ESSENTIALS OF STRATEGIC

ANALYSIS
CHAPTER 9 (Part 3)
BIG QUESTIONS:
1. What types of strategies are used by organizations?

 SWOT ANALYSIS

 PEST ANALYSIS

 PORTER’S FIVE FORCES MODEL

SWOT ANALYSIS
SWOT ANALYSIS
● After the assessment of mission,
values and objectives, NEXT STEP
in the Strategic Management
process is to analyze the
organization and its environment
using a technique known as SWOT
ANALYSIS
 IMPORTANCE OF THE SWOT ANALYSIS
When you are analysing a business, it is important to know what the
business is doing well (strengths) and where improvements could be
made (weakness)  focus is internal

In addition, we want to know what external factors may be effecting the

business, both in ways that can strengthen its business (opportunities)
and ways that create threats to the business  focus is external

A SWOT analysis is one tool used to help analyze a business and to

make business decisions.
SWOT Analysis:
An examination of the business’s strengths, weaknesses,
opportunities and threats

A SWOT begins with a systematic evaluation of the organization’s

resources and capabilities (basic strengths and weaknesses)
Strengths
● This is a look at the internal organization
Goal
● A major goal in assessing strengths is to Identify its sustainable
competitive advantage (things the organization has or does
exceptionally well in comparison with competitors)

● These are capabilities that because they are rare, costly to imitate and
cannot be substitute, they become potential sources of competitive
advantage

Examples of sustainable competitive advantage:

- Special knowledge or expertise
- Superior technologies
- Unique distribution systems
Weaknesses
Goal:
Identify things that inhibit performance and hold the
organization back from fully accomplishing its objectives
● This is a also a look at the internal organization
Examples:
- Outdated products
- Lack of capital
- Shortage of talented workers
- Poor technology
STRENGTHS & WEAKNESSES
– INTERNAL TO BUSINESS
Opportunities
Opportunities: External factors that a business could use to
its advantage
Possible opportunities:
- Possible new markets
- Strong economy
- Weakness in competitors
- Emerging technologies
● This is a look at what is happening in the external environment NOT
internally
Threats
Threats: External factors that could cause trouble for the
business or product

Possible threats
- Emergence of new competitors
- Resource scarcities
- Changing customer tastes
- New government regulations
- Weak economy
OPPORTUNITIES & THREATS
– EXTERNAL TO BUSINESS
JUST A LITTLE NOTE...

● Strengths and weaknesses are generally

determined by looking at the past and current
conditions of the business.

● Focusing on the customers and competition can

help identify opportunities and threats
Assessing Competitive Position:
PEST ANALYSIS
 PEST ANALYSIS
General Environment
 The general environment of organizations consist of all external
conditions that set the context for managerial decision-making.
 The general environment is composed of the following forces:
political, economic, technological, socio-cultural, and natural
environment conditions

● A PEST Analysis is a way of analyzing the external environment and

how it’s affecting the business.
● It analyzes opportunities and threats based on PEST conditions.
Political Conditions
● Laws and regulations
● Business forms
● Political trends

Questions to ask:
- How stable is the government?
- Will government policy influence laws that regulate or tax your business?
- What is the government's position on business ethics?
- What is the government's policy on the economy?
- Is the government involved in trading agreements?
Economic Conditions
Managers must be concerned with economic conditions in the general
environment, particularly those that influence customer spending, resource
supplies and investment capital
● Economic growth
● Unemployment rate
● Employment level per capita
● Disposable income
● interest/inflation rates
● Impact of globalization
● Long-term prospects for the economy
● Labour costs https://www.tutor2u.net/economics/reference/consumer-spending
Socio-Cultural Environment
Socio-cultural conditions of a society or region are the norms, customs and social
values on matters such as ethics, human rights, gender roles and lifestyles
● Population demographics
● Education system
● Environmental trends
● Health/nutrition values
Questions to ask include:
- What is the dominant religion?
- How much time do consumers have for leisure?
- What are the roles of men and women within society?
- How long is the population living?
- Are the older generations wealthy?
- Does the population have a strong/weak opinion on green issues?
Technological Environment
Not only must managers stay on top of
latest technologies, they must also
be aware of their work implications
● Information Technology (IT) systems
● Broadband Internet access

Questions to ask:
- Does technology allow for products and services to be made more cheaply and
to a better standard of quality?
- Do technologies offer consumers and businesses more innovative products and
services such as Internet apps?
- How is distribution changed by new technologies?
- Does technology offer companies a new way to communicate with consumers?
PORTER’S MODEL OF
5 STRATEGIC
FORCES AFFECING
INDUSTRY
COMPETITION
PORTER’S FIVE FORCES MODEL
● Harvard scholar, Michael Porter
The ideal: no rivals to compete with for resources and customers
(Monopoly conditions)
The reality for most businesses is rivalry and competition

● Porter’s the five force model is a framework for competitive industry

analysis
● It analyzes five competitive forces that shape every industry and
helps determine an industry's weaknesses and strengths.
● An understanding of these five forces can help managers make
strategic choices that best position a firm within the industry.
PORTER’S Five Forces Model

1. Industry Competition

The intensity of rivalry among

firms in the industry and the
ways they behave competitively
towards one another
PORTER’S Five Forces Model

2. New entrants

The threat of new competitors

entering the market, based on
the presence or absence of
barriers to entry
PORTER’S Five Forces Model

3. Substitute products
or services
The threat of substitute
products or services, based
on the ability of consumers
to find what they want from
other sellers
PORTER’S Five Forces Model

4. Bargaining power of
suppliers
The ability of resource
suppliers to influence the
price that one has to pay for
their product or service.
PORTER’S Five Forces Model

5. Bargaining power of
consumers
The ability of customers to
influence the price that they
will pay for the firm’s products
or services
PORTER’S FIVE FORCES MODEL
Industry Attractiveness
The five competitive forces:
● constitute what Porter calls the
“industry structure” and
●it establishes the industry’s
attractiveness or potential to generate
long-term returns
●The less attractive the industry
structure, the harder it will be to make
good strategic choices and realize a
sustained competitive advantage
relative to rivals.
 Industry Attractiveness
According to Porter’s model and
analysis, an unattractive industry
is one in which:
●Rivalry among competitors is intense
●Substantial threats exist in the form
of possible new entrants and
substitute products
●Suppliers and buyers are very
powerful in bargaining over such
things as prices and quality
Industry Attractiveness
According to Porter’s model and
analysis, an attractive industry
is one in which:
● there is less existing competition
● few threats from new entrants or
substitutes
● low bargaining power amount
suppliers and buyers
HOMEWORK
CASE STUDY: 5.1 HBC: From Fur to Fendi

• Read the case study provided on the Hudson’s

Bay Company.

• In your groups, prepare a SWOT Analysis.