SWOT Matrix

SWOT matrix is composed of 9 cells there are :

Four key factors : S, W, O, T Four strategy cells : SO, WO, ST, WT One is always left blank( upper left cell)

SWOT matrix helps the manager to develop four types of strategies: SO ( strength opportunity)strategies. WO ( weakness opportunities) strategies. ST ( strength Threat ) strategies WT( weakness- Threat) strategies

SWOT MATRIX
Always Blank Strengths (S) 1 2 3 List strengths 4 5
SO strategies 1 2 3 Use strengths to take 4 Advantage of 5 opportunities

Weaknesses (W) 1 2 3 List Weaknesses 4 5

WO strategies 1 2 3 Overcome weaknesses 4 By taking advantage of 5 opportunities

Opportunities(O) 1 2 3 List opportunities 4 5

Threats (T) 1 2 3 List Threats 4 5

ST strategies 1 2 3 List the strengths 4 to avoid threats 5

WT strategies 1 2 3 Minimize the weakness 4 and avoid threats 5

SO, WO, ST, WT strategies

1. SO strategies uses the firms internal strengths to take advantage of external opportunities. All managers would like their organizations to be in a position in which the internal strengths can be used to take advantage of external trends and events. When the firm has major weakness it will strive to overcome them and make them strengths. When the company faces major threats it will seek to avoid them in order to concentrate on opportunities. 2.WO strategies : aim at improving the internal weakness by taking advantage of the external opportunities. Sometimes key external opportunities exist but the firm has internal weakness that prevent it from exploiting those opportunities.

3.ST strategies use firms strength to avoid or reduce the impact of external strengths 4. WT Strategies are defensive strategies directed at reducing internal weakness and avoiding external threats .An organization face d by numerous external threats and internal weakness may indeed be in a difficult situation. Such firms may fight for its survival , merge , retrench , declare bankruptcy / liquidation

Matching Key external and Internal Factors to formulate alternative strategies

Key Internal Factors Internal Working Capacity( an internal strength) Key External Factors 20% annual growth in the cell phone industry( external opportunity) Resultant strategies Acquire cellphone Inc.

Insufficient Capacity(internal weakness)

Exit of 2 foreign competitors from industry( ( external opportunity)

Horizontal integration by buying competitors facilities

Strong R&D ( Internal strength) Poor employee morale( Internal Weakness)

Decreasing no of adult buyers (external threat) Strong union activity( external threat)

Develop new products for adults Develop new employee benefits package.

Environmental appraisal / ETOP

ETOP is technique available for environment analysis. ETOP involves dividing the environment into different sectors and then analyzing the impact of the each sector on the organization. Strategists have to use their knowledge and experience to place the different environmental issues where they mainly belong so that the clarity can emerge. The identification of environmental issues help the strategists to have a good idea of where the environmental opportunities and threats lie.

Environment Threat and Opportunity Profile (ETOP) foe a bicycle company

Environment sector
Market

Nature of Impact

Impact on each sector

Industry growth rate is 7% to 8% ; for sports cycle growth rate is 30% Technological up gradation of industry in progress, Import of machinery simple Large no of suppliers and importing raw materials easy. Growing affluence among the urban consumers No significant factor Customer preference for sports cycle

Technological

Supplier

Economic Political Socio Cultural

International

Emerging threat from the cheap imports from China .

 As observed from the example : the sports cycle manufacturing is an attractive proposition due to the many opportunities operating in the environment. The preparation of ETOP provides the strategists with a clear picture of which sector have favorable impact on the organization and where does the organization stands in respect to the environment. Such an understanding helps an organization in formulating appropriate strategies to take advantage of the opportunities and counter the threats in its environment.

BCG Matrix
The BCG matrix provides a framework for allocating resources among different business units and allows one to compare many business units at a glance. In the early 1970's the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines).

The BCG growth-share matrix displays the various business units on a graph of the market growth rate vs. market share relative to competitors.
The BCG model is a well-known portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize which products within company product mix get more funding and attention.

 X axis : Relative market share as an indicator of relative competitive position of a business unit in a given industry. Y axis: Industry growth rate : as an indicator of relative industry attractiveness

Star The mission is to HOLD the market share . a business unit that has a large market share in a fast growing industry and the objective is to invest cash to maintain that position. This cell corresponds closely to the growth phase of the PLC. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. A star will become a cash cow when its industry matures. Eg Telecommunications, Hotel industry.

Cash Cow The mission " harvest" for short term profits and cash flows. A business unit that has a large market share in a mature, slow growing industry. Since the units operate in low growth or decline industries , they do not need to reinvest all the cash generated. Cash cows require little investment and generate cash that can be used to invest in other business units. In terms of PLC they are generally the mature businesses. These businesses can adopt mainly the stability strategies. Eg : Scooters for Bajaj Autos, toothpaste for Colgate

 Question Mark (or Problem Child) The mission is to BUILD the market. A business unit that has a small market share in a high growth market. They require large amounts of cash to maintain or gain market share. These business units require resources to grow market share, but whether they will succeed and become stars is unknown. These units are the major users of the cash outlays are needed in the areas of product development, market development. No single set of strategies can be recommended here , if co feels that it can obtain a dominant market share , it may select the expansion strategy otherwise retrenchment strategy. Eg :

 Dog - a business unit that has a small market share in a mature industry. They neither generate nor require large amount of cash In terms of PLC the dogs are the products that are usually in the late maturity or decline stage. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share. Eg Photocopiers