S W O T analysis

knowledge is power

F o r le a r n in g p u rp o s e o n ly. N o t fo r c o m m e rc ia l u s e
 Inspired by Fred Koffman (prof. MIT)

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PORTER’S 5 FORCES MODEL
 INTRODUCTION

• The Five Forces model of Porter is an outside-in business unit strategy tool
that is used to make an analysis of the attractiveness (value...) of an industry
structure.

• It captures the key elements of industry competition.

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PORTER’s FIVE FORCES MODEL
Potential
entrants

Threat of
new entrants

Bargaining power Industry competitors

of suppliers
Suppliers Buyers
Rivalry among Bargaining power
existing firms of buyers

Threat of
substitutes

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 List the following

• Who is your competition / Rivalry?

• Who are the New entrants?
• What are the Substitutes?
• Who are your suppliers?
• Who are your buyers?

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 PORTER’s FIVE FORCES MODEL
Threat of
Threat
Newof New
Entrants
Entrants

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 Threat of New Entrants
Economies of Scale

Barriers to Product Differentiation

Entry
Capital Requirements

Customer Switching Costs

Access to Distribution Channels

Government Policy

Expected Retaliation

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 PORTER’s FIVE FORCES
MODEL Threat of
Threat of New
New
Entrants
Entrants

Bargaining
Power of
Suppliers

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 Bargaining Power of Suppliers

Suppliers are likely to be powerful if:

Suppliers exert power
in the industry by: Supplier industry is dominated by a few
firms
* Threatening to raise Suppliers’ products have few substitutes
prices or to reduce
Buyer is not an important customer to
quality supplier
Powerful suppliers
can squeeze Suppliers’ product is an important input to
industry profitability buyers’ product
if firms are unable to Suppliers’ products are differentiated
recover cost
Suppliers’ products have high switching
increases
costs

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 PORTER’s FIVE FORCES
MODEL Threat of
Threat
Newof New
Entrants
Entrants

Bargaining Bargaining
Power of Power of
Suppliers Buyers

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 BARGAINING POWER OF BUYERS

Buyer groups are likely to be powerful if:

Buyers compete with the
Buyers are concentrated
supplying industry by:
Purchase accounts for a significant fraction of
supplier’s sales

Products are undifferentiated * Bargaining down prices

Buyers face few switching costs * Forcing higher quality
Buyer presents a credible threat of backward * Playing firms off of
integration
each other
Buyer has full information

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 PORTER’s FIVE FORCES
MODEL Threat of
Threat of New
New
Entrants
Entrants

Bargaining Bargaining
Power of Power of
Suppliers Buyers

Threat of
Substitute
Products
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 Threat of Substitute Products

Keys to evaluate substitute products:

Products with improving
price/performance tradeoffs relative
Products with to present industry products
similar function
limit the prices
firms can charge
Example:

Electronic security systems in place of

security guards

Fax machines in place of overnight mail

delivery
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 PORTER’s FIVE FORCES
MODEL Threat of
Threat of New
New
Entrants
Entrants

Bargaining Rivalry Among Bargaining

Power of Competing Firms in Power of
Suppliers Industry Buyers

Threat of
Substitute
Products
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 RIVALRY AMONG EXISTING COMPETITORS

Intense rivalry often plays out in the following

ways:
Using price competition
Staging advertising battles
Increasing consumer warranties or service
Making new product introductions

Occurs when a firm is pressured or sees an

opportunity
Price competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but may be

costly to smaller competitors
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 COCA-COLA

• Traditional competition:
§ Prices of Pepsi, local brands
§ Market share
§ Promotional actions of competition

• New entrants:
§ New “look-a-like” manufacturers

• Substitute products:
§ Fashionable new drinks, milk drinks, coffee, beer, ...

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 COCA-COLA

• Suppliers:
§ Price and availability of ingredients on world market
§ Quality speed safety, traceability, flexibility of supply chain

• Buyers/consumers:
§ High as a result of intense competition both among branded and
unbranded products.
§ Combined purchase power of shops, bars, supermarkets

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 Competitive Advantage

• The Competitive Advantage model of Porter learns that

competitive strategy is about taking offensive or defensive
action to create a defendable position in an industry, in order
to cope successfully with competitive forces.

• Companies can combat the pressure of the five forces and

create competitive advantages.

• There are 2 basics types of Competitive Advantage :

§ Cost leadership (low cost)
§ Differentiation

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 Strengths of five forces model:

§ The model is strong tool for competitive analysis at industry level.

§ It provides useful input for performing a SWOT analysis.

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 Limitations

• Inside-out strategy is ignored (core competence)

• It does not cope with synergies and interdependencies within the

portfolio of large corporations (parenting advantage)

• The environments which are characterized by rapid, systemic and

radical change require more flexible, dynamic or emergent
approaches to strategy formulation (disruptive innovation)

• Sometimes it may be possible to create completely new markets

instead of selecting from existing ones (blue ocean strategy)

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 SWOT Analysis

S W O T

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 SWOT-Why?

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 SWOT-Why are they done poorly?

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 Competitive GROWTH Goals
Advantage

OPERATIONAL & WATCH

People goals

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 P E S T L E
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 Topics

• Introduction
• PEST Analysis
• PESTLE Analysis
• Dimensions of the model
• Aim of the analysis
• Apple Inc – PESTLE Analysis
• Conclusion

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 Introduction

Apple was founded by Steve Jobs, Steve Wozniak, and Ronald

Wayne on April 1, 1976 to develop and sell personal computers.
It was named Apple Inc. on January 9, 2007 to reflect its shifted
focus towards consumer electronics.

Its best-known hardware products are the Mac line of computers,

the iPod media player, the iPhone smartphone, and
the iPad tablet computer.

Apple has continuously come up with innovative products

making it the most valuable company in the world and leaving
behind all its competitors.

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 PEST Analysis

It is a simple and effective tool used in situation analysis to

identify the key external (macro environment level) forces that
might affect an organization.

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 PESTLE Analysis

Incorporating the Legal and Environmental dimensions in the

model makes it more comprehensive and gives better results.

PEST

PESTLE

LE

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 Dimensions of the model

• Government • Growth rates • Health

stability • Inflation rate consciousness
• Tax policy • Interest rates • Education level
• Trade control • Exchange rates • Population growth
• Import restrictions • Unemployment rate
• Competition trends • Lifestyles
regulation • Labor costs • Buying habits
• Tariffs • Stage of business • Religion and beliefs
• Regulation/de- cycle • Age distribution
regulation • Credit availability • Family size
• Bureaucracy • Stock market trends • Minorities
• Trade patterns • Life expectancy

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 • Basic • Anti-trust law • Weather
infrastructure • Discrimination • Climate change
level law • Laws regulating
• Rate of • Copyright, environment
technological patents / pollution
change Intellectual • Air and water
• Spending on property law pollution
research & • Consumer • Recycling
development protection • Waste
• Legislation • Employment management
regarding law • Carbon
technology
• Health & safety footprints
law

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 Aim of the Analysis

Find out the current external factors

affecting an organization.

Identify the external factors that may

change in the future.

Exploit the changes (opportunities) or

defend against them (threats) better than
competitors would do.

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 Apple Inc – PESTLE Analysis

P
E E

L S
T
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 Political Factors

• It is reported that more than a half of sales of their products

come from countries other than America.

• Apple Inc manufactures a number of its parts and products

from outside the US, like Czech Republic, Ireland, China,
Korea and Cork.

• The bad political relations between US and the other world

have bad outcomes for the company.

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 Economic Factors

Inflation, recession and currency are three important

economic factors that Apple noticed.

Since Apple Inc products were viewed as luxury

products, therefore customers started pending less on
them.

US dollar value keeps fluctuating, however the company

has purchased itself foreign currencies and thus, the
economic effects on the company are minimized.
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 Social Factors

As the world cannot be imagined without the gadgets, thus Apple

products have marked their presence on the international market.

As the purchasing power of the common has risen in various markets

across the world the purchasing of luxury products have gone up.

Possessing these items are considered as status symbols in many

societies which have also increased the sales of Apple Inc products.

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 Technological Factors

• Technology has a short lifetime. That is why Apple needs to

upgrade their product more often so they will outdo their
competitors easily.

• Apple Inc has invested largely in its product research and

development field and thus its products are at the top of the
new innovative products ranking.

• One of the most innovative and technologically advanced

products is the iPod which marked the demise of walkman.

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 Legal Factors

Apple Inc has been a participant in various

legal proceedings and claims since it
began operation.

In October 2009, Nokia Corporation sued

Apple for Apple's infringement of Nokia's
patents relating to wireless technology

Apple has been in a number of patent

cases with players like HTC and Samsung.

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 Environmental Factors

From reporting the entire carbon footprint to finding

ways to reduce that footprint, Apple takes a
comprehensive approach to environmental responsibility.

Apple’s commitment to the environment includes

properly disposing of electronic equipment at the end of
its useful life. It responsibly recycle your computers and
displays.

On track towards achieving an ambitious goal: to power

every Apple facility entirely with energy from renewable
sources — solar, wind, hydro and geothermal.

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 Conclusion

PESTLE Analysis is one of the most comprehensive

models to study the effect of various forces present in
the environment and subsequently prepare oneself to
exploit the opportunities and defend against the threats.

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 For the external factors

Seriousness of Impact
Low High

Minimum Must
High resources if plan
any for
Probability of
occurrence

Maintain
Low Forget
flexibility in
it
plan

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 SWOT Analysis

Learning Objectives
What is SWOT Analysis?

Aim of SWOT Analysis

Who needs SWOT Analysis?

How to conduct SWOT Analysis?

Benefits & Pitfalls of SWOT Analysis

Brainstorming & Prioritization in SWOT Analysis

Tips & Exercise for SWOT Analysis

Example text
Go ahead and replace it w ith
your ow n text. This is an
exam ple text.
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 What is SWOT Analysis?

Acronym for Strengths,

Strengths Weaknesses, Opportunities,
and Threats.
Technique is credited to Albert
Humphrey who led a research
project at Stanford University
in the 1960s and 1970s.
Planning tool used to
SWOT Weakness
understand Strengths,
Oppurtunity Weaknesses, Opportunities, &

Analysis Threats involved in a project /

business.
Used as framework for
organizing and using data and
information gained from
situation analysis of internal
and external environment.
Technique that enables a
Threats group / individual to move
from everyday problems /
traditional strategies to a fresh
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 What is SWOT Analysis?

STRENGTHS

Characteristics of the business or a team

that give it an advantage over others in
the industry.
Positive tangible and intangible
attributes, internal to an organization.

Beneficial aspects of the organization

or the capabilities of an organization,
which includes human competencies,
process capabilities, financial
resources, products and services,
customer goodwill and brand loyalty.

Examples - Abundant financial resources,

Well-known brand name, Economies of
scale, Lower costs [raw materials or
processes], Superior management talent,
Better marketing skills, Good distribution
skills, Committed employees.

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 STRENGTHS

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 What is SWOT Analysis?

OPPORTUNITIES

Chances to make greater profits in the

environment - External attractive factors
that represent the reason for an
organization to exist & develop.
Arise when an organization can take
benefit of conditions in its
environment to plan and execute
strategies that enable it to become
more profitable.
Organization should be careful and
recognize the opportunities and grasp
them whenever they arise. Opportunities
may arise from market, competition,
industry/government and technology.
Examples - Rapid market growth, Rival
firms are complacent, Changing customer
needs/tastes, New uses for product
discovered, Economic boom, Government
deregulation, Sales decline for a substitute
product .

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 OPPORTUNITIES

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 What is SWOT Analysis?

WEAKNESSES

Characteristics that place the firm at a

disadvantage relative to others.

Detract the organization from its

ability to attain the core goal and
influence its growth.
Weaknesses are the factors which do
not meet the standards we feel they
should meet. However, weaknesses
are controllable. They must be
minimized and eliminated.

Examples - Limited financial resources,

Weak spending on R & D, Very narrow
product line, Limited distribution, Higher
costs, Out-of-date products / technology,
Weak market image, Poor marketing skills,
Limited management skills, Under-trained
employees.

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 WEAKNESSES

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 What
SWOT is SWOT
ANALYSIS Analysis?
- THREAT

THREATS

External elements in the environment that

!
could cause trouble for the business -
External factors, beyond an organization’s
control, which could place the
organization’s mission or operation at risk.
Arise when conditions in external
environment jeopardize the reliability
and profitability of the organization’s
business.
Compound the vulnerability when they
relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the
stability and survival can be at stake.
Examples - Entry of foreign competitors,
Introduction of new substitute products,
Product life cycle in decline, Changing
customer needs/tastes, Rival firms adopt
new strategies, Increased government
regulation, Economic downturn.

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 THREATS

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 SWOT Analysis

Learning Objectives
What is SWOT Analysis?

Analysis
Aim of SWOT Analysis?

Who needs SWOT Analysis?

How to conduct SWOT Analysis?

Benefits & Pitfalls of SWOT Analysis

Brainstorming & Prioritization in SWOT Analysis

Tips & Exercise

Example text
Go ahead and replace it w ith
your ow n text. This is an
exam ple text.
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 Aim of SWOT Analysis?

H A RM FU L
L
H ELPFU
To help decision makers
share and compare ideas.

To bring a clearer
common purpose and
understanding of

S W factors for success.

To organize the
important factors
linked to success and
failure in the business
world.
To analyze issues that
have led to failure in

T
the past.

O To provide linearity to
the decision making
process allowing
complex ideas to be
presented
systematically.
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 SWOT Analysis

Learning Objectives
What is SWOT Analysis?

Aim of SWOT Analysis

Who needs SWOT Analysis?

How to conduct SWOT Analysis?

Benefits & Pitfalls of SWOT Analysis

Brainstorming & Prioritization in SWOT Analysis

Tips & Exercise

Example text
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your ow n text. This is an
exam ple text.
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 Who needs SWOT Analysis?

• When the team has not met its

targets
2 • Customer service can be better
• Launching a new business unit to
pursue a new business
• New team leader is appointed

Business Unit

Job Holder Company

• When supervisor has issues with
work output • When revenue, cost & expense
targets are not being achieved
1 • Assigned to a new job
• New financial year – fresh targets 3 • Market share is declining
• Job holder seeks to improve • Industry conditions are unfavorable
performance on the job • Launching a new business venture

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 Who needs SWOT Analysis?
SWOT Analysis is also
required for / during...
Changing Jobs

Product Launch

Decision Making

Personal Development Planning

Competitor Evaluation

Product Evaluation

Strategic Planning
Brainstorming Meetings
Workshop Sessions

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 SWOT Analysis

Learning Objectives
What is SWOT Analysis?

Aim of SWOT Analysis

Who needs SWOT Analysis?

How to
How to conduct
conduct SWOT
SWOT Analysis?
Analysis?

Benefits & Pitfalls of SWOT Analysis

Brainstorming & Prioritization in SWOT Analysis

Tips & Exercise

Example text
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your ow n text. This is an
exam ple text.
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 How to conduct SWOT Analysis?

1. Analyse Internal & 2. Perform SWOT Analysis 3. Prepare Action Plans

External Environment & Document

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 How to conduct SWOT Analysis?

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 How to conduct SWOT Analysis?

1. Analyse Internal & 2. Perform SWOT Analysis 3. Prepare Action Plans

External Environment & Document

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 How to conduct SWOT Analysis?

2. Perform SWOT Analysis & Document

Carry your findings forward - Make sure that the
SWOT analysis is used in subsequent planning.
Revisit your findings at suitable time intervals.

Evaluate listed ideas against

Objectives - With the lists compiled,
sort and group facts and ideas in
relation to the objectives.
List Strengths,
Weaknesses,
Create a workshop environment - Opportunities, & threats
Encourage an atmosphere
conducive to the free flow of
information.
Select contributors - Allocate research & information gathering
Expert opinion may be tasks - Background preparation can be carried
required for SWOT out in two stages – Exploratory and Detailed.
Information on Strengths & Weaknesses
should focus on the internal factors &
information on Opportunities & Threats
should focus on the external factors.
Establish the objectives - Purpose of
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 How to conduct SWOT Analysis?

3. Prepare Action Plan

Once the SWOT analysis has been completed, mark each point with:

Things that MUST be addressed immediately

Things that can be handled now

Things that should be researched further

Things that should be planned for the future

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 SWOT Analysis

Learning Objectives
What is SWOT Analysis

Aim of SWOT Analysis

Who needs SWOT Analysis?

How to conduct SWOT Analysis?

Benefits &
Benefits & Pitfalls
Pitfalls of
of SWOT
SWOT Analysis
Analysis

Brainstorming & Prioritization in SWOT Analysis

Tips & Exercise

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exam ple text.
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 Benefits & Pitfalls of SWOT Analysis

Benefits of SWOT Analysis

Benefits of
SWOT
Analysis

Knowing the Competion Forecasting

Reviews a company's Provides a variety of information
competitors & benchmarks critical to forecasted variables.
against them to configure Threats, for e.g., can impact a
strategies that will put the business's forecast. By
Decision Making Tool
company in a competitive understanding the company's
Provides well-rounded advantages & disadvantages,
advantage. information that prompt
forecasts will be more accurate.
well-informed decisions.
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 Benefits & Pitfalls of SWOT Analysis

Benefits of SWOT Analysis

Besides the broad benefits, here are few more benefits of conducting SWOT Analysis:

Helps in setting of objectives for strategic planning

Provides a framework for identifying & analyzing strengths,

weaknesses, opportunities & threats

Provides an impetus to analyze a situation & develop suitable

strategies and tactics

Basis for assessing core capabilities & competencies

Evidence for, and cultural key to, change

Provides a stimulus to participation in a group experience

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 Benefits & Pitfalls of SWOT Analysis

Pitfalls of SWOT Analysis

Can be very subjective. Two people rarely come up with the same
final version of a SWOT. Use it as a guide and not as a prescription.

May cause organizations to view circumstances as very simple due

to which certain key strategic contact may be overlooked.

Categorizing aspects as strengths, weaknesses, opportunities &

threats might be very subjective as there is great degree of
uncertainty in market.

To be effective, SWOT needs to be conducted regularly. The pace

of change makes it difficult to anticipate developments.

The data used in the analysis may be based on assumptions that

subsequently prove to be unfounded [good and bad].

It lacks detailed structure, so key elements may get missed.

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 SWOT Analysis

Learning Objectives
What is SWOT Analysis?

Aim of SWOT Analysis

Who needs SWOT Analysis?

How to conduct SWOT Analysis?

Benefits & Pitfalls of SWOT Analysis

Brainstorming
Brainstorming &
& Prioritization
Prioritization in
in SWOT
SWOT Analysis
Analysis

Tips & Exercise

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exam ple text.
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 Brainstorming & Prioritization in SWOT Analysis

Brainstorming Prioritization

Output from Brainstorming exercise is Prioritized

Begin brainstorming by asking the At the end of the Brainstorming exercise:

following questions: • Reduce the list of strengths & weaknesses to
• What opportunities exist in our no more than five distinctive competencies and
external environment? debilitating weaknesses
• What threats to the institution exist • Strengths that are distinctive
in our external environment? competencies
• What are the strengths of our • Weaknesses that are debilitating
institution? • Reduce threats and opportunities to the five
• What are the weaknesses of our most critically important of each.
institution?

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 SWOT Analysis

Learning Objectives
What is SWOT Analysis?

Aim of SWOT Analysis

Who needs SWOT Analysis?

How to conduct SWOT Analysis?

Benefits & Pitfalls of SWOT Analysis

Brainstorming & Prioritization in SWOT Analysis

Tips & Exercise

Example text
Go ahead and replace it w ith
your ow n text. This is an
exam ple text.
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 Tips & Exercise

TIPS

Do’s Don’ts
ü Be analytical and specific. х Try to disguise weaknesses.
ü Record all thoughts and ideas. х Merely list errors and mistakes.
ü Be selective in the final evaluation. х Lose sight of external influences and
ü Choose the right people for the trends.
exercise. х Allow the SWOT to become a blame-
ü Choose a suitable SWOT leader or laying exercise.
facilitator. х Ignore the outcomes at later stages of the
ü Think out of the box planning process.
ü Be open to change

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 Tips & Exercise

TIPS

Introduce the
SWOT method and
its purpose in your Be willing to
When organization to breakaway from
conducting a
gain acceptance. traditional methods.
SWOT analysis,
designate a
leader or group
facilitator.

Discuss and record the

results. Prepare a
While doing a written summary of the
SWOT analysis SWOT analysis to give
for your job, to participants.
invite someone
to brainstorm
with you. KAIZEN | LEAN | SIX SIGMA
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 Tips & Exercise

EXERCISE

Assume that a car manufacturing company has recently launched its

products. Perform a SWOT analysis for the same.

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 Tips & Exercise

EXERCISE
Helpful

STRENGTHS WEAKNESSES
• No Competition in the EV • High Price
Segment. • Low aesthetic appeal

Internal
• Environment friendly • Small driving range [up to
• Economic to Drive [Rs. 0.4 80 KM]
per km] * • Competition from gasoline
• Government subsidies [8% vehicles
excise duty] *

OPPORTUNITIES THREATS

• Huge untapped EV market • Government incentives

External

• Growing demand of green to gasoline vehicles

technologies • Entry of competitors
• Rising fuel costs • Stringent safety
• Growing road congestion requirements anticipated
in urban cities • Availability of hybrid vehicles

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 Tips & Exercise

EXAMPLE

Mc Donald’s SWOT Analysis

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 Tips & Exercise
Mc Donald’s
SWOT Analysis INTERNAL

STRENGTHS WEAKNESSES

• Ranks very high on the Fortune Magazine's most • Failing pizza test market thus limiting the
admired list ability to compete with pizza providers.
• Community oriented • High training costs due to high turnover.
• Global operations all over the world • Minimal concentration on organic foods.
• Cultural diversity in the foods • Not much variation in seasonal products .
• Excellent location • Quality concerns due to franchised operations.
• Assembly line operations. • Focus on burgers / fried foods not on healthier
• Use of top quality products options for their customers.
OPPORTUNITIES THREATS

• Opening more joint ventures. • Marketing strategies that entice people from
• Being more responsive to healthier options. small children to adults.
• Advertising wifi services in the branches. • Lawsuits for offering unhealthy foods.
• Expanding on the advertising on being • Contamination risks that include the threat of
more socially responsible e-coli containments.
• Expansions of business into newly developed • The vast amount of fast food restaurants that
parts of the world. are open as competition.
• Open products up to • Focus on healthier dieting by consumers.
allergen free options • Down turn in economy affecting the ability to eat
such as peanut free. EXTERNAL that much. KAIZEN | LEAN | SIX SIGMA
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 Tips & Exercise

Points to Ponder

• Keep your SWOT short and simple , but remember to include important details.
For example, if you think your communication skills is your strength, include
specific details, such as verbal / written communication.

• When you finish your SWOT analysis, prioritize the results by listing them in order
of the most significant factors that affect you / your business to the least.

• Get multiple perspectives on you / your business for your SWOT analysis. Ask for
input from your employees, colleagues, friends, suppliers, customers and partners.

• Apply your SWOT analysis to a specific issue , such as a goal you would like to
achieve or a problem you need to solve. You can then conduct separate SWOT
analyses on individual issues and combine them.

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 DONT
QUI T

~ Z ig Z ig la r