SWOT analysis and

strategy

SWOT analysis- what is it?

Study of both internal and external environment
Internal environment: financial performance
and resources, human resources, production
facilities and capacities, market share, customer
perception, product quality, product availability
and organizational communication
External environment: market information,
economic condition, social trends, government
regulations etc.

SWOT important issues and benefits

Simplicity- should not be complicated
Low cost
Flexibility: should be capable of incorporating
any last minute information
Integration: should be able to incorporate
information from various diverse sources
Collaborative spirit: open to all departments and
highly participative

SWOT how to get started?

Stay focused, carry of several product specific
analyses if needed- focused, but not myopic
Search extensively for competitors, even the
minor ones
Collaborate with other functional areas,
brainstorming gives better ideas
Examine issues from customers perspective
Separate internal issues from external ones. (It
is not possible to manufacture We cannot
manufacture

Customers perspective- why?

What do customers (and non customers) think
of us and our products?
How important is this for us?
What is the comfort level of our customers with
the products and services offered by us?
What do our internal customers employees
and stakeholders- think of us?

Why do the perceptions differ?

This product has most advanced features It is
too expensive
This product is made from robust material It is
too heavy
This product is sturdy It is unattractive

The strategic statements and SWOT-I

An old established firm stable after sales,
experienced, trustworthy old fashioned,
inflexible, no innovation
A large supplier comprehensive product line,
technical expertise, stable supplier, high status
bureaucratic, dealing only with large accounts,
impersonal

The strategic statements and SWOT-II

A comprehensive product line wide variety,
single source supplier, convenient limited
expertise
Having industry standards wide product
adoption, high standards and image, good
market position vulnerable to change in
technology, limited view of potential competitors

Internal and external issues

Would this issue exist if the firm did not exist? If
the answer is yes, it is an external issue, if it is
no, then it is internal.
Thus, SWOT analysis is about knowing yourself,
knowing your customers, knowing your
competitors and knowing the environment

Potential internal strengths

Abundant financial resources, well known brand
name, high ranking in the industry, economies of
scale, proprietary technology and patented
processes, lower cost of production, brand image,
superior management talent, better marketing
skills, superior quality products and services,
alliance with other firms, good distribution skills,
high employee morale.

Potential internal weaknesses

Lack of strategic direction, limited financial
resources, weak spending on R and D, very
narrow product line, limited distribution, higher
cost of production, outdated products or
technologies, internal operating and political
problems, weak market image, poor marketing
skills, alliance with weak firms, limited
management skills, undertrained employees

Potential external opportunities

Rapid market growth, complacent rival firms,
changing customer needs / tastes, opening of
foreign market, mishap of a rival firm,
discovering new uses of existing products,
economic growth, government deregulation, new
technology, demographic shift, other firms
seeking alliance with you, high brand switching,
declining sales of a substitute product, new
distribution methods

Potential external threats

Entry of foreign competitors, introduction of
new substitute products, declining PLC,
changing customer needs / tastes, rival firms
adopting more effective strategy, increased
government regulation, economic downturn,
new technology, demographic shift, foreign trade
barriers, poor performance of ally firm

Michael Porters five force model

THREAT FROM
POTENTIAL
ENTRANTS

COMPETITION
FROM
EXISTING FIRMS

BARGAINING
POWER
OF
BUYERS

COMPETITIVE ANALYSIS

BARGAINING
POWER
OF
SUPPLIERS

THREAT
OF
SUBSTITUTION

Strengths and weaknesses

Strength is meaningful only when it is used to
satisfy a customers need
Size and financial resources: The Tata advantage
inflexible and slow to change?
Scale and cost economies: timely processing of
information, better communication,
transportation and distribution strategies,
reducing waste etc.

Opportunities and threats

Trends in competitive environment:
development of the mall culture and its effect on
the small retail outlets in urban areas
Trends in technological environment: postal
operation and the effect of e-mail on it,
e-business
Trends in socio-cultural environment: fast food
and RTS food sector and its effect on
conventional market Precut and ready-to- serve
vegetables

SWOT driven strategic planning

Focusing on offering solutions to customers
rather than improving specific products
If strengths match opportunities, they become
capabilities
Minimizing / avoiding weaknesses and threats
threats could be converted into opportunities if
the right resources are available
Weaknesses that cannot be addressed become
limitations

The SWOT matrix

Strengths
Match

Convert
Weaknesses
Minimize/ avoid

Opportunities
Match

Convert
Threats
Minimize / avoid

What can give you competitive

advantage? -I
Relationships- brand loyal customers, high
customers switching costs, long term
relationship with supply chain partners, strategic
alliance agreement, co-marketing and cobranding arrangements
Legal: patents and trademarks, tax advantage,
zoning laws, global trade restrictions

What can give you competitive

advantage? -II
Product related advantage: Brand equity,
exclusive products, superior quality features,
guarantees and warrantees, outstanding
customer service, research and development
Price related advantage: lower production cost,
economies of scale, large volume buying, low cost
distribution
Production related advantages: Company image,
large promotion budget, superior sales force,
creativity

What can give you competitive

advantage? -III
Distribution related advantage: Efficient
distribution system, Just-In-Time inventory
control, superior information system, exclusive
distribution outlets, convenient locations
People related advantages: Superior
management talent, strong organizational
culture, committed employees

Strategies for getting competitive

advantage
Operational excellence : Low cost, no frills
airline services
Product leadership: Excellence in product
technology Microsoft
Customer intimacy: Long term relationship with
the customers Wal-Mart, LIC of India
Importance of understanding the core
competencies in the above areas and
implementing them

Moving beyond SWOT setting

marketing goals
SMART goals Specific, Measurable, Attainable,
Realistic and Time Bound
At the same time, goals have to be consistent,
comprehensive and a little intangible ( Having
the best trained work force)
Importance of assigning responsibility and
resources

The Nirma story

1969 Karasanbhai Patel starts manufacturing
phosphate free detergent powder and sells at Rs.
3.50 per Kg against HLLs Surf which was sold at
Rs.15 per Kg
Demand keeps on increasing 1999 Nirma
becomes a major consumer brand offering range of
products including detergents, soaps and personal
care products latest technology for manufacturing
6 mfg units 400 distributors and 2 million retail
outlets

The growth
1990 Nirma beauty soap launched 1999 Nirma
becomes Indias second largest toilet soap
manufacturer with 15% market share against HLLs
65% and Godrejs 8%
Good quality and unbeatably low price
Backward integration and manufacturing of raw
materials
Both manufacturing plants completed ahead of
schedule and at a cost lower than the estimated one

Cost control
Control of distribution costs by elimination of
intermediaries
In-house printing and packaging unit
Diversification using existing brand image
Nirma Super washing powder and detergent
cake, Nirma salt etc.

Taking on the competition brand

positioning
Nirma bath against Lifebuoy
Nirma beauty soap against Lux
Nirma Rose against Breeze
Nirma Lime against Jai Lime
Identifying the market preferences North
prefers pink soaps while South prefers green
ones

Sales promotion
1.25 to 2% of turnover spent on advertisement,
against the normal 6 to 10%. Use of relatively
unknown models, simple ads and more focus on
making the product available, taking feedback
and then having an enduring ad campaign
Creation of a sub-premium sector offering
huge margins to the retailers
Corporate advertisement to change the cheap
image of the products

Secret of Nirmas success

Cost competitiveness
Backward integration
Supply chain management
Sustainable advantage