We all know SWOT analysis as a basic model for strategic planning. However, in the CIMA SCS and ACCA SBL exams, when faced with a question on drawing up a SWOT for an organisation or whether a strategic option is an excellent strategic fit, we may be stumped for a few seconds on where to start. So, use the following models as a good starting point:
1. For opportunities, use the Ansoff model.
Ansoff is a 2*2 matrix that builds off two indicators – market and product. Examples of strategies for each:
- Market penetration (acquiring your competitor)
- Market development (taking your product or services to new markets, e.g., globally or online presence etc.)
- Product development (a spin-off of your product or service to cater to niches like ethnicity, gender, age groups etc.)
- Diversification (the hardest of the four, new product in a new market)
Diversification can be related or unrelated
Related diversification can be forward or backward vertical integration (for, e.g. a wholesaler sets up retail stores and reaches the end consumer directly. This helps to bring down the cost of the final product or increase profits for the wholesaler. Though nowadays, with technology and aggregator business models, it is easy to reach the customer directly in any part of the globe)
(a spin-off of your product or service to cater to niches like ethnicity, gender, age groups etc.)
In short, Ansoff will help you identify appropriate strategic options which can be a good fit for your business that:
- Fit into your vision, mission, and values framework
- Are acceptable to shareholders and the wider stakeholder community
- Are economically and technically feasible
2. For threats, you can use the PESTLE and TOWS matrix as explained below.
PESTLE enables us to identify risks in our external environment along with the following parameters:
You can do a small exercise and see how COVID 19 influences your business, along with these parameters. Remember, the impact need not always be negative. E.g. COVID 19 has simply accelerated digital transformation and connectivity through work from home. So think holistically! COVID has been a revenue booster for some companies, e.g. pharma, online education, and e-commerce. So there are positives and negatives to every risk event, and it depends on the nature of your industry and business model.
Other than PESTLE, you can also use porter’s five forces to understand the complexity of your industry and where you are placed in that industry. Are you the market leader or the market follower? Do you innovate, or do you focus on cost leadership? Or are you simply stuck in the middle?
The TOWS matrix also will help you build on the SWOT and help you build strategies that can help:
- Build and enhance strengths
- Resolve or reduce weaknesses
- Exploit or expand opportunities
- Avoid or thwart threats
So next time you are faced with strategy identification or evaluation, use these simple models within your main model (SWOT) and unleash your creativity!
Which of the company’s strengths can be used to maximize the opportunities you identified?
How can you use the company’s strengths to minimize the threats you identified?
What action(s) can you take to minimize the company’s weaknesses using the opportunities you identified?
How can you minimize the company’s weaknesses to avoid the threats you identified?