SWOT analysis

A scan of the internaland external environment is an important part of the stra­tegic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W) and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic envi­ronment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.

Strengths. A firm’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

- patents or certain expertise;

- strong brand names;

- good reputation among customers;

- cost advantages from proprietary know-how;

- exclusive access to high grade natural resources;

- favorable access to distribution networks.

Weaknesses. The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

- lack of patent protection;

- a weak brand name;

- poor reputation among customers;

- high cost structure;

- lack of access to the best natural resources;

- lack of access to key distribution channels.

In some cases, a weakness may be the flip side of the strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities. The external environmental analysis may reveal certain new opportunities for profit and growth. Examples of such opportunities include:

- an unfulfilled customer need;

- arrival of new technologies;

- loosening of regulations;

- removal of international trade barriers.

Threats. Changes in the external environment also may present threats to the firm. Examples of such threats include:

- shift in consumer tastes away from the firm’s products;

- emergence of substitute products;

- new regulations;

- increased trade barriers.

Essential vocabulary:

SWOT analysis – анализ сильных и слабых сторон, возможностей и угроз

expertise n – специальные знания, компетентность, эрудиция

proprietary – составляющий собственность

flip side - обратная сторона

regulations n – предписание, инструкция

shift n, v – сдвиг, перемещение

substitute adj – взаимозаменяемый

Ex.1 Mark the following statements True or False.

· Strategic management is a process, not a single event. True/False

· Strategic management involves top managers and not subordinates. True/False

· Good strategic management monitors results and makes changes True/False

· Strategic management is concerned with actual resources, not future resources. True/False

· Strategic management uses tools like the product life cycle to plan future actions. True/False

· Bill Gates is a good example of an effective strategic manager. True/False

· Strategic management is the same as having a strategic plan. True/False

· Corporate strategy and strategic management are the same things. True/False

Ex.2. Phrasal verbs with out. Complete the following sentences, using suitable forms of the verbs in the box below.

sort out make out bring out pull out

spell out buy out carry out

sell out sound out turn out

1. The firm … about five hundred sport cars a year.
2. We hope to … our production problems soon.
3. If the firm doesn’t make a profit, the owners will probably ….
4. I’m willing to consider introducing flexitime, but would you first … the advantages of the system, please?
5. Givenchy have … an exciting new perfume.
6. Would you … the cheque to David Cotton, please?
7. In order to develop new products, pharmaceutical companies have to … a lot of research.
8. Several leading banks such as Barclays have … of South Africa
9. A group of senior managers want to take over the firm by … it ….
10. We are looking for a new chief executive. I understand one or two possible candidates have already been ….

Ex.3. Complete the sentences with the words and expressions in the box. There are two expressions you don’t need.