SWOT analysis
Company
S
W
O
trengths and
eaknesses
Industry, Economic and Technical
pportunities
and
Strategic Analysis
T
hreats
© Colin Boyd 2002
SWOT analysis for Wendy’s
Strengths and weaknesses are specific to
Wendy’s – they are internal characteristics
Inside Wendy’s
Strategic Analysis
Outside Wendy’s
= the external environment
© Colin Boyd 2002
SWOT analysis for Wendy’s
Opportunities and threats apply to all the
members of the industry that Wendy’s is in –
they are external characteristics
Outside Wendy’s
= the external environment,
which is the same for all
members of the fast food
industry
Strategic Analysis
© Colin Boyd 2002
The PEST model of the external environment
PEST = the Political,
Economic, Social and
Technological environments
that interact with business.
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Political, Economic and Social Dimension
•International and National Economic Policies
•Traditional Government Regulation
•Government Restrictions
•Recent Political and Social Developments
•Consumer Pressure
•Economic Developments
•Population Change
•Wealth Changes
•Leisure Trends
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
For each item on the checklist; for this industry
(as defined by horizontal integration for the
specific firm we are examining); what are the
threats and opportunities facing all the
members of this industry, both now and in the
foreseeable future?
Environmental Opportunities and Threats must
be the same for all members of any one industry
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Political, Economic and Social Dimension
International and National Economic Policies
• taxation
• regional incentives
• trade agreements
Traditional Government Regulation
• safety – employee, customer, bicycle helmets
• hygiene
• competition -- de-regulation
Government Restrictions
• trade with Iraq, Cuba
• advertising and display of tobacco products
• coping with new medical technologies
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Political, Economic and Social Dimension
Recent Political and Social Developments
•
•
•
•
Quebec separatism
the “Green” movement
skateboarders and snowboarders
acceptability of cosmetic surgery
Consumer Pressure
• telemarketing conduct
• negative option pricing of cable TV
• acceptability of tobacco use and advertising
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Political, Economic and Social Dimension
Economic Developments
•
•
•
•
•
the “boom and bust” economic cycle
counter-cyclical businesses
seasonality
other economic cycles
drivers of demand – direct or derived?
Population Change
•
•
•
•
Strategic Analysis
large aboriginal youth population
Sask. population will be skewed
baby boomers = 1 million extra Canadians
“a python swallowing a pig”
© Colin Boyd 2002
The Thunder of the Baby
Boomers
Compared to what a normal
population profile would be like,
Canada has 1 million extra people in
the baby boomer age range
funeral parlours
nursing homes
retirement property
80
bird watching
walking
70
golf
health foods
fitness
60
office building
homes
travel
rings
50
the pill
universities
40
rock’n roll
school buses
school building
30
A baby boomer born
baby food
in 1955 is now aged 56
20
daiper cleaning
0
10
…like a python swallowing a pig, the bulge moves ever onwards…
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Political, Economic and Social Dimension
Wealth Changes
•
•
•
•
huge changes in disposable income
holidays, gadgets, car ownership
many more people own houses = improvements
the stinking rich – 4 Season’s Hotels
Leisure Trends
•
•
•
•
Strategic Analysis
more time off work, less home work = leisure time
hedonist pursuits – skiing, windsurfing, travel
exotic foods, cooking
home cocoon – alarms, home theatre, take-out food
© Colin Boyd 2002
Environmental Threats and Opportunities
Market Factors
•Product Life Cycle
•Market Demand
•Market Requirements
•Consumer Preferences
•Pricing Structure
•Distribution Requirements
•New Products
•New Competitors
Strategic Analysis
© Colin Boyd 2002
The Product Life Cycle
MATURITY
DECLINING
GROWTH
SALES
VOLUME
DECLINE
CONSTANT
GROWTH
ACCELERATING
GROWTH
INTRODUCTION
TIME
Strategic Analysis
© Colin Boyd 2002
Strategic Analysis
© Colin Boyd 2002
Porter's Generic Strategies
Niche Positioning
• it is probably easier to establish a niche position when
the market is growing
Product Differentiation
• when the pie is growing, no one is fighting too hard for
market share, and hence differentiation is possible in the
growth stages of the life cycle = MARKETING SKILLS
Cost Leadership
• A mature market means a fight for market share via
price competition, which in turns puts all the attention
on product costs = MANUFACTURING SKILLS
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Market Factors
•Market Demand
• consumable goods – how many per person per year?
• durable goods – how long do they last?
• derived demand – 1 auto = 5 tires
•Market Requirements
• utility products – coloured nails? Westjet
• need for a broad range of products
•Consumer Preferences
• draft beer trends – dark tasty ale v light lager
• organic foods
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Market Factors
•Pricing Structure
• air fares – return versus single
• rebate coupons preserving the retail price structure
• grey market goods
•Distribution Requirements
• growth in 2 income families
• less time to shop = catalogues + internet, not retail
• IKEA = KD (KnockDown) furniture
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Market Factors
•New Products
• lonely hearts via digital phones
• computers v VCRs
• floppy discs v compact discs v mini-discs
•New Competitors
• Fujifilm and Kodak versus digital photos
• Canon and Kodak into photocopiers
• Sony Store and Sony Entertainment
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Product and Technology Dimension
•Raw Materials
•Pricing of Raw Materials
•New Ingredients or Raw Materials
•Cost and Experience Curves
•Process Innovation
•Technological Breakthrough
Strategic Analysis
© Colin Boyd 2002
Environmental Threats and Opportunities
Product and Technology Dimension
•Raw Materials
• general availability – new diamond sources
• geographical scarcity
• cost/unit vol. dictates the location of manufacturing?
•Pricing of Raw Materials
• vulnerability to price increases? e.g. OPEC oil prices
• Hedging strategies – Westjet v Air Canada
•New Ingredients or Raw Materials
• plastic kayaks
• Substitute away from vulnerable raw materials
Strategic Analysis
© Colin Boyd 2002
The Experience Curve
Slope of .2 to .3, meaning a 20% to 30%
reduction in unit manufacturing
costs for each doubling
of production
Kingston 4GB
DataTraveler
Pocket USB
Drive $12.99
Cost
per
Unit
made
2
101
10
10 3
10 4
Total Accumulated Production
Strategic Analysis
105
106
© Colin Boyd 2002
Environmental Threats and Opportunities
Product and Technology Dimension
•Process Innovation
• multi-screen cinemas on a single-screen footprint
• computers replacing secretaries in Commerce
• home wine-making
•Technological Breakthrough
•
•
•
•
Strategic Analysis
Apple Computer and Apple Corp. - no music use
insulin from GM bacteria instead of from pigs
laser eye surgery
digital photography and digital music
© Colin Boyd 2002
CENTRAL STRATEGIC ALTERNATIVES
1 Stay as you are
2 Continue in current business, but in a more efficient
and streamlined way
3 Get out of all or part of current business by selling,
merging or liquidating
4 Expand current business
5 Expand primarily in businesses other than main
current business = DIVERSIFICATION
6 Choose alternatives 2 or 3, and 4 or 5.
1
2 and 3
4 and 5
6
Strategic Analysis
STABILITY
RETRENCHMENT
GROWTH
COMBINATION
© Colin Boyd 2002
Decision Making at the Strategic Level
…involves questions such as….
•
•
•
•
•
•
•
•
Are we in the right kind of business?
Should we stay the same, or change in some way?
Should we become smaller, or bigger?
On which dimension(s) should we change…
….geographical scope?
….breadth of products offered?
….extent of vertical integration?
….specialization versus diversification?
Strategic Analysis
© Colin Boyd 2002