Environmental analysis

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Environmental analysis

  1. 1. General Environment
  2. 2. SWOT Analysis Strengths Weakness Opportunities Threats
  3. 3. General Environment TOWS Matrix Threats Opportunities Strengths Weaknesses
  4. 4. TOWS Matrix Develop four types of strategies – Strengths-Opportunities (SO) – Weaknesses-Opportunities (WO) – Strengths-Threats (ST) – Weaknesses-Threats (WT)
  5. 5. SO Strategies Threats Opportunities Weaknesses Strengths (TOWS) SO Strategies Use a firm’s internal strengths to take advantage of external opportunities
  6. 6. WO Strategies Threats Opportunities Weaknesses Strengths (TOWS) WO Strategies Improving internal weaknesses by taking advantage of external opportunities
  7. 7. ST Strategies Threats Opportunities Weaknesses Strengths (TOWS) ST Strategies Using firm’s strengths to avoid or reduce the impact of external threats.
  8. 8. WT Strategies Threats Opportunities Weaknesses Strengths (TOWS) WT Strategies Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats.
  9. 9. TOWS Matrix Steps in developing the TOWS Matrix 1. 2. 3. 4. List the firm’s key external opportunities List the firm’s key external threats List the firm’s key internal strengths List the firm’s key internal weaknesses
  10. 10. TOWS Matrix Developing the TOWS Matrix 5. 6. 7. 8. Match internal strengths with external opportunities and record the resultant SO Strategies Match internal weaknesses with external opportunities and record the resultant WO Strategies Match internal strengths with external threats and record the resultant ST Strategies Match internal weaknesses with external threats and record the resultant WT Strategies
  11. 11. TOWS Matrix StrengthsS WeaknessesW List Strengths List Weaknesses SO Strategies WO Strategies Use strengths to take advantage of opportunities Overcome weaknesses by taking advantage of opportunities Threats-T ST Strategies WT Strategies List Threats Use strengths to avoid threats Minimize weaknesses and avoid threats Opportunitie s-O List Opportunities
  12. 12. SPACE Matrix Strategic Position and Action Evaluation Matrix   Four quadrant framework Determines appropriate strategies     Aggressive Conservative Defensive Competitive
  13. 13. SPACE Matrix Two Internal Dimensions   Financial Strength [FS] Competitive Advantage [CA] Two External Dimensions   Environmental Stability [ES] Industry Strength [IS]
  14. 14. SPACE Matrix Overall Strategic position determined by: – – – – Financial Strength [FS] Competitive Advantage [CA] Environmental Stability [ES] Industry Strength [IS]
  15. 15. SPACE Matrix Developing the SPACE Matrix: • • • • • • EFE Matrix IFE Matrix Financial Strength Competitive Advantage Environmental Stability Industry Strength
  16. 16. SPACE Matrix • • • Select variables to define FS, CA, ES, & IS Assign numerical ranking from +1 (worst) to +6 (best) for FS and IS; Assign numerical ranking from –1 (best) to –6 (worst) for ES and CA. Compute average score for FS, CA, ES, & IS
  17. 17. SPACE Matrix • • • Plot the average scores on the Matrix Add the two scores on the x-axis and plot point on X. Add the scores on the y-axis and plot Y. Plot the intersection of the new xy point. Draw a directional vector from origin through the new intersection point.
  18. 18. SPACE Factors Internal Strategic Position External Strategic Position Financial Strength (FS) Environmental Stability (ES) Return on investment Leverage Liquidity Working capital Cash flow Ease of exit from market Risk involved in business Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry Competitive pressure Price elasticity of demand
  19. 19. SPACE Factors Internal Strategic Position External Strategic Position Competitive Advantage CA Industry Strength (IS) Market share Product quality Product life cycle Customer loyalty Competition’s capacity utilization Technological know-how Control over suppliers & distributors Growth potential Profit potential Financial stability Technological know-how Resource utilization Capital intensify Ease of entry into market Productivity, capacity utilization
  20. 20. SPACE Matrix FS Conservative Aggressive +6 +5 +4 +3 +2 +1 CA IS -6 -5 -4 -3 -2 -1 +1 -1 +2 +3 +4 +5 +6 -2 -3 -4 -5 Defensive -6 ES Competitive

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