SAGA LEADERSHIP PRODUCTS

SWOT Analysis
                                                       

A SWOT is a scan of internal and external factors: internal to the company classified as strengths (S) or weaknesses (W), external to the company classified as opportunities (O) or threats (T). The SWOT analysis provides information that is helpful in matching the company's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. Strengths A company's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include: • speed • innovations and patents • strong marketing or branding • good reputation among customers • location • cost advantages from proprietary know-how • exclusive access to high grade natural resources • favorable access to distribution networks Questions to help ascertain Strengths include:

1. What are the major sources of a company's revenue and profit?

2. What is the market share of the company in its various product lines?

3. Does the company have strong brands?

4. Is the marketing/advertising effective?

5. What is the major focus are of the company?

6. Does the company have a pool of skilled employees?

7. Is the morale of the employees high?

8. Are there rewards in place to create an atmosphere conducive to excellence?

9. What is the cost of capital?

10. What is the stock price track record?

11. Does the company harness information technology effectively?

12. Does the company manage its inventories efficiently?

13. Has the company demonstrated the ability to adapt and change?

14. Is the company able to innovate?

15. How has the company withstood international competition?

16. What are your advantages?

17. What do you do well?

18. What makes you different from your competition?

Weaknesses The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses: • too much inventory • high A/R • quality • lack of differentiation • lack of patent protection • a weak brand name • poor reputation among customers • high cost structure • lack of access to the best natural resources • lack of access to key distribution channels • lack of marketing expertise Questions to help ascertain Weaknesses include:

1. What are the least profitable product lines for the company?

2. In what areas is the company not able to recover costs?

3. Which are the weak brands?

4. Is the marketing/advertising effective?

5. Is the company not focused?

6. Is the company able to attract talent?

7. What are the biggest expenditures of the company?

8. Is the company able to raise money when it needs to?

9. Does the stock price history inspire confidence?

10. Will the company be able to stand price pressure from competitors?

11. Has the company been able to bring new ideas and products to the market place?

12. Do employees feel facilitated to perform their best?

13. Do employees have faith in management?

14. Are the corporate governance standards high enough?

15. Is the company losing out to competitors on the technology front?

16. What could be done better?

17. What is done badly?

18. What should be avoided?

19. What causes problems or complaints?

Opportunities The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include: • an unfulfilled customer need • arrival of new technologies • loosening of regulations • removal of international trade barriers • Internet • New markets Questions to help ascertain Opportunities include:

1. What is the competitive position of the company?

2. Are there new technologies that the company can use to innovate or lower costs?

3. Are there opportunities to extend brands into related areas?

4. Are there inexpensive acquisition opportunities?

5. Can the company use the internet as a channel of marketing?

6. Is there room for implementation of incentive plans to boost employee performance?

7. Can the company spread its wings internationally?

8. Can quality of operations, products and inventory management be improved without incurring serious cost?

9. Can the company move up the value chain?

10. Is there an opportunity to demand better prices from suppliers?

11. Can the employees be multi-skilled to reduce the level of redundancy?

12. Is the time right for upstream or downstream diversification?

13. Are there opportunities to cooperate with non-competitive businesses for mutual benefit?

14. Can dead-wood work-force or product lines be reduced to boost profitability?

15. Can the company get more predictable cash flows by establishing better relations with customers?

16. Where are the good chances facing you?

17. What are the interesting trends?

Threats Changes in the external environmental also may present threats to the firm. Some examples of such threats include: • shifts in consumer tastes away from the firm's products • emergence of substitute products • new regulations • increased trade barriers • new competition • price wars • new products introduced by the competition Questions to help ascertain Threats include:

1. Does the company have adequate reserves to withstand sudden changes in the environment?

2. What is the level of regulation in the industry?

3. Is there trade union activity that could have an adverse effect?

4. Do the products of the company have enough brand equity to withstand price competition?

5. Are international competitors eating away market share?

6. Are employees adequately trained and motivated?

7. Is the company considered a good employer?

8. Is the company spread too thin?

9. Are accounting practices non-conservative?

10. Are the financials on the verge of illiquidity?

11. If the investment environment becomes non-conducive, can the company work with internal accruals?

12. Is the company keeping up with technological changes?

13. Have margins been under pressure?

14. Is the size of transactions decreasing?

15. Has the company been able to keep up with competitors in cyberspace?

16. What is your competition doing?

17. Are the specifications for your products or services changing?

18. Is changing technology threatening your business?

19. Do you have bad debt or cash-flow problems?

Simple rules for successful SWOT analysis • be realistic about the strengths and weaknesses of your organization • analysis should distinguish between where your organization is today, and where it could be in the futures • be specific. Avoid grey areas. • always analyze in context to your competition i.e. better then or worse than your competition The SWOT Matrix A company may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the company can overcome a weakness in order to prepare itself to pursue a compelling opportunity. To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT is shown below: SWOT Matrix Strengths Weaknesses

Opportunities S-O strategy W-O strategy

Threats S-T strategy W-T strategy

S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.

W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.

S-O strategies pursue opportunities that are a good fit to the company's strengths.

W-O strategies overcome weaknesses to pursue opportunities.