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Exploring Swot Analysis And Competitive Advantage Strategic Management Business Essay

The study by Helms and Nixon (2010) identifies that SWOT analysis has grown as an integral tool for addressing complex strategic situations by reducing the amount of information to improve decision making. SWOT is short form of four words which is strengths, weaknesses, opportunities, and threats. It could simply understand as the study of an organization's internal strengths and weaknesses, and its external environment which is opportunities and threat that provides the building blocks for realization of the required alignment of organization variables or issues. Therefore, an understanding of all external and internal factors is assists in forming a vision of the future.

According to Helms and Nixon (2010), SWOT is a general tool designed to be used initially stages of decision making so when a precursor to strategic planning in various kinds of applications. In summarized, one is allowed to take action in condition they're known strengths and weaknesses and understand the opportunities and threats his / her has currently.

In addition, all organizations are hope to gaining competitive advantage. It could be gain through offering consumers greater value, either by giving lower prices or by providing greater benefits or services that justifies higher prices. The purpose of much of business strategy is to accomplish a sustainable competitive advantage that can increase the business profitability and brand image.

SWOT ANALYSIS

A SWOT analysis was systematically applied at a national level when preparing the afore-mentioned long-term strategy. However, it is clear that only the quality performance of the SWOT analysis will form a suitable strategic structure. Therefore, the business environment will much influence organization performance now and in the foreseeable future. The detail of SWOT analysis is explained in following sections.

Internal Environment

Internal environment are an internal factors within an organization in many areas such as management, staff, finance, research and development, operational efficiency and capacity, technical frameworks, culture, and organizational structure. Internal environment involves strengths and weaknesses in organization, those viewed therefore of factors and variables that can be handled within organizations.

Strengths

Strengths are represents the organization's internal power and strong points of view an organization own to compete against its competitors. It also can be view as organizational features and internal positive attitudes that permit organizations own strategic capacity to achieve organizational goals. It also can define as skills and capabilities that permit organizations lay out and implement their strategies in order to do better than their competitors.

Weaknesses

Weaknesses are represents the organization's negative impact of product and service value in relation to customers or competitive environment. It also can define as shortages in internal functions that produce organizations struggling to achieve their goals or lose their competitive advantage. This might allow their opponents to do much better than the business performance. Thus, it ought to be determine and acknowledge earlier in order bitter reality without procrastination.

External Environment

External environment is contains all changes that take places outsides the organization's boundary such as customers, suppliers, economic, political, cultural, and technological changes. External environment contains opportunities and threats of an organization.

Opportunities

Opportunities are defined as a set of conditions well suited for reaching goals at the right time. Rousan and Qawasmeh (2009) states that opportunities can be divided into three types those are added, supplementary, and explosive. Added opportunity is using the available resources to expand their benefits, so the revenues in this category are limited. Then, supplementary opportunity is where the organizations have to obtain new knowledge. Where explosive opportunity requires organizations to get capital in R&D to make large changes in organization standards and attributes.

Threats

Threats can define as a challenge caused by a negative attitude inconsistent with the business common norms. Besides, it also can be looked at as any improper event of force in the external environment that triggers harm to the organization's strategy. Furthermore, threats are a couple of conditions, resources and functions that organizations need to pressured, but cannot influence or control over it, means which has gone out in our control.

Why Use SWOT Analysis?

SWOT analysis is use to build up a plan or find a remedy for an organization's problem. It is because that takes consideration in various internal and external factors which is maximizes the potential of the strengths and opportunities while minimizing the impact of the weaknesses and threats of an organization.

When to work with SWOT Analysis?

SWOT Analysis is uses when must developing a strategic plan or finding a solution to issues. These tasks are performed by managers, designers or by the complete project team. Teamwork is particularly effective in providing structure, objectivity, clarity and will focus further discussions about strategy that might otherwise tend to wander.

SWOT Analysis Usage

SWOT analysis has been utilized by countless practitioners, marketing researchers, and is also a familiar and popular tool for business marketing and strategy areas. This tool is employed to determine alternatives and complex decision situations. It could be constructed quickly and can reap the benefits of multiple viewpoints as a brainstorming exercise.

There are three steps to utilize the SWOT analysis which is firstly analyses the inner factors and then analyses the external factors, and lastly create a worksheet. Above all, internal analysis is examine the capabilities of your organization's strengths and weaknesses. The planner might list down ideas from projects that both successful and unsuccessful completely in the most notable row of the SWOT grid.

Second step is external analysis known as environmental analysis Here have to analyses the opportunities and threats or obstacles to organization's performance that place at the bottom row of the SWOT grid. This has to carefully examine the market in which you intend to launch the product and analyze what the status of the competition.

In addition, there have to make a worksheet by creating four quadrants which each is strengths, weaknesses, opportunities, and threats as shown on table 1. 1. This enables planners better know how strengths can be leveraged to understand new opportunities and know how weaknesses can slow progress or magnify organizational threats. Then list specific items into the column correctly. But each column is limit to ten or fewer points per heading to avoid over generalizations. If there tend to be items are thought of, and then have to prioritize them so that only 10 top items for every single category.

Table 1. 1 Quadrants for SWOT Analysis

Positive

Negative

Internal

Strengths

1

1

2

2

3

3

4

4

5

5

6

6

7

7

8

8

9

9

10

10

External

Opportunities

1

1

2

2

3

3

4

4

5

5

6

6

7

7

8

8

9

9

10

10

Source: Adopted from Strategic Management: Concept and Cases, 2nd ed. (2006)

Finally, the individual has to know if the strengths owned permit to consider advantages from the opportunities. Besides, if the strengths owned is able to overcome the threats that have been identified. Moreover, here can also overcome the identified threat by minimize the weaknesses.

COMPETITIVE ADVANTAGE

The comprehensive or idea concept of competitive advantage is defined in The Free Encyclopedia of Wikipedia (2010) as a position of the company in a competitive landscape which allows the company earning return on investments greater than the expense of investments. Competitive advantage is a theory that seeks to address a few of the criticisms of comparative advantages, and it ought to be relevant, unique, and sustainable. Competitive advantage occurs when a business acquire or develops an attribute or combination of attributes which allows it to outperform its competitors. Besides, it is an increase of attributes and resources in perform at an increased level than others in the same industry or market.

There are two basic types of competitive advantage which is cost advantages and differentiation advantages. Cost advantage is refer to an organization can deliver the same benefit as opponents but better value. However, cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation. The figure 1. 1 shown the mixture of the resource based and positioning views to illustrate the idea of competitive advantage.

ResourcesFigure 1. 1 A model of Competitive Advantage

Value

Creation

Cost Advantage

Or

Differentiation Advantage

Distinctive

Competencies

Capabilities

Source: Adopted from QuickMBA. com

According to find 1. 1, the firm must have resources and functions that are superior to those of its competitors. Without this superiority, the competitors simply could replicate the actual firm was doing and any advantage quickly would disappear. Resources are use to setting up a cost or differentiation advantages. The resources include patents and trademarks, proprietary know-how, installed customer base, and brand equity. Besides, the organization also offers ability to work with its resources effectively which identifies capability of the organization. Distinctive competencies are consisting resources and capabilities. Then your organization process value creating activities, the business operate in upstream suppliers and downstream channel members.

Competitive Strategy

The four strategies relate to the extent to that your scope of any business' activities are narrow verses broad and the extent to which a small business seeks to differentiate its products. Competitive strategy contains moves to attract customer, endure competitive pressures, and strengthen organization's market position. It purposes are to earn a competitive advantage, cultivate clientele of loyal customers, and knock the sock off rivals, ethically and properly. For information, competitive strategy is narrower in scope than business strategy. It is because it focuses on management's plan to compete successfully. The four strategies are shown in the figure 1. 2 in following.

Degree of product differentiationFigure 1. 2 Five Generic Competitive Strategies

High

Differentiation Focus

Differentiation

Best-Cost Provide

Cost

Focus

Cost

Leadership

Low

Broad

Narrow

Scope of Business Activities

Source: Adopted from tutor2u. net

According to figure 1. 2, low priced leadership striving to be the overall low-cost provider in industry. Besides, broad differentiation is striving to make customer loyalty by differentiating one's product offerings from rival's products. Low cost focus has to focusing on a narrow buyer segment, out-competing rival on basic of lower costs. In addition, high differentiation is offering niche members a product or service custom-made to their needs. Some more, best cost provider strategy is striving to give customers more value for the money by combining an emphasis on low priced with an emphasis on upscale differentiation.

Competitive Dimensions

The organizations are value the customers' needs and wants. Therefore, the organizations apply the competitive dimensions that are transformed such needs and wants into targeted areas. These competitive advantages are comprising four factors which are cost, quality, time, and flexibility as defines as following.

Cost

Organization must make some kind of compromise between the cost and the characteristics with their products and services. Basically, almost all of organization will choose to regulate the cost of material and employee compensation rates attempt to achieve higher levels of productivity.

Quality

Quality may be accomplished by adding unique attributes to products to improve their competitive attractiveness so as to benefit customers in the ultimate stage. Quality can be achieves in two ways which is quality of design and quality of conformity such capability of organization to transform inputs to conformable outputs.

Time

Time is the most important factor to compete among each others. For instance, delivery time can be considered a way to obtain competitive advantages. This is reaching through reducing the period f time taken between getting and accepting customer orders and then gives products to customers. Otherwise, the period of time between product ideas generation till obtaining the final design or production is consider as important factor.

Flexibility

Flexibility is defines as the power of the processes to switch from one product to another or from one customer to another at least time and most reasonably priced or impact. Besides, overall flexibility can also view as the capability to adapt the production capacity to changes on the market demands.

RELATIONSHIPS BETWEEN SWOT ANALYSIS AND COMPETITIVE ADVANTAGE

It is not intelligent to think that using organizational strengths to build a competitive advantage will not require through external environment analysis. The truth is whether a business is strong or weak is a relative measure with comparison to its external environment. It really is widely proven that organizations can achieve a competitive advantage by counting on organizational strengths and interacting with the strategic choice in order to utilize opportunities and avoid threats or override weakness or both.

STRATEGIC MANAGEMENT

Strategy management is the procedure of specifying an organization's objectives, developing policies and plans to accomplish these objectives, and allocating resources to implement the plans. It is the highest degree of managerial activity, usually performed by the company's top management as well as executive team. It offers overall direction to the complete organization. An organization's strategy must be appropriate for its resources, circumstances, and objectives. The objective of a standard corporate strategy is to carry out its mission effectively and efficiently. An excellent corporate strategy should integrate an organization's goals, policies, and action sequences or tactics into cohesive whole.

Strategic planning was first brought into practice in the private sector in 1960-1970, accompanied by the general public sector some 10-20 years later. According to Diskiene, Galiniene, and Marcinskas (2008), Strategic planning gives quite a clear description of the use of the SWOT strategy analysis tools. There are also involved several reasons of strategic plans fail where discuss in problem statement section.

PROBLEM STATEMENT

SWOT analysis usually reflect someone's existing position and view point, which can misused to justify a previously decided plan of action rather then used as a way to open up new possibilities. It really is significant to say that sometimes threat can be view as opportunities, with regards to the people or groups involved. Finding from Helms and Nixon (2010) clearly indicate that an optimist is one who sees an opportunity atlanta divorce attorneys difficulty. Adversely, a pessimist is person who sees difficulty atlanta divorce attorneys opportunity.

SWOTs makes it possible for companies to have lazy course and took for fit rather than to stretch, they look for strengths that opportunities yet ignore the opportunities they don't feel they can use with their advantage. A more active approach would be to involve identifying the most attractive opportunities and then plan to stretch the business to meet these opportunities. This might make strategy difficult to the business rather than fit between its existing strength and the opportunities (Helms & Nixon, 2010).

Helms and Nixon (2010) highlights that categorization of variables into one of the four SWOT quadrants is also challenging. It is because if the strengths that are not maintained could become weaknesses. Even more, if opportunities not used the right time, but adopted by competitors, may become threats. Helms and Nixon (2010) also agrees there is confusing in classifying issues such often threat to a small business can be called opportunities but setback and catastrophes are real problems and cannot be classified as opportunities. So the opportunities is a good solution to a difficulty rather than problem itself. Besides, conditions to assign a variable to one of the four quadrants may become more difficult to clarity if the methodology is not used for an organization but for a country.

While SWOT pays to to profile and enumerate issues, it generally does not provide actual strategies to implement to take benefits of opportunities while leveraging strengths. In a nutshell, it is no strategic direction provided. It is because SWOT is only using simple set of words or point form without clear detail may be difficult to interpret. The brief format of the SWOT tool may be an oversimplification of an business situation that is more complex. The SWOT tool does not represent the entire and entire analysis so it may lead to inaccurate results (Helms and Nixon, 2010).

Helms and Nixon (2010) states that SWOT is need to work with with additional tools of analysis which is combinations with other strategic tools and models to be able to get more accurate results. Many researchers suggest that Porter's 5-Forces Analysis is a proper internal analysis which targets the organization's external environment. Hence, 5-Foces analysis is applied more specifically to the organization's competitive environment.

According for the Free Encyclopedia of Wikipedia (2010), strategic plans fail is involves multiple reasons which can refer to the business failure to comprehend the customers' wants and needs. Otherwise, organization inability to predict environmental reaction which what's the competitor recently doing. Besides, the business also over-estimates the resource competence. This can be said that the organization is does not know if the staff, equipment, and processes can handle the new strategy. In addition, the business is failure to coordinate, failure to acquire senior management commitment, failure to acquire employee commitment and failure to follow the plain. Finally, the business might under-estimate of energy requirements.

In the business enterprise arena the grouping of internal and external issues is a frequent starting place for strategic planning. This is a most significant starting point for implementing the SWOT analysis. If fail to categories or indentified it, then the whole analysis becomes less accurate for organization. In fact, the organization will eventually lose the opportunities to compete in the market with the competitors. Therefore, the planner or top management have to determined the external and internal factors which strengths, weaknesses, opportunities, and threats carefully in order which will get accurate result.

CONCLUSION

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