The three important steps in SWOT analysis are: 1. Identification
2. Conclusion 3. Translation 1. Identification:
(a) Identify company resource strengths and competitive capabilities (b) Identify company resource weaknesses and competitive deficiencies (c) Identify company’s opportunities
Unit 5: Organisational Appraisal: Internal Assessment 1
Notes
Strengths
Strong brand image High quality products Latest technology High intellectual capital Cordial industrial relations
Weaknesses
Weak distribution network Narrow product lines Rising costs
Poor marketing plan
Opportunities
New markets
Profitable new acquisitions R&D skills in new areas New businesses
Threats
Increase in competition Barriers to entry
Change in consumer tastes New or substitute products Threat of takeover
2. Conclusion:
(a) Draw conclusions about the company’s overall situation
3. Translation: Translate the conclusions into strategic actions by acting on them:
(a) Match the company’s strategy to its strengths and opportunities (b) Correct important weaknesses
(c) Defend against external threats
In devising a SWOT analysis, there are several factors that will enhance the quality of the material:
1. Keep it brief, pages of analysis are usually not required.
2. Relate strengths and weaknesses, wherever possible, to industry key factors for success. 3. Strengths and weaknesses should also be stated in competitive terms, that is, in comparison
with competitors.
4. Statements should be specific and avoid blandness.
5. Analysis should reflect the gap, that is, where the company wishes to be and where it is now.
6. It is important to be realistic about the strengths and weaknesses of one’s own and competitive organisations.
Probably the biggest mistake that is commonly made in SWOT analysis is to provide a long list of points but little logic, argument and evidence. A short list with each point well argued is more likely to be convincing.
Did u know? What is TOWS Matrix?
TOWS matrix is just an extension of SWOT matrix. TOWS stand for threats, opportunities, weaknesses and strengths. This matrix was proposed by Heinz Weihrich as a strategy formulation – matching tool.
Notes TOWS analysis poses a number of questions:
What actions should a company take? Should it focus on using company’s strengths to capitalize on opportunities, or acquire strengths in order to be able to capture opportunities? Or should it actively try to minimize weaknesses and avoid threats?
TOWS matrix illustrates how internal strengths and weaknesses can be matched with external opportunities and threats to generate four sets of possible alternative strategies. This matrix can be used to generate corporate as well as business strategies. An example of TOWS matrix is shown below:
Internal factors/ External factors
Strengths(S) Weaknesses(W)
Opportunities(O) SO strategies: strategies that use strengths to take advantage of opportunities.
WO strategies: strategies that take advantage of opportunities by over -coming weaknesses Threats(T) ST strategies: strategies that use
strengths to avoid threats.
WT strategies: strategies that minimize weaknesses and avoid threats.
To generate a TOWS matrix, the following steps are to be followed:
1. List external opportunities available in the company’s current and future environment, in the ‘opportunities block’ on the left side of the matrix.
2. List external threats facing the company now and in future in the “threats block” on the left side of the matrix.
3. List the specific areas of current and future strengths for the company, in the “strengths block” across the top of the matrix.
4. List the specific areas of current and future weaknesses for the company in the “weaknesses box” across the top of the matrix.
5. Generate a series of possible alternative strategies for the company based on particular combinations of the four sets of factors.
The four sets of strategies that emerge are:
SO Strategies
SO strategies are generated by thinking of ways in which a company can use its strengths to take advantage of opportunities. This is the most desirable and advantageous strategy as it seeks to mass up the firm’s strengths to exploit opportunities. For example, Hindustan Lever has been augmenting its strengths by taking over businesses in the food industry, to exploit the growing potential of the food business.
ST Strategies
ST strategies use a company’s strengths as a way to avoid threats. A company may use its technological, financial and marketing strengths to combat a new competition. For example, Hindustan Lever has been employing this strategy to fight the increasing competition from companies like Nirma, Procter & Gamble etc.
Unit 5: Organisational Appraisal: Internal Assessment 1
Notes
WO Strategies
WO Strategies attempt to take advantage of opportunities by overcoming its weaknesses. For example, for textile machinery manufacturers in India the main weakness was dependence on foreign firms for technology and the long time taken to execute an order. The strategy followed was the thrust given to R&D to develop indigenous technology so as to be in a better position to exploit the opportunity of growing demand for textile machinery.
WT Strategies
WT Strategies are basically defensive strategies and primarily aimed at minimizing weaknesses and avoiding threats. For example, managerial weakness may be solved by change of managerial personnel, training and development etc. Weakness due to excess manpower may be addressed by restructuring, downsizing, delayering and voluntary retirement schemes. External threats may be met by joint ventures and other types of strategic alliances. In some cases, an unprofitable business that cannot be revived may be divested.
Strategies which utilize a strength to take advantage of an opportunity are generally referred to as “exploitative” or “developmental strategies”. Strategies which use a strength to eliminate a weakness may be referred to as “blocking strategies”. Strategies which overcome a weakness to take advantage of an opportunity or eliminate a threat may be referred to as “remedial strategies”. The TOWS matrix is a very useful tool for generating a series of alternative strategies that the decision-makers of the firm might not otherwise have considered. It can be used for the company as a whole or it can be used for a specific business unit within a company. However, it may be noted that the TOWS matrix is only one of many ways to generate alternative strategies.
Caselet
SWOT Analysis of Tata Motors
T
ata Motors began in 1945 and has produced more than 4 million vehicles. Tata Motors Limited is the largest car producer in India. It manufactures commercial and passenger vehicles, and employs in excess of 23,000 people. This SWOT analysis is about Tata Motors.Strengths
1. The internationalisation strategy so far has been to keep local managers in new acquisitions, and to only transplant a couple of senior managers from India into the new market. The benefit is that Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned work discipline and how to get the final product 'right first time.'
2. The company has a strategy in place for the next stage of its expansion. Not only is it focusing upon new products and acquisitions, but it also has a programme of intensive management development in place in order to establish its leaders for tomorrow.
3. The company has had a successful alliance with Italian mass producer Fiat since 2006. This has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge exchange. For example, the Fiat Palio Style was launched by Tata in 2007, and the companies have an agreement to build a pick-up targeted at Central and South America.
Notes Weaknesses
1. The company's passenger car products are based upon 3rd and 4th generation platforms, which put Tata Motors Limited at a disadvantage with competing car manufacturers.
2. Despite buying the Jaguar and Land Rover brands (see opportunities below); Tat has not got a foothold in the luxury car segment in its domestic, Indian market. Is the brand associated with commercial vehicles and low-cost passenger cars to the extent that it has isolated itself from lucrative segments in a more aspiring India? 3. One weakness which is often not recognised is that in English the word 'tat' means
rubbish. Would the brand sensitive British consumer ever buy into such a brand? Maybe not, but they would buy into Fiat, Jaguar and Land Rover (see opportunities and strengths).
Opportunities
1. In the summer of 2008 Tata Motor's announced that it had successfully purchased the Land Rover and Jaguar brands from Ford Motors for UK £2.3 million. Two of the World's luxury car brand have been added to its portfolio of brands, and will undoubtedly off the company the chance to market vehicles in the luxury segments. 2. Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in
2004 for around USD $16 million.
3. Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst the World is getting ready for greener alternatives to gas-guzzlers, is the Nano the answer in terms of concept or brand? Incidentally, the new Land Rover and Jaguar models will cost up to 85 times more than a standard Nano!
4. The new global track platform is about to be launched from its Korean (previously Daewoo) plant. Again, at a time when the World is looking for environmentally friendly transport alternatives, is now the right time to move into this segment? The answer to this question (and the one above) is that new and emerging industrial nations such as India, South Korea and China will have a thirst for low-cost passenger and commercial vehicles. These are the opportunities. However the company has put in place a very proactive Corporate Social Responsibility (CSR) committee to address potential strategies that will make is operations more sustainable. 5. The range of Super Milo fuel efficient buses are powered by super-efficient, eco-
friendly engines. The bus has optional organic clutch with booster assist and better air intakes that will reduce fuel consumption by up to 10%.
Threats
1. Other competing car manufacturers have been in the passenger car business for 40, 50 or more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean production.
2. Sustainability and environmentalism could mean extra costs for this low-cost producer. This could impact its underpinning competitive advantage. Obviously, as Tata globalises and buys into other brands this problem could be alleviated. 3. Since the company has focused upon the commercial and small vehicle segments, it
has left itself open to competition from overseas companies for the emerging Indian luxury segments. For example ICICI bank and DaimlerChrysler have invested in a new Pune-based plant which will build 5000 new Mercedes-Benz per annum. Other
Unit 5: Organisational Appraisal: Internal Assessment 1
Notes
players developing luxury cars targeted at the Indian market include Ford, Honda and Toyota. In fact the entire Indian market has become a target for other global competitors including Maruti Udyog, General Motors, Ford and others.
4. Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple of fronts. The price of steel and aluminium is increasing putting pressure on the costs of production. Many of Tata's products run on Diesel fuel which is becoming expensive globally and within its traditional home market.
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