SWOT analysis

© Colin Boyd 2002Strategic Analysis

SWOT analysis

Industry, Economic and Technical Opportunities

and Threats

Company Strengths and

Weaknesses


SWOT analysis for Wendy’s

Strengths and weaknesses are specific to Wendy’s – they are internal characteristics

Inside Wendy’s Outside Wendy’s= the external environment


SWOT analysis for Wendy’s

Opportunities and threats apply to all the members of the industry that Wendy’s is in –

they are external characteristics

Outside Wendy’s= the external environment,

which is the same for all members of the fast food

industry


The PEST model of the external environment

PEST = the Political, Economic, Social and

Technological environments that interact with business.


Environmental Threats and OpportunitiesPolitical, Economic and Social Dimension

•International and National Economic Policies•Traditional Government Regulation•Government Restrictions•Recent Political and Social Developments•Consumer Pressure•Economic Developments•Population Change•Wealth Changes•Leisure Trends


Environmental Threats and Opportunities

For each item on the checklist; for this industry (as defined by horizontal integration for the specific firm we are examining); what are the threats and opportunities facing all the members of this industry, both now and in the foreseeable future?

Environmental Opportunities and Threats must be the same for all members of any one industry



International and National Economic Policies

Traditional Government Regulation

• taxation• regional incentives• trade agreements

• safety – employee, customer, bicycle helmets• hygiene• competition -- de-regulation

Government Restrictions• trade with Iraq, Cuba• advertising and display of tobacco products• coping with new medical technologies



Recent Political and Social Developments

Consumer Pressure

• Quebec separatism• the “Green” movement• skateboarders and snowboarders• acceptability of cosmetic surgery

• telemarketing conduct• negative option pricing of cable TV• acceptability of tobacco use and advertising



Economic Developments

Population Change

• the “boom and bust” economic cycle• counter-cyclical businesses• seasonality• other economic cycles• drivers of demand – direct or derived?

• large aboriginal youth population• Sask. population will be skewed• baby boomers = 1 million extra Canadians• “a python swallowing a pig”


The Thunder of the Baby Boomers

010

2030

4050

6070

80

daiper cleaningbaby food

school buildingrock’n roll

the pill universities

office buildingrings

homesfitness

health foods

travel

golfwalkingbird watching

retirement property

nursing homes

funeral parlours

A baby boomer bornin 1955 is now aged 56

school buses

…like a python swallowing a pig, the bulge moves ever onwards…

Compared to what a normal population profile would be like,

Canada has 1 million extra people in the baby boomer age range



Wealth Changes

Leisure Trends

• huge changes in disposable income• holidays, gadgets, car ownership• many more people own houses = improvements• the stinking rich – 4 Season’s Hotels

• more time off work, less home work = leisure time• hedonist pursuits – skiing, windsurfing, travel• exotic foods, cooking• home cocoon – alarms, home theatre, take-out food



Market Factors

•Product Life Cycle•Market Demand•Market Requirements•Consumer Preferences•Pricing Structure•Distribution Requirements•New Products•New Competitors


INTRODUCTION

ACCELERATINGGROWTH

CONSTANTGROWTH

DECLININGGROWTH

DECLINE

MATURITY

SALESVOLUME

TIME

The Product Life Cycle


Porter's Generic Strategies

Niche Positioning

Product Differentiation

Cost Leadership

• it is probably easier to establish a niche position when the market is growing

• when the pie is growing, no one is fighting too hard for market share, and hence differentiation is possible in the growth stages of the life cycle = MARKETING SKILLS

• A mature market means a fight for market share via price competition, which in turns puts all the attention on product costs = MANUFACTURING SKILLS


•Market Demand


Market Factors

•Consumer Preferences

•Market Requirements

• consumable goods – how many per person per year?• durable goods – how long do they last?• derived demand – 1 auto = 5 tires

• utility products – coloured nails? Westjet• need for a broad range of products

• draft beer trends – dark tasty ale v light lager• organic foods


•Pricing Structure


Market Factors

•Distribution Requirements

• air fares – return versus single• rebate coupons preserving the retail price structure• grey market goods

• growth in 2 income families• less time to shop = catalogues + internet, not retail• IKEA = KD (KnockDown) furniture


•New Products


Market Factors

•New Competitors

• lonely hearts via digital phones• computers v VCRs• floppy discs v compact discs v mini-discs

• Fujifilm and Kodak versus digital photos• Canon and Kodak into photocopiers• Sony Store and Sony Entertainment



Product and Technology Dimension

•Raw Materials•Pricing of Raw Materials•New Ingredients or Raw Materials•Cost and Experience Curves•Process Innovation•Technological Breakthrough


•Raw Materials


•Pricing of Raw Materials

• general availability – new diamond sources• geographical scarcity• cost/unit vol. dictates the location of manufacturing?

• vulnerability to price increases? e.g. OPEC oil prices• Hedging strategies – Westjet v Air Canada


•New Ingredients or Raw Materials• plastic kayaks• Substitute away from vulnerable raw materials


The Experience Curve

10 10 10 10 10 101 2 3 4 5 6

CostperUnit

made

Total Accumulated Production

Slope of .2 to .3, meaning a 20% to 30%reduction in unit manufacturing

costs for each doublingof production

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•Process Innovation


•Technological Breakthrough

• multi-screen cinemas on a single-screen footprint• computers replacing secretaries in Commerce• home wine-making

• Apple Computer and Apple Corp. - no music use• insulin from GM bacteria instead of from pigs• laser eye surgery• digital photography and digital music



1 STABILITY 2 and 3 RETRENCHMENT 4 and 5 GROWTH 6 COMBINATION

CENTRAL STRATEGIC ALTERNATIVES

1 Stay as you are2 Continue in current business, but in a more efficient

and streamlined way3 Get out of all or part of current business by selling,

merging or liquidating4 Expand current business5 Expand primarily in businesses other than main

current business = DIVERSIFICATION6 Choose alternatives 2 or 3, and 4 or 5.


Decision Making at the Strategic Level

…involves questions such as….

• Are we in the right kind of business?• Should we stay the same, or change in some way?• Should we become smaller, or bigger?• On which dimension(s) should we change…• ….geographical scope?• ….breadth of products offered?• ….extent of vertical integration?• ….specialization versus diversification?

SWOT analysis

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