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A firm's strengths are its resources and capabilities that can be used for developing a competitive advantage.

Strong brand names Good reputation among customers Affiliation/registeration with some reknowned Institutions.

The absence of certain strengths are a weakness. Lack of patent protection A weak brand name Poor reputation among customers High cost structure Lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. For example, a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.

The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include: An unfulfilled customer need Arrival of new technologies Loosening of regulations Removal of international trade barriers

Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

Shifts in consumer tastes away from the firm's products Emergence of substitute products New regulations Increased trade barriers

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed.

The SWOT matrix, can be changed into what is known as the TOWS Matrix that is shown on the next slide:

TOWS Analysis

STRENGTHS

WEAKNESSES

OPPORTUNITIES

S-O STRATEGIES

W-O STRATEGIES

THREATS

S-T STRATEGIES

W-T STRATEGIES

S-O strategies pursue opportunities that fit well the company's strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. W-T strategies make a defensive plan to prevent the firm's weaknesses from making it susceptible to external threats.

Albert Humphrey (1960s-70s) 1.Satisfactory 2.Opportunity 3.Fault 4.Threat SOFT Analysis

Urick and Orr (1964)

From SOFT to SWOT


LET ME TELL YOU . . . . SWOT IS A USELESS THING

Planned Strategy: 1-Goal or objective

2-SWOT
3- Evaluation SWOT Results 4- Action

Aim Asses s Activat e Appl y

Goal or objective Apply SWOT Evaluate SWOT Results Take action

A SWOT analysis with the objective of: "To double the business in the next three years."
. Strengths

and Oppertunities In business since 19xx. MD has xx years of experience in the industry and as head of the company. Sales and profits have grown steadily

Weakness and Threats Jnr. Manager has no experience or education for his position of Sales Manager Marketing assistant has little marketing experience

Sales and profits were Rs.xx million in 19xx. MD responds personally to all customer complaints MD wants to get involved in the field of marketing "We have an excellent reputation for quality," MD

MD says that he is not a good executive Employees feel free to complain directly to MD MD can't find a good General Manager at the salary he wants to pay Company is having trouble selling GEMA (its new product) MD is worried about converting 5,000 GEMA into cash

Manufactured Products," "Modifications" and "Repairs" have Gross Profit margins greater than 50%

Stock held increased too much during recent months with resulting interest cost of RS.4,000 a month MD can't break the habit of getting involved in everything The company does not appear to have historical trend data They spent Rs.992,000 advertising GEMA and they have trouble selling it.

No track record of previous years growth rate Difficulties in Selling new product What is more realistic then? . . . . . Redefine the objective as to INCREASE THE BUSINESS IN NEXT 3 YEARS.

Step 1 Information collection In the here and now BE REALISTIC! AVOID MODESTY. Step 2 What might be

Step 3 Plan of action

Assemble SWOT group. Manage necessary components. Set up meeting times Distribute/ complete the tool to individuals In the group meeting, combine individual answers. Collaborate on each category. Complete the analysis. Discuss how to use the information gathered from the SWOT for your next steps.

SWOT may result in an exercise for the sake of an exercise (i.e. useless).

Trust . . . . 1- in your SWOT Team 2- in your abilities to face the challenges the weakness and threats Ability and willingness to implement change Diversity Time