Chapter # 6 : SWOT Analysis ad gap analysis
Corporate appraisal (where we are)
o Analyzing external environment
i. SLEPT analysis
ii. Porter’s 5 forces model
o Analyzing internal environment (Situation analysis/Position audit)
i. Resources audit
ii. BCG and GEBS matrices
iii. Value chain analysis
iv. System structure
o SWOT Analysis
o Gap analysis
Corporate appraisal is assessment of SWOT in relation to internal (SW) and external (OT) factors affecting organization to
establish long term plans.
OT Analysis---Analyzing external broad environment:
What Social factors affect:
Changing values and lifestyle
Changing pattern of work and leisure
Why social factors are considered:
• Stakeholders are members of society--assessment of their values and beliefs
• Good (ethical) reputation
• Avoid restrictive legislation
• Change = opportunities
o Health and safety legislation
o Employment laws
o Environmental legislation
o Information about performance.
Economic key forces affecting organizations:
Interest Rates and Tax rates
Availability of Credit
Govt. fiscal policies (taxation, govt. spending, borrowing and repayment) and monetary policies (control of money
demand and supply through rates)
Foreign Exchange Rates
Foreign Trade Balances
Consumer income, debt and spending
International economic issues:
o Extent of protectionist measures
o Comparative rates of growth, inflation, wages and taxation
o The freedom of capital movement
o Exchange rates o Economic agreements
Exchange rate is the rate at which a national currency exchanges for other national currency.
Demand and supply of currencies in foreign exchange market (Floating exchange rate)
Govt. (Fixed exchange rate)
Synthesis of above two (Managed exchange rate)
Spot exchange rate (rate set for immediate delivery of a currency)
Forward exchange rate (rate set for future exchange of a currency)
Closing rate (Spot exchange rate at Balance Sheet date)
Type of Govt.
Stability of Govt.
Govt. attitude i.e. privatization or nationalization
Amount of bureaucracy
Pricing, dividend, tax, employment issues
Political risk is the risk that political factors will affect an organization e.g. war, corruption, nationalization, political instability.
Jeannet and Hennessry developed a checklist to assess political risk:
1. How stable is Political system.
2. How long will govt. remain in power.
3. How strong is govt.’s commitment to specific rules of game.
4. If present govt. is succeeded, how specific rules of games would change.
5. What would be the effect of change in specific rules of game.
6. In light of these effects, what decisions and actions should be taken now?
o Change in production techniques
o Invention and innovation
OT Analysis ---Analyzing external specific and direct environment:
(Porter’s 5 forces model)
i) When costumers have powers:
•Small number of customers
•They make high volume purchases
•Products they are buying are undifferentiated
•Alternative sources of supply are available (substitute or switching)
ii) When Suppliers Have Power:
•Small number of suppliers •Few substitutes exist
•Suppliers are not dependent on the buyer for a lot of their sales
•Suppliers have differentiated their products
•It is costly to switch suppliers
iii) When Rivalry Among Existing Competitors Is Intense:
•Slow industry growth
•High fixed costs (plants, machinery, outlets)
•A large number of competitors
•High exit barriers (what you lose if you leave the business)
•Small changes in market share have a big pay-off
iv) Barriers That Block New Entrants
•Economies of scale
•Large capital requirements
•High switching cost
•Limited access to distribution channels
•Some government policies and regulations
•Other advantages that are hard to duplicate such as patents, great locations, subsidies, partnerships, etc.
•History of aggressive retaliation toward new entrants
v) Indirect Competitors/Substitutes
•Close substitutes place a ceiling on the price that can be charged for a product or service
•Close substitutes also set indirect performance comparisons
•Main product is sensitive to price of substitute.
Responding to the Organization/Marketing environment:
Companies can passively take environment as uncontrollable and they must adapt to.
Companies can take environmental management perspe