SWOT analysis is a famous technique that has been used for decades now to analyse the four major factors of an organisation namely strength, weaknesses, opportunities and threats. This helps in better analysing any organisation, when conducting a strategic analysis often analysts also use it as a stepping stone for their analysis. It is not only an analysis of the organisation itself but rather it is a more deep analysis of the market and all business activities related to the organisation . The SWOT analysis is known as a strategic planning tool and it has featured in business text since 1972, but no one knows who originally invented SWOT analysis. Today it can be found almost in every textbook on strategy, marketing and any other business disciplines. There have been many studies that were conducting in different business schools and some of the famous ones even conducted in Harvard are backed up by Micheal Porter, Ansoff and writers such as Philip Kotler. Their studies have lead to the conclusion that SWOT be the tool to better understand the strategic fit between an organisation’s strategies and the environment in which it competes. This is also a good tool to analyse such organisations which on the face have been delivering profits but are either declining or are losing market share. For example doing analysis of organisation such as Yahoo would be a good idea which is a profitable venture but is loosing its market heavily to Google (Adams, 2005).
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Importance of SWOT Analysis
An organization can take the best advantage of the environmental opportunities if it can utilize the resources available to the organizations up to the optimum level. The person in charge of designing the strategy who is also called the strategic leader of the organisation using SWOT can keep his head right over deciding whether the opportunity that is arising is good enough with the matched weaknesses and strengths of the organisation . Keeping this in mind one needs to keep his/her head right about one thing that whenever they are analysing to pursue an opportunity always point out the related weaknesses and strengths, maybe a priority SWOT analysis can also be a very good idea. A real opportunity can only be identified if the opportunity has a strategic fit between the environmental conditions and the resources that the organization possess .
SWOT might not be the only perfect tool for strategic analysis while there have been greater criticism on SWOT. The reason being that people consider it to be very easy and based on that people just do it just like that without giving proper thought on the ideas behind a strength/weakness or an opportunity/threat. While doing SWOT one tends to ignore many other factors such as the financial factors and in this case other strategic tools can be more important; But even though SWOT holds its own importance (De Witt and Meyer, 1998).
The main model consists of two inherently different types of evaluations:
- Internal evaluation
- External evaluation
Strengths are the good and the power parts of the organisations. They explain what the organisation is good at. This is not only on the organisational level but all wide. This explains the organisations strength in terms of customers, suppliers, utilisation of resources etc. Usually when conducting a strength analysis it is important to consider that strength is something at which the organisation is not only good at but also better than its competition. It provides them the competitive edge in comparison to their competition. This is one ability at which they are very good at . When describing strength companies tend to be ignorant about things such as CRM (customer relationship management), or SCM (Supply chain management) but they can also be considered as strengths if they are effective and contribute to the profit financially or non financially.
A weakness is defined as a deficiency in an individual and this same fits to an organisation as well where weakness of an organisation explains something at which they aren’t good at. Organisational weaknesses are areas where they are not good against their competition. Now they can be areas of great strength at one time but then later lost to the competition due to not being taken care of. Its necessary that the customer point of view is brought into consideration rather than conduction the weakness analysis of only the organisation. Its hard to admit the areas where one is not good at and in this case organisations need to admit but often this doesn’t happen.
Opportunity is just like a term in an individual’s life similar when it comes to trhe organisation but the scope of opportunity is bigger, the opportunities that come to the organisation are everywhere in every nook and corner it’s just that they need to realise it and use it with the current set of resources. Opportunities are also related to trends that the organization has been seeing in the past, they can also be buying behaviours. They can also come in by identifying a particular market segment which was not being looked after before but is now being looked after very carefully . Finally some opportunities come from the external environment and acting on the right time is the most important agenda.
Threats can be organisation relate and the ones that are not in this case the threats are being considered the ones related to the organisation. Now the threats can also be seen as the opportunities that were not grabbed and later turned onto threats. Threat is a unfavourable situation in which the organisation doesn’t want to see itself. Few threats can be the entrance of new competitors, slow market growth, increased bargaining power of key buyers or suppliers, technological changes etc.
Macro environment comes in as the new driving force in the industry where the macro environment tends to play a major role in the entire effort of competition. The business environment is just like a moving film and it is necessary to track down any changes that are happening around the business. The organisational related factors that [play a part in the macro environment need to be brought under consideration. Its nessecary to bring in a number of key vital factors into account that can influence different areas of the organisation, these areas can be supply related demand related and even directly related to the legal issues of the firm . 1993 The “radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization” (Tsiakkiros, 2002). To make a strong environmental analysis PEST has proven to be the best technique and such a technique that looks deeply into the pores of the business and extracts out information related to different areas of the macro environment. A pest analysis not only needs to identify the factors that can affect the political, technological, legal and environmental issues but it is also an analysis that is used to create a relation among things. The analysis sees and examines the impact of these factors and their affect ion one another and then the combined affect on the organisation. The results can be used to perform various tasks such as understanding the future strategy, exploring the future opportunities in the environment .
Further explanation of each of the factors that count is a pest analysis is as follows:
Political factors include legal and regulatory factors like elections, employment law, consumer protection, environmental regulations, industry-specific regulations, competitive regulations, inter-country relationships / attitudes, war, terrorism, political trends, governmental leadership, taxes, and government structures .
Economic factor includes factors like taxation, government spending levels, disposable income, job growth/unemployment, exchange rates, tariffs, inflation, consumer confidence index, import/export ratios, and production levels .
Social factors include factors like demographics (age, gender, race, family size, etc.), lifestyle changes, population shifts, trends, fads, diversity, Immigration laws, health, living standards, housing trends, fashion, attitudes to work, leisure activities, occupations, and earning capacity.
Technological factors include inventions, new discoveries, research, energy uses/ sources/ fuels, communications, rates of obsolescence, health (pharmaceutical, equipment, etc.),manufacturing advancements , information technology, internet, transportation, bio-tech, genetics, waste removal/recycling etc.
Selected Company (PC WORLD)
Brief Introduction of Selected Company
The selected company “PC World” is part of the electronic retailer giant DSGi Plc. DSG international is one of Europe’s leading specialist electrical retailing groups. It operates a multi-channel approach to electrical retailing. More than 100 million customers shop in-store and online every year with DSGi (DSGi, 2010). The business of DSGi can be divided into three major categories:
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PC World is Britain’s largest specialist chain of computing superstores. The superstores offer more than 5,000 product lines including extensive ranges of PCs, laptops, printers, software, peripherals and accessories from the major brands, as well as many PC World exclusive products. In-store PC Clinics offer on the spot advice and service. Component Centres offer a ‘one-stop shop’ for customers with advanced technical knowledge, providing a vast choice of PC components and upgrade products at competitive prices. In 2007, PC World won Retail Week’s Product Innovation of the Year award, for its Data Recovery service. Every PC World store has an in-store business centre staffed by experienced business specialists. They offer local companies face-to-face help and advice with choosing the best IT solutions. There are 157 stores in the UK and 10 in the Republic of Ireland. (PC World, 2010)
SWOT Analysis of “PC WORLD”
- Strong high street presence
- Multi channel approach
- Strong distribution channels
- Huge base of domestic customers
- Employees integrity
- Fewer customer focus
- New mega stores
- 2012 Olympics
- Apple’s growth in European markets
- Growth in the IT & Gadget Industry
- Slow economic growth
- Negative customer perception
- Threat of new competitors
- Falling market share
DSG has a very strong high street presence. In any big retail park or high street we can easily find either a PC World , Currys or Currys Digital. Moreover it has a multi channel approach: retail stores, e-commerce and B2B. There are very strong distribution channels of PC World. Just for an example the whole of Apple product’s distribution is done via the distribution channels of DSGi. There is a very strong base of domestic customers in UK for PC World as a brand which serves as one of the most vital strengths of PC World.
PC World has history of strong incentive based pay schemes. The employees get heavy commission based on sales. Initially it did work out to work pretty well. But the employees do take it to their advantage. The results is unsatisfied customers who are miss sold. This also leads to the next weakness which fewer focus on customer needs. The focus is more on sales and KPI’s, hence the customer’s benefit are overshadowed by the sales & KPIs.
The idea of new two in one Currys & PC World Mega stores is very appealing. Customer get more choice in terms of products and services under one roof. The Olympics 2012 is one occasion on which almost every single business is relying as an opportunity for growth and profitability and PC World can also take advantage of this Global event. Apple products are getting global attention and likewise in Europe as well. PC World controls the entire distribution of APPLE products in UK & Europe. This can serve as a very strong strategic alliance and PC World can be benefited out of this. A very recent example was the launch of IPAD. PC World was given a head start of 60 days from APPLE for selling IPADs in their stores. The IT & Gadget sectors are seeing a very drastic increase and PC World’s main offerings are these gadgets and IT products and services.
The first and the most crucial threat is the negative perception of the customers. As highlighted in the weaknesses sales and KPIs are given preference over customer’s benefits due to the traditional structure of PC World. It is also evident by the comment of DSGi’s CEO “John Brawett.” “The biggest challenge for us is to change the perception of our customers.” In recent times PC World has seen falling shares part of the fact can be attributed to the recession but customer’s negative perception has also affected. There are new competitors coming into the market like BEST BUY, ARGOS and John LEWIS are offering extensive IT Solutions as well.
PEST Analysis of “PC WORLD”
UK has seen a very recent change in the political structure. Due to the economic downturn the investors are not very confident specially the foreign investors. The Govt. Is making the efforts to reassure the foreign investors, but the cap put on the international immigrants served as a big threat to the foreign investors. Mr David Cameron’s visit to India was an attempt to promote the trading relationship with India. The share price of the company reflects this fact. The company share price slumped from 36p to 21p in just 3-4 months time (DSGi, 2010). The political factors are in favour of the company.
The UK economy is seeing a very slow growth and some experts have shown the danger of a double dip recession. The new Govt. has raised the taxes in order to boost the economy but the economy is still growing at a very slow rate. The economic factors are not in favour of the company. In 2008 the overdraft limit of the company was reduced from 4.5 million to 2.5 million. The consequences were seen as 300 employees from the head office were made redundant.
The socio-cultural factors are a mix of both good and bad. The markets love the new innovative products: IPAD made record sales in the Apple’s history followed by a successful launch of IPHONE 4. PC World controls the distribution of APPLE products throughout Europe and APPLE products are becoming increasingly popular and famous in the European markets. On the other hand the negative customer perception is a big threat to the PC WORLD’s growth. Hence there is a mix of social factors affecting the external environment of PC WORLD.
PC World’s tagline is “bringing life to technology.” PC World is always at the fore fronts in the process of introducing new technologies to the UK markets. PC World was the only retailer except APPLE’s retail stores to stock the IPAD for 60 days after the launch. The challenge for the organization is to keep up with the rate of change in technology, because the technology changes at a very rapid rate.
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