Internal and External

Analysis

1. SWOT ANALYSIS
2. PORTER’s 5 FORcEs
3.PEST A n a l y s i s
4 . Va l u e Chain A n a l y s i s
 SWOT ANALYSIS
• SWOT analysis is a planning tool used to understand the
Strengths, Weaknesses, Opportunities, and Threats involved in
a project or in a business. It involves specifying the objective of the
business or project and identifying the internal and external factors
that are supportive or unfavorable to achieving that objective. (1)

• SWOT is often used as part of a strategic planning process.

SWOT is an acronym for Strengths, Weaknesses,
Opportunities, Threats.

(2)
 SWOT ANALYSIS
HISTORY
• The origin of SWOT analysis is credited by Albert Humphrey, who led a
research project at Stanford University in the 1960s and 1970s using data
from many top companies.
• Goal of SWOT was to identify why corporate planning failed. Humphrey and
the team used the categories “What is good in the present is Satisfactory, good
in the future is an Opportunity; bad in the present is a Fault and bad in the
future is a Threat.”. Hence they came up with SWOT.(3)

MYTH OF SWOT:
Some researchers reference the 1965 publication “Business Policy,
Text and Cases” from Harvard University in which a framework is used which closely resembles a
SWOT analysis.

Strengths, Weaknesses,
opportunities, risks, environment & problems of other
industries. The terms SWOT or THREATS is not used so it is myth.(3)
 SWOT ANALYSIS
PURPOSE
• Reveal your competitive advantages
• Analyze your prospects for sales profitability and
product development
• Prepare your company for problems
• Allow for the development of contingency plans
• A strategic option, such as entering a new market or launching
a new product
• A opportunity to make an acquisition
• A potential partnership
• Project planning and project management
• An investment opportunity
• Personal financial planning
• Personal career development - direction, choice, change, etc.
(5
)
 SWOT ANALYSIS
Advantage & Limitations

(6)
 SWOT ANALYSIS
Advantage & Limitations

(6)

(6) www.rapidbi.com/SWOT
 SWOT ANALYSIS
Advantage & Limitations (7)
 SWOT ANALYSIS
Advantage & Limitations
• Strengths may not lead to an advantage
• SWOT’s focus on the external environment is
too narrow
• SWOT gives a one-shot view of a moving
target
• SWOT overemphasizes a single dimension of
strategy
 SWOT ANALYSIS
How to
• Set objectives
• Generate alternative strategies
• Evaluate alternative strategies
• Monitor results, and
• Gain commitment among the stakeholders
during each step of this process (7)
 Porter’s 5 Forces
HISTORY
Michael E. Porter (8)

• Born in 1947.
• Professors in Harvard Business School.
• Introduced Porter's 5 Forces Model.
• Written 18 books & over 125 Articles.
Porter’s Chart

(9)
 Importance of The 5 Forces
(9)

Measure and monitor

strategy effectiveness

Strategize :
* Competitive advantage
* Cost advantage
* Market dominance
Industry analysis : * New product development
1) Industry relevance * Contraction / Diversification
2) Industry players * Price leadership
3) Industry structure * Global
4) Future changes * Re-engineering
* Downsizing
Basic knowledge * De-layering
of business strategy * Restructuring
& forces that influence
the decision making

What strategy
How to deal with competition?
to use?
 Threats of New Entrants
The easier it is for new companies to enter the industry, the more cutthroat
competition there will be.
Factors that can limit the threat of new entrants are:

• How loyal are the end users?

• How hard is it for the end users to switch and use another product?
• Does it require a large seed capital to enter this industry?
• Do entries to this industry regulated by government?
• How hard is it to gain access to the distribution channels?
• How long does it take for new staff to acquire the necessary skills to do the
work?
 Threat of Substitutes
Threats of Substitute in the Porter’s theory actually means
goods and services that does similar functions

o How many close substitutes are available?

o How pricy are the substitutes?

o What is the perceived quality of the

substitutes?
 Rivalry among firms
• How many close competitors exist in the
industry?
• What are the sizes of your close
competitors?
• What is the industry structure? Is it a
fragmented, consolidated, oligopoly or monopoly
industry?
• What is the current industry growth rate?
Bargaining Power of Customers
1. How large are your buyers’ company?

2. How many companies are there for the buyer to choose

from?

3. Are the buyers buying a huge volume?

4. Do you depend only on a few buyers to sustain your

sales?
 Bargaining power of Suppliers
• Are there substitutes for your suppliers’ products?

• Do your suppliers serve multiple industries? Does the total

industry revenue accounting for only a mall portion of the
supplier’s total revenue?
• Do suppliers have the capacity to enter your business?

• Does your company capable to enter the supplier’s business?

(10)
 PEST ANALYSIS
• PEST analysis is used to identify the external
forces affecting an organisation .This is a
simple analysis of an organisation’s Political,
Economical, Social and Technological
environment. A PEST analysis incorporating
legal and environmental factors. (11)
 PEST is AN
•
ACRONYM
P for POLITICAL FACTORS
• E for ECONOMIC FACTORS
• S for SOCIAL FACTORS
• T for TECHNOLOGICAL FACTORS

(12)
 POLITICAL FACTORS
• Trade agreements, tariffs or restrictions
• Tax levies and tax breaks
• Type of government regime example communist,
democratic, dictatorship
• Voluntary codes and practices
• Market regulations

(13)
 ECONOMIC FACTORS
• Marketers need to consider the state of a trading
economy in the short and long-terms. This is especially
true when planning for international marketing.
• Overseas economies and trends
• General taxation issues
• Market routes and distribution trends

(13)
 SOCIAL FACTORS
The social and cultural influences on business vary from
country to country.
It is important that such factors are observed
• Lifestyle trends
• Demographics
• Consumer attitudes and opinions
• Brand, company, technology image
• Consumer buying patterns
• Fashion and role models
• Ethnic/religious factors

(13)
 TECHNOLOGICAL FACTORS
• Competing technology development
• Associated/dependent technologies
• Replacement technology/solutions
• Manufacturing maturity and capacity
• Information and communications
• Technology is vital for competitive advantage, and is a
major driver of globalization.

(13)
 Advantages
• Advantages
• Provides a simple and easy-to-use framework for your analysis.
• Involves cross-functional skills and expertise.
• Helps to reduce the impact and effects of potential threats to
your organization.
• Aids and encourages the development of strategic thinking
within your organization.
• Provides a mechanism that enables your organization to identify
and exploit new opportunities.
• Enables you to assess implications of entering new markets both
nationally and globally.

(14)
 Disadvantages
• Disadvantages
• Users can oversimplify the information that is used for making decisions.
• The process has to be conducted regularly to be effective and often organizations do
not make this investment.
• Users must not succumb to 'paralysis by analysis' where they gather too much
information and forget that the objective of this tool is the identification of issues so
that action can be taken.
• Organizations often restrict who is involved due to time and cost considerations. This
limits the technique's effectiveness as a key perspective may be missing from the
discussions.
• Users' access to quality external information is often restricted because of the cost
and time needed to collate it.
• Assumptions often form the basis for most of the data used, making any decision
made based on such data subjective.

(14)
 Limitations
• Collecting enormous amounts of relevant data from the right
sources becomes a bit of a problem, especially since most of the
pertinent data must be collected from external agencies. This
makes PEST analysis not only time consuming but costly as well.
Also, getting the latest data and keeping the analysis updated with
it becomes a problem.

• Oftentimes, the factors mentioned in the analysis are based more

on assumptions and less on actual facts. An analysis based on
unfounded assumptions can lead to planning disasters. So,
it’s important to device some method to cross-verify whether
the factors mentioned in the PEST analysis.

(15)
 Value-Chain Analysis
• Value-chain analysis
– a strategic analysis of an organization that
uses value creating activities.
• Value is the amount that buyers are willing
to pay for what a firm provides them and
is measured by total revenue

(16)
 Primary activities
– contribute to the physical creation of the
product or service, its sale and transfer to the
buyer, and its service after the sale.

– inbound logistics, operations, outbound

logistics, marketing and sales, and service

(16)
 Support activities
• activities of the value chain that either add value
by themselves or add value through important
relationships with both primary activities and
other support activities
• procurement, technology development, human
resource management, and general
administration.

(16)
The Value Chain

(17)
TYPES OF FIRM
ACTIVITIES
• Primary activities:
Those that are involved in the creation, sale and transfer of
products (including after-sales service)
 Inbound logistics
 Operations
 Outbound logistics
 Sales and marketing
 Service and support

(18)
TYPES OF FIRM
ACTIVITIES
• Support Activities:
Those that merely support the primary
activities
 Human resources
 Tech. development
 Procurement

(18)
 USES OF VALUE CHAIN
ANALYSIS:
• The sources of the competitive advantage of a firm can be seen
from its discrete activities and how they interact with one another.
• The value chain is a tool for systematically examining the
activities of a firm and how they interact with one another and
affect each other’s cost and performance.
• A firm gains a competitive advantage by performing these
activities
better or at lower cost than competitors.
• Helps you to stay out of the “No Profit Zone”
• Presents opportunities for integration
• Aligns spending with value processes

(19)
 Advantages Of Value Chain
Analysis
• A big advantage is that the value chain is a very flexible strategy
tool for looking at your business, your competitors and the
respective places in the industry’s value system.
• The value chain can be used to diagnose and create
competitive advantages on both cost and differentiation
• The value chain is well known and has been a mainstay of
strategy
teaching in business schools for the last 20 to 25 years.
The book, Competitive Advantage was published in 1985.
• It can be adapted for any type of business – manufacturing, retail
or service, big or small.

(20)
 Disadvantages Of Value Chain
Analysis
• It’s very strengths of flexibility mean that it has to be adapted to a particular
business situation and that can be a disadvantage since, to get the best
from the value chain, it’s not “plug and play”.
.
• The format of the value chain laid out in Porter’s book Competitive
Advantage, is heavily oriented to a manufacturing business and the
language can be off-putting for other types of business.
.
• The scale and scope of a value chain analysis can be intimidating. It can
take a lot of work to finish a full value chain analysis for your company and
for your main competitors so that you can identify and understand the key
differences and strategy drivers.
.
• Many people are familiar with the value chain but few are experts in its use

(20)
 References
1. https://rapidbi.com/swotanalysis/#.VowD6Pl97cc
2. http://www.businessnewsdaily.com/4245-swot-analysis.html
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4.http://www.businessballs.com/swotanalysisfreetemplate.htm
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