SWOT is an acronym for internal Strength (S) and Weakness (W) of an organization, and external Opportunities (O) and Threats (T) facing that organization. A merging of the organization’s resources with the opportunities in the environment results in an assessment of the organization’s opportunities. This merging is frequently called SWOT analysis because it brings together the organization’s Strengths, Weakness, Opportunities, and Threats in order to identify a strategic niche that the organization can exploit. SWOT analysis provides information that is helpful in matching the firms’ resources and capabilities to the competitive environment in which it operates and is therefore an important contribution to the strategic planning process. Having completed the SWOT analysis, the organization reassesses its mission and objectives. In the light of the SWOT analysis and identification of the organization’s opportunities, management reevaluates its mission and objectives. Are they realistic? Do they need modification? If changes are Continue reading
Strategic Management Tools
Bowman’s Strategy Clock – A Competitive Strategy Analysis Tool
In many open markets, most goods and services can be purchased from any number of companies, and customers have a tremendous amount of choice. It’s the job of companies in the market to find their competitive edge and meet customers needs better than the next company. So, how, given the high degree of competitiveness among companies in a marketplace, does one company gain competitive advantage over the others? When there are only a finite number of unique products and services out there, how do different organizations sell basically the same things at different prices and with different degrees of success? This is a classic question that has been asked for generations of business professionals. In 1980, Michael Porter published his seminal book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors”, where he reduced competition down to three classic strategies: Cost leadership, Product differentiation and Market segmentation. These three generic strategies Continue reading
What are Dynamic Capabilities?
Concept of Dynamic Capabilities of a Firm A dynamic capability refers to company’s ability to integrate, build and transform internal and external competencies. They can help an organization to achieve innovative forms of competitive advantage through integration, building and transformation of internal and external competencies, as to respond to changes in the environment. This management theory was defined by David Teece, Gary Pisano, and Amy Shuen in their 1997 paper Dynamic Capabilities and Strategic Management. In the context of achieving organizational change, aligned to the external pressure: namely, these capabilities are perceived as business processes that use resources — specifically the processes of integration, restructuring, acquisition and release resources — to adapt or create market changes. Dynamic capabilities are especially helpful in explaining the sources of competitive advantage in extremely volatile markets. Dynamic capabilities are determined by organizational and managerial processes, positions and paths. The organizational and managerial processes refer Continue reading
Internal-External (IE) Matrix
The Internal-External (IE) Matrix positions an organization’s various divisions in a nine cell matrix. The IE Matrix is a strategic management tool which is used to analyze the current position of the divisions and suggest the strategies for the future. The Internal-External (IE) Matrix is based on an analysis of internal and external business factors which are combined into one suggestive model. The IE matrix is a continuation of the EFE matrix and IFE matrix models. The Internal-External (IE) Matrix is based on two key dimensions: the IFE total weighted scores on the x €‘axis and the EFE total weighted scores on the y axis. Recall that each division of an organization should construct an IFE Matrix and an EFE Matrix for its part of the organization. The total weighted scores derived from the divisions allow construction of the corporate-level IE Matrix. On the x €‘axis of the IE Matrix, an Continue reading
Business Strategy: The Three Generic Strategies
Three of the most widely read books on competitive analysis in the 1980s were Michael Porter’s Competitive Strategy, Competitive Advantage, and Competitive Advantage of Nations. In his various books, Porter developed three generic strategies that, he argues, can be used singly or in combination to create a defendable position and to outperform competitors, whether they are within an industry or across nations. The strategies are (1) overall cost leadership, (2) differentiation, and (3) focus on a particular market niche. Cost Leadership, Differentiation, and Scope These strategies are termed generic because they can be applied to any size or form of business. We refer to them as trade-off strategies because Porter argues that a firm must choose to embrace one strategy or risk not having a strategy at all. Overall lower cost or cost leadership overall cost-leadership strategy, a strategy in which an organization attempts to gain a competitive advantage by Continue reading
Advantages and Disadvantages of having a Mission Statement
Mission statement is a summary statement of a company’s or organization’s purpose about what it wants to accomplish in the larger environment. Mission statement is playing an important role with the overall strategic planning of an organization. All of the strategic planning of an organization should base on the mission of an organization that had been set. Strategic planning include all the long-range plans, strategic plans and also annual plans which include decision making about the human resource management, production and operation, finance and it is also concerned about the marketing planning. A well-defined mission statement is very important to guide people in the organization, clearly defines who the customer is and what services and products the businesses are intended to provide. A good mission statement should contain some criteria. First, a good mission statement should be market-oriented. A market-oriented mission statement focuses on satisfying customer’s needs. A mission statement Continue reading