Question

Q1 (3 Marks) (CLO S1] Produce an example to show how SWOT Matrix can be used to match any key external and internal factor and formulate an alternative strategy. Q2 (4 Marks) (CLO S1] The directional vector in the matrix below shows the strategic position of the company taking into consideration the two internal dimensions, financial position (FP) and competitive position (CP) and the two external dimensions, stability position (SP) and industry position [IP]. Analyze the strategic profile of the firm using the SPACE Matrix and suggest an appropriate strategy for it to pursue. IP Q3 (3 Marks) [CLO C1] Evaluate when 'Joint Ventures' and 'Cooperation Among Competitors' are appropriate means for achieving strategies. ***Good Luck ***

Answer 1

Solution for Question 1:

A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is a high-level strategic planning model that helps organizations identify where they’re doing well and where they can improve, both from an internal and external perspective. It is an acronym for “Strengths, Weaknesses, Opportunities, and Threats.”

You typically want to conduct a SWOT analysis at the beginning of your strategic planning process or during a strategy refresh. Your entire leadership team should be heavily involved, because they should have the ability to look across your organization and offer insight into your competitive environment and/or business landscape. When the leadership team offers appropriate recommendations regarding your strengths, weaknesses, opportunities, and threats, you will end up with a SWOT analysis that has the credibility to be used constructively in the strategic planning process.

A Detailed SWOT Analysis Example

To help you get started, we’ve created this SWOT analysis template. (The examples below are specific to a financial organization, but only for examples sake; the SWOT analysis exercise is applicable to all businesses!) You’ll notice we divided our hypothetical examples for strengths, weaknesses, opportunities, and threats based on the four Balanced Scorecard perspectives. You don’t have to use the Balanced Scorecard to be successful with your SWOT analysis, but this method does provide a strong framework for your discussion.

Strengths

Start by asking the question, “What are we good at?” This is a broad question, but in the beginning stages of your discussion, you should accept all answers.

1. Financial Strengths: What is your most reliable source of financial growth? Is it your current customers? A particular product? Your service fee structure?
2. Customer Strengths: Where is your customer growth coming from? Is this coming from referrals, or a particular industry segment like healthcare or retail? Is it mainly retail or commercial? Why are your customers choosing you over your competitors?
3. Internal Strengths: What do you do very well as an organization? Are you the first to innovate products in your industry? Do you have strong customer relationships or partnerships?
4. Learning & Growth Strengths: Where do you excel insofar as your employees are concerned? Is it your compensation model? Could it be your workforce development program? Your culture?

Weaknesses

Next you should ask yourself, “What are we not good at?” or “Where do we have opportunities to improve?”

1. Financial Weaknesses: What is your biggest financial weakness? Perhaps most of your customers are in a cyclical industry and subject to market whims, for example. Or maybe your most used product has the lowest profit margins.
2. Customer Weaknesses: Where do your customers think you need to improve? This could be your investment products, locations, loan origination, or competitive prices for interest rates.
3. Internal Weaknesses: What do you do poorly? Do you have opportunities to improve in project management for opening new branches? What about for one-touch call resolution for customer service?
4. Learning & Growth Weaknesses: What are your biggest challenges with employees? Do you have particularly high turnover in certain departments or a negative perception of the organizational culture?

Opportunities

Following your discussion on threats, ask those in leadership to look toward the future and consider, “Where do we see big possibilities for our organization?”

1. Financial Opportunities: What is your biggest opportunity to improve your finances? This might be starting a new product line, increasing customer retention, or going after a new geographical area.
2. Customer Opportunities: Where could you dramatically improve with your customers? Could you improve your online interface? What about cross-selling related products, or better understanding your customers’ purchasing habits?
3. Internal Opportunities: What processes will drive you well into the future if you could improve upon them? This may entail partnering with a mortgage origination company or developing neighborhood sponsorships.
4. Learning & Growth Opportunities: What opportunities do you have to leverage staff? For example, do you have cross-training opportunities? Could you make a few tweaks to improve your culture and thus your retention?

Threats

After identifying opportunities, zero in on your biggest threats by asking, “What do we see on the horizon as being potentially harmful to our organization?”

1. Financial Threats: What threats could seriously impact your financial health? This could be low-cost competitors, a partner entering the banking space, or an overseas banking product.
2. Customer Threats: What is your biggest concern about your customers? Does one of your competitors offer zero-fee checking that could steal some of your market share? How simple is your customers’ ease of departure?
3. Internal Threats: What current areas of your business might harm you later? Do you have a new product rollout soon that could potentially fail? Are you struggling through a merger or an office upgrade?
4. Learning & Growth Threats: What threatens the people within your organization? This could be anything from instability in your customer support department to staff member departures to a department-specific pushback against new technology.

Solution for question 2:

5. Two internal dimensions (financial position [FP] and competitive position [CP])
5. Two external dimensions (stability position [SP] and industry position [IP])

Most important determinants of an organization’s overall strategic position

Steps to Develop a SPACE Matrix:

1. Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP)
2. Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the FP and IP dimensions.

                Assign a numerical value ranging from –1 (best) to –7 (worst) to each of the variables that make up the SP and CP dimensions

3. Compute an average score for FP, CP, IP, and SP
4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix
5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point
6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection point

Hence: This vector reveals the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative

Solution for question 3:

A framework for using joint ventures (and other forms of cooperative strategy) within varying competitive environments is constructed, and hypotheses are developed concerning the impact of particular industry traits upon firms' options in pursuing them. Industry examples illustrate the framework's hypotheses. In this framework, demand traits suggest what types of cooperative strategies are needed.

Competitor traits suggest how firms will respond to these needs for cooperation. Since joint ventures can be inherently unstable organizational forms, it is important for managers to

(1) select the right cooperative strategy option and

(2) modify the autonomy from (and coordination with) sponsoring firms that ventures enjoy as their industry structures evolve. Familiarity with cooperative strategy options is important because

(1) as growth slows,

(2) as markets shrink or become crowded,

(3) as industries become global, or

(4) as technological change accelerates to speeds where individual firms cannot recover their initial investments, managers will have less margin for error.

If managers do not learn how to use cooperative strategies advantageously their firms may encounter difficulties in delivering adequate value to their customers, replenishing their base of skills, and/or safeguarding their abilities to increase long-term shareholder value.