ASSESSING THE FIRMS INTERNAL & EXTERNAL ENVIRONMENT CHAPTER 2
SWOC ANALYSIS
- In strategic marketing management, firms must understand both their
internal capabilities and the external environment to formulate effective strategies.
- One of the most widely used tools in this process is the SWOC
Analysis, which identifies a company’s Strengths, Weaknesses, Opportunities, and Challenges.
SWOC ANALYSIS - Serves as a foundation for
decision making, helping organizations align their internal strengths with external opportunities while
addressing weaknesses and mitigating Challenges.
SWOC ANALYSIS – is a strategic
planning tool used to evaluate organizations position in the market by analyzing internal and external
factors.
STRENGTHS - internal
advantages that give a company a competitive edge. WEAKNESSES -
internal limitations that hinder performance.
OPPORTUNITIES - external factors the company can exploit for growth.
CHALLENGES - external risks that may harm the organization.
STRATEGY FORMULATION USING SWOC
The real value of SWOC comes from using it to generate strategies.
- SO, Strategies (Strength-Opportunity): Use strengths to
exploit opportunities. • Example: A strong online presence (S) + growing
demand for online shopping (O) → Expand digital marketing.
- WO Strategies (Weakness-
Opportunity): Overcome weaknesses by leveraging opportunities. • Example: Weak brand
awareness (W) + rising trend in influencer marketing (O) → Partner with influencers
SC
Strategies (Strengths-Challenges): Use strengths to avoid or reduce challenges. • Example:
Strong supply chain (S) + threat of rising costs (C) → Negotiate better supplier contracts.
• WC
Strategies (Weakness-Challenges): Defensive tactics to minimize weaknesses and challenges.
•
Example: High employee turnover (W) + growing competition (C) → Invest in employee retention
programs
WHAT IS ENVIRONMENTAL SCANNING- it is the gathering of information
pertaining to the company’s external environment; processing the gathered information into strategic
analysis whether unfavorable future time; hence, enabling organization to create a defense prior to the
anticipated attacks.
THE COMPANY’S DYNAMIC ENVIRONMENT
INVADED BY SIX (6) UNCONTROLLABLE FACTORS:
- Demographics
- Technology
- Social and Cultural Forces
- Economic Condition
- Political and Legal
Forces - Competition
DEMOGRAPHICS – pertains to the characteristics of the population, which explains who they
are and how much they are willing to sacrifice as payment to the products or services they would like to
enjoy or avail. (Populations age, income, gender, civil status, education, religious & professional
affiliation, race, geographic location).
TECHNOLOGY
- The internet has now become a way of life.
- People now spend more time online than watching tv or
reading magazine. - A recent consumer survey shows that everyone is
jumping on mobile applications already. - Consumers from all generations are starting to make
more purchases on smartphones and tablets through browsers and app.
SOCIAL AND CULTURAL FORCES
- Purchasing decisions can also
be affected by a social class or a particular group where an individual is affiliated
with. - The
cultural comfort zone that the group adheres to could shape consumers buying
decisions.
- Social Classes (upper, middle, lower)
- Individuals orientation about time, family, leisure, personal goals, career and
even religion may directly or indirectly dictate his or her actions and decisions.
- Changing consumer preference
ECONOMIC CONDITIONS
- An economy that is slowing down when there
is an increasing inflation rate, the ballooning price levels of commodities affect the buying power of
consumers. - Economic condition does not only affect
marketing programs but also the business operation and its cycle in general.
4 STAGES OF BUSINESS
CYCLE: 1. Prosperity -
manifests growth and success in almost different aspects of business endeavors. 2. Recession- is
a period where both consumers and business are tightening their economic belts. 3. Depression-
is a period of sustained recession. 4. Recovery- is
an upswing period where companies are slowly recuperating from the ill-fated period of recession or
depression.
POLITICAL AND LEGAL FORCES
- when the state enacts and promulgates laws, these limit legitimate actions of a firm.
- These forces affect the effort of the firms as to the production, promotion and
distribution of their products to the target market.
COMPETITION
- these forces affect the effort of the firm as to the
production, promotion and distribution of their products to the target market.
Brand Competition – companies have
to deal consistently with brand competition form marketers of directly similar products.
Substitute Products – these are items
that can replenish the same needs or wants specially in the absence of the intended product brand.
Competition for target
customers- marketers have to work double since companies rival for the customers limited budget and
limited attention.
PORTERS FIVE FORCES
- Michael porters five forces framework is a powerful tool for analyzing the level of
competition within an industry and identifying its attractiveness or profitability.
- It helps managers and entrepreneurs understand the dynamics that influence
competition and guides them in developing strategies to improve market positioning.
OVERVIEW OF PORTERS FIVE FORCES
1. Threat of new entrants
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threats of substitute products
or services 5. Industry rivalry (competitive
rivalry among existing competitors)
These forces
collectively determine the intensity of competition and the profit potential of an industry.