
• Successful businesses keep a watch on their overall business environment and recognize and exploit new opportunities faster than their competitors
• Limitations of SWOT Analysis
• SWOT Analysis may cause organizations to view circumstances as very simple, leading to overlooking certain key strategic contacts
• Categorizing aspects as strengths, weaknesses, opportunities, and threats in SWOT Analysis might be very subjective due to a great degree of uncertainty in the market
• SWOT Analysis stresses the significance of strengths, weaknesses, opportunities, and threats but does not provide guidance on how an organization can identify these aspects for itself
• Limitations of SWOT Analysis not in control of management

  • Price increase
  • Inputs/raw materials
  • Government legislation
  • Economic environment
  • Searching a new market for the product which is not having overseas market due to import restrictions
• Internal limitations


  • Insufficient research and development facilities
  • Faulty products due to poor quality control
  • Poor industrial relations
  • Lack of skilled and efficient labor
• The Competitor Analysis


  Meaning, Objectives, and Significance
• Organizations must operate within a competitive industry environment and do not exist in a vacuum
• Analyzing an organization's competitors helps to discover weaknesses, identify opportunities, and threats from the industrial environment
• While formulating an organization's strategy, managers must consider the strategies of the organization's competitors
• Competitor analysis is a driver of an organization's strategy and affects how firms act or react in their sectors
• The organization does a competitor analysis to measure/assess its standing amongst the competitors
• Competitor analysis


  1. Driver of an organization’s strategy and effects on how firms act or react in their sectors

  2. Begins with identifying present as well as potential competitors

  3. Permits an organization to concentrate on those organizations with which it will be in direct competition
• Industry analysis


  Gives information regarding probable sources of competition, including all the possible strategic actions and reactions and effects on profitability for all the organizations competing in the industry
• Michael Porter's Five Forces Model

  • Threat of new potential entrants
  • Threat of substitute product/services
  • Bargaining power of suppliers
  • Bargaining power of buyers
  • Rivalry among current competitors
• The main objectives of doing competitor analysis
• Main objectives of doing competitor analysis

  • Study the market
  • Predict and forecast organization’s demand and supply
  • Formulate strategy
  • Increase the market share
  • Study the market trend and pattern
  • Develop strategy for organizational growth
  • Plan for diversification and expansion
  • Study forthcoming trends in the industry
  • Understand the current strategy strengths and weaknesses of a competitor
  • Insight into future competitor strategies
• Competitors should be analyzed along various dimensions such as their size, growth, profitability, reputation, objectives, culture, cost structure, strengths and weaknesses, business strategies, exit barriers, etc.
• Risk of entry by potential competitors

  • Potential competitors refer to the firms which are not currently competing in the industry but have the potential to do so if given a choice
  • Entry of new players increases the industry capacity, begins a competition for market share and lowers the current costs
  • The threat of entry by potential competitors is partially a function of extent of barriers to entry