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SITUATIONAL ANALYSIS
MAJOR CONSIDERATIONS
1. How well is the current strategy working?
2. What are the organisation’s SWOT?
-Internal Strengths and Weaknesses(AFI’s)
-External Threats and Opportunities
3.How strong is the organisation’s competitive
position?
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STRATEGY IN PRACTICE
Key strategic and financial indicators of
performance
1. Trends in market share
2. Trends in profit margin
3. Trends in net profits
4. Tends in sales growth or decline
5. Credit rating
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PRESENT STRATEGY
SWOT ANALYSIS involves sizing up an
organisation’s INTERNAL Strengths and
weaknesses and EXTERNAL opportunities and
threats.
STRENGTH- something an organisation is
good at doing e. useful skills, know-
how,achievement leading to competitive
advantage.
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SWOT ANALYSIS
WEAKNESS- something an organisation lacks,
does poorly, or a condition which places the
organisation at a disadvantage.
Internal strengths represent COMPETITIVE
ASSETS, internal weaknesses represent
COMPETITIVE LIABILITIES.
The preferred position is for the assets to
OUTWEIGH the liabilities by a big margin.
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STRENGTHS AND WEAKNESSES
STRENGTHS are critical to strategy
formulation because – they can serve as a
cornerstone of strategy and help build
COMPETITIVE ADVANTAGE.
A good strategy will aim at correcting a firm’s
WEAKNESSES which can make it vulnerable,
prevent it from pursuing attractive opportunities
and put it at a competitive disadvantage.
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BUILDING CORE COMPETENCES
A CORE COMPETENCE is something a
company does ESPECIALLY WELL
compared to its competitors.
TYPES:
1. Superior skills in producing high quality
products and services
2. Superior system for delivering customer
orders accurately and swiftly
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CORE COMPETENCES
3.Better After- Sales service capability
4.High innovativeness in developing new
products and services
5. Superior mastery of an important technology
6.Better product display skills
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CORE COMPETENCE
A CORE COMPETENCE is important because
– it gives the firm added capability, competitive
edge it can exploit and it is a potential
cornerstone of strategy formulation.
COMPETITIVE ADVANTAGE is easier to build
when- a firm has a CORE COMPETENCE,
competitors can not offset these core
competencies and it is costly and time-
consuming for rivals to match competency.
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EXTERNAL THREATS
EXTERNAL FACTORS which pose a threat
to a firm include
1. Emergence of cheaper technologies
2. Introduction of and better products / services
by rivals
3. Entry of low-cost foreign competitors
4. Vulnerability to rise in interest rates
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SWOT AND STRATEGY
Therefore, a good strategy will always aim at
capturing a firm’s best growth opportunities
and creating defences against threats to its
competitive position and future performance.
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ROLE OF SWOT ANALYSIS
SWOT Analysis helps a firm to answer the following
questions:
1. Does the firm have internal strengths on which an
attractive strategy can be built?
2. Which weaknesses does the strategy need to
address?
3. Which opportunities does the firm have resources to
pursue with a chance of success?
4. What threats should the firm worry about most?
