Internal Analysis & Long-Term Objectives and Strategies

Week-4 DQs

1.      Describe SWOT analysis as a way to guide internal analysis. How does this approach reflect the basic strategic management process? What are potential weaknesses and limitations of SWOT analysis?

A SWOT analysis can be defined as a historical technique in which a manager creates a brief overview of a company’s strategic actions. It is based on the assumptions that an effective strategy can be made by sound matching between firms’ internal factors (Strengths and Weaknesses) and its external factors (Opportunities and Threats). This, in turn, helps managers to make a good strategic decision by strengthening its strengths and opportunities and reducing its weaknesses and threats. This technique can be used as a guide to internal analysis as follows:

Strengths: A strength is a source or capability controlled by or available to a firm that gives it an advantage relative to its competitors in meeting the needs of the customers it serves (Pearce II, J.A.,& Robinson, R.B., 2012). Its strengths include the well-experienced employees, leading company of the nation, proximity to the market, collaborative effort from its government, the banks and shareholders, Brand reputation, Savvy people etc.

Weaknesses: A weakness is a deficiency in one or more of the company’s resources or capabilities relative to its competitors that provides a disadvantage in meeting the customer demands. The major weaknesses include lack of innovative employees, higher transportation costs, diseconomies of scale, capital restructuring issues, shortage of electricity, internal conflicts among the staffs, limited capital or financial resources etc.

Opportunities: An opportunity is a fundamental favorable situation in the company. The opportunities includes tax exemptions from government, technological changes, growing markets and customers, favorable relationship with stakeholders, job opportunities, huge profit and image etc.

Threats: A threat is a major unfavorable situation in a firm’s environment (Pearce II, J.A.,& Robinson, R.B., 2012). The major threats consist of entrance of globalized firms such as India tiers companies, increased bargaining power of buyers and suppliers, technological change, government restricted restructuring, unfair competition, economic liberalization, blockade or Nepal bandhs, devaluation of currency, civil war, decreased sales or profit margin etc.

SWOT analysis reflects the basic strategic management process in which a logical framework is made for guiding and analyzing the discussions and reflections of the firm’s alternative actions available to managers. For example, an opportunity to one manager may be potential threat to another. In such case, the SWOT analysis provides an organized framework for insightful discussions and information sharing in order to improve the managers’ choices or decision making in each of the strategic processes.

The potential weaknesses and limitations of SWOT analysis can be described as follows:

1.      It can overemphasize internal strengths and downplay external threats

2.      It can be static and can risk ignoring changing circumstances

3.      It can overemphasize a single strength or element of strategy

4.      A strength is not necessarily a source of competitive advantage

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

2.      What is benchmarking? How can benchmarking assist in strategy development and formulation?

Benchmarking is a process of the comparing a firm’s specific activity with a competitor or other doing the same thing in the marketplace. Firms in the same industry often have different marketing skills, operating facilities, financial locations, technical know-how, brand name, managerial talent, level of integration and so on. These differentiating resources can be relative strengths or weaknesses depending upon the strategy a firm choses. While choosing the strategies, a manager should compare the firm’s key internal capabilities with its rivals so as to differentiate its key success factors.

The benchmarking can be used to support in formulating and developing the strategies in the following ways:

·         Benchmarking helps a firm to identify the best practices in the industry and utilizing these capabilities in formulating strategies within a firm to gain a competitive advantage.

·         Benchmarking helps in understanding a success and failure of a company that can be used to alter crucial strategies and adjust accordingly.

·         It teaches how a firm can lower its costs, and improve the efficiency that can lead to excellence.

·         It can be used to improve the quality and continuous improvement so as to win the market leadership.

In short, benchmarking can focus on roles, processes, or strategic issues. It can be used to establish the function or mission of an organization. It can also be used to examine existing practices while looking at the organization as a whole to identify practices that support major processes or critical objectives.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

3.    Compare and contrast value chain analysis and the resource-based view of a firm. What are the objectives of each?

The value chain analysis and Resource-based view of a firm are both important approaches that can be used to evaluate the firm’s strengths in comparison to its competitors. The value chain analysis is mainly concerned with creating a maximum value through proper distribution or logistics of goods or services. In contrast, Resource-based view is concerned with the proper utilization of resources to gain a competitive advantage in the marketplace.

Value Chain analysis: This analysis of a firm entails the analysis of key activities in creating values in each stage of supply chains. It consists of two major activities, primary activities are logistics, operation, sales and services, and supporting activities include human Resource management, procurement, and technology development etc. The primary activities are supported by its supporting activities. Ina addition, activity in the value chain analysis is measured in terms of the value it adds on its products to contribute the firm's overall value. It clearly shows that how a firm can reduce its costs and improve its efficiency in each of these stages to gain a competitive edge. The main objective of this analysis is to know and evaluate the major activities which are most valuable to achieve a competitive advantage.

Resource-based View: The resource-based analysis of a firm emphasizes on using available resources, knowledge and competencies to excel the firm's economic value. The resources can be intangible such as brand name, image and reputation, and tangibles such as human resources, capital, materials, and machines. These both resources would provide the value to their customers. The main objective of this analysis is to allocate and make a maximum utilization of available resources to achieve a competitive advantage

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

4.    Explain how you might use value chain analysis, resource-based view, three circles analysis, product life-cycle analysis, and SWOT analysis to get a better sense of what might be a firm's key building blocks in attaining a strategic competitive advantage over competitors?

Analyses such as value chain analysis, resource-based view, three circles analysis, product life-cycle analysis, and SWOT analysis, are key approaches which give an emphasis on internal activities to create a competitive advantage in the marketplace over its rivals. The major purposes of these analyses are outlined as follows:

a. Value chain analysis: It focuses on improving the supply chain activities that add value to company’s products or service better than its competitors, so as to gain a competitive advantage in the market place.

b. Resource-based analysis: It emphasizes on proper allocation and utilization of resources such as tangible and intangibles to improve the firm’s economic performance.

c. Three circle analysis: It focuses on identifying the competitor’s offerings, customer demands and providing the products that can satisfy the customers better than its rivals.

 d. Product life-cycle analysis: It helps the firms to develop or adjust the strategies as per the different phases of product life cycles such as introduction, growth, maturity and decline.

e. SWOT analysis: It focuses on analysis of the internal factors such as strengths, weaknesses, and external factors such opportunities and threats so as to respond the quickly to its environment and exploit the opportunities.

In conclusion, it can be said that all these analyses are directly concerned with firm’s key building blocks in getting a better sense in terms of firm’s environment, resources, time, cost, methods in attaining a strategic competitive advantage over competitors.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.