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Running head: SWOT 1

Strategic management is the process through which management


determines what
position to compete within a market (Varlaro, 2011) in an effort to maximize
profit (Stewart &
Porter, 2008). These decisions are determined through assessing the
variables which compose the
internal and external environment. Stated differently, leadership determines
this position when
the perceived internal strengths and weaknesses of the company are
juxtaposed against the
perceived external threats and opportuntities. This process, referred to as a
SWOT Analysis or a
TOWS Matrix, assists leadership in first determining the competitive position
in the context of
these variables, and then guiding the proper allocation of resources. It is this
allocation of
resources in the support of the chosen strategic position which may yield a
sustainable
competitive advantage; however, it may be further argued that this
sustainable competitive
advantage may only be derived from the human capital of an organization.
External Variables and their Analysis
The SWOT Analysis may assist leadership in considering the external
environmental
variables and the impact these variables have in the environment, as
summarized through the
opportunities (O) and threats (T) components of the acronym. These impacts
are considered

when assessing the current and future viability of the company. To complete
an external
environmental scan, conceptual models such as the Porter Five-Forces
model, or the Slater and
Olson (2002) Augmented Porter Model may be employed. Both models
support leadership in
assessing the microeconomic environment, or the variables within the firms
immediate market
(Wood, 2011).
The external environmental scan may begin with an assessment of the
general
environment and trends such as social, legal and political which envelope the
organization and
Running head: SWOT 2

other players within the given market such as competitors, suppliers and
customers. The Porter
Five Forces, or the Augmented Porter Model, further assist leadership through
a more detailed
analysis of these players within the specific market and the impact these
players have on the
firms viability, or profitability (Stewart & Porter, 2008). It is important to note
that these models
are mental tools, and their effectiveness may be bounded by leaderships
ability to use them.
Internal Variables and their Analysis
The successful application of a SWOT Analysis also considers the internal
variables, or
the internal environment in the attempt to determine the strengths (S) and
weaknesses (W) of the

organization. These internal variables would include the financial health such
as liquidity and
leveraging, current product portfolio and future products in the pipeline, as
well as the value
chain and current or possible competencies. Much like the external analysis,
during the internal
analysis, conceptual models such as value chain analysis, BCG or GE Product
Portfolio
Matrices, or the 7-S Model may be employed.
SWOT, HR and Sustainable Competitive Advantage
Once the external and internal variables are assessed, leadership then
chooses a strategic
position within the market which best matches the observed strengths and
weaknesses against the
observed opportunities and threats. Although, this matching is not what
necessarily yields a
sustained competitive advantage. If one considers the resource-based theory
of the firm, all
activities within the firm add value to one another. Yet, resource allocation by
leadership, which
focuses and aligns all firm activities behind the strategic initiative are crucial
to the success of
the strategic position. Therefore, it is the ability for the firm to combine these
activities in such a
Running head: SWOT 3

way that is specific to itself and hard to imitate by competitors that is


sustainable competitive
advantage.
This assessment seems to be consonant with Porters (1996)
conceptualization of tradeoffs,

organizational uniqueness and interlocking activities, as well as Prahalad &


Hamels (1990)
conceptualization of core competencies. But, it is important to note two other
observations. First,
cost and organizational efficiencies are important for the continued viability
of the organization,
but are not synonymous with strategy (Porter, 1996). Second, strategy must
evolve (Aaker,
2011), but this evolution may be supported through emergent learning
processes garnered from
within the organization (Yahagi, personal communication, 2005; Nonaka,
personal
communication, 2005). It may be argued that these emergent learning
processes can only be
facilitated by leaderships cultivation of a supportive and empowering
corporate culture.
To surmize the above observations, sustainable competitive advantage may
be considered
a management vision and directive which is then built into the organizational
structure and
culture to consistently create differentiation from competitors while
simultaneously offering
superior value to customers through efficient and effective interlocking
company activities
(Varlaro, 2009). This assessment of sustainable competitive advantage
seems to capture the
above observations, as well as highlight the importance of the human
resource component in two
ways. First, strategy may only evolve if faciliated through corporate culture.
Second, the core

competencies (Prahalad & Hamel, 1990) and the fit of these core
competencies (Porter, 1996)
which seem to be the only source of true sustainable competitive advantage
may be found in the
human capital of the organization. This observation thus supports the
importance of the human
resource component in any organizations ability to sustain competitive
advantage, and how
Running head: SWOT 4

resource allocation might actually be synonymous with the alignment of


human capital behind
strategic initiatives.
Sustainable Competitive Advantage
It may be argued that sustainable competitive advantage is derived from the
focused
allocation of resources towards a strategic position. This strategic position is
first decided upon
through leaderships application of a SWOT Analysis and the matching of an
organizations
percieved strengths and weaknesses to the perceived opportunitities and
threats. Yet, future
resource investments are also guided by this SWOT Analysis as leadership
chooses which
organizational inititatives to support. These initiatives, if supported properly,
then align with the
strategic position and combine to provide the organization with a uniqueness
of capability which
differs from other players within the market. It is this continued dedication to
uniqueness of

capability; or value proposition; which yields sustainable competitive


advantage and may only be
derived from the human capital of an organization.
Running head: SWOT 5

References
Aaker, D. (2001). Developing business strategies (6th ed.). New York, NY:
John Wiley & Sons.
Porter, M., (1996). What is Strategy? Harvard Business Review, (NovemberDecember).
Prahalad, C.K., and Hamel, G., (1990). The Core Competencies of the
Corporation, Harvard
Business Review, (May-June).
Slater, S., and Olson, E., (2002). A Fresh Look at Market Analysis. Business
Horizons (January
-February): 15-23.
Stewart, T. (Interviewer) & Porter, Michael E. (Interviewee). (2008). The Five
Competitive
Forces That Shape Strategy: An Interview with Michael E. Porter [Interview
Video].
Retrieved from FreeVideoLectures Website
http://freevideolectures.com/Course/
2526/Strategy/5
Varlaro, J. D. (2011). Strategy and Sustainable Competitive Advantage.
Unpublished Essay. The
Chicago School of Professional Psychology.
Varlaro, J. D. (2009). Strategies, Blue Oceans and HR [Powerpoint Slides].
Retrieved from
http://public.me.com/jdvarlaro

Wood, N. (2011). Week 5: Microeconomics. Retrieved from


http://www.1929highland.com
/Business/Microeconomics/micro.htm