Business Creation Principles - Essay Example

Business and Marketing Planning Principles BUSINESS AND MARKETING PLANNING PRINCIPLES A SWOT analysis is utilized to describe the strengths, weaknesses, opportunities, and threats that a company considers as strategic factors. A SWOT analysis results in identification of an organization’s core competencies, as well as the identification of opportunities which the firm does not currently make use of because of limited finances and resources (Pahl & Anne, 2009: p31). While A SWOT analysis is a good tool for analyzing a company’s internal and external environment, it is only as useful as the information contained inside. Market research and collection of accurate information are vital in SWOT analysis to identify important issues in a company’s environment. First, a company needs to assess its market, first by assessing what internal and external factors will affect the company. The company also needs to find out who its customers are, what weaknesses and strengths its competitors possess, the various driving forces behind trends in sales, as well as the potentially important markets. Next, it needs to assess itself, beginning with how it differs from its competition, its general market conditions, the demand for its services and products, and its capabilities. Finally, the company needs to analyze its competition, including analyzing what the company’s general market conditions are. The company should identify its real competitors and substitute competitors, assess their weaknesses, strengths, strategies, objectives, and patterns of reaction, as well as identify the competitors to attack and those to avoid. The internal analysis of weaknesses and strengths puts its focus on the internal factors that imbue a company with specific merits and demerits in meeting its target market’s needs (Hartline, 2011: p34). Strengths refer to the company’s core competencies that provide the firm with advantages in their endeavors to meet its target market’s needs. This analysis of strengths needs to be market oriented since the strengths will only be meaningful if they aid the firm in meeting its customer’s needs. Weaknesses, on the other hand, refer to limitations that a company faces when implementing or developing a strategy. They need to be examined from the perspective of the customer since the client will most likely perceive the weaknesses that are not of the companies’ knowledge. Market focus, when analyzing the strengths and weaknesses of a company, does not mean that weaknesses and strengths that are not market oriented should be lefty out (Leontiades, 2007: p12). Rather, it suggests that the strengths and weaknesses need to be tied to the customer’s needs. When looking at internal factors that would affect a firm, it is vital to consider the resources. This includes the existing overall brand, product quality brand associations, sales, profitability, relative cost of the product, product portfolio analysis, and employee capability. The company also needs to identify internal problems, weaknesses, strategic strengths, uncertainties, and constraints (Hartung, 2010: p20). The external analysis is used to examine the threats and opportunities that exist in a firm’s environment. The threats and opportunities are in independent existence as far as the firm is concerned. To differentiate threats and opportunities, as well as weaknesses, a firm should ask whether the issue at hand would exist in the absence of the company (Pride, 2010: p28). If the issue would be in existence, then this should be considered as external to the firm. Opportunities can be referred to as the favorable conditions in the environment that could reap rewards if acted upon in the right manner by the company. Opportunities exist, but they need to be acted on if there are to be any benefits to the company. Threats refer to barriers or conditions that may stop the firm from attaining its objectives. When studying a company’s external factors, there are some areas that need to be considered. These include; customer analysis for customer motivations segments and unfulfilled needs, competitive analysis, market analysis, and environmental analysis (Pride, 2010: p39). The SWOT matrix aids the company to visualize the analysis. When executing this analysis, it is vital to comprehend how the various elements work together. When a firm matches its external opportunities to its internal strengths, it forms core competencies to meet the needs of its client base. In addition, a firm needs to act in order to convert into strengths its internal weaknesses, as well as convert its external threats into opportunities. An environmental analysis contains the four dimensions associated with external analysis. The interests are in environmental events and trends that possess the potential to affect the company’s strategy (Pride, 2010: p17). The analysis needs to identify various events and trends, as well as estimate their impact and likelihood of occurrence. During the conduction of this kind of analysis, a company might be distracted to perform a broad and extensive survey of trends. Therefore, it is vital to restrict the analysis to the areas where it carries relevance to have a significant strategic impact. This analysis can be divided into five areas, which are the future, socio-cultural, political- legal, technological, and economic. The economic area deals with the economic trends that may impact on business activity, such as disposable income, availability of energy, levels of unemployment, levels of inflation, and the rates of interest. The technological factors have to do with the rate at which the technologies in existence are maturing, as well as the technological trends or developments that could directly affect the industry. Government factors include what variations and changes in the regulations are possible, what their impact is forecasted to be on the industry, what incentives and taxes are under development, which can have an effect on the development of company strategy, as well as the existence of government or political instability risks and their projected effect. Socio-cultural factors deal with the emerging or current trends in fashions, lifestyle, and other cultural components. The implications they hold for the industry, demographic trends that may affect the industry’s market size such as population shifts, income, and rate of growth, as well as taking into consideration whether these trends are representative of a threat or an opportunity (Richard & Abbas, 2009: p9). Another external factor to be considered is the future, for example, the significant trends and what they portend for future events, the key areas of uncertainty regarding events or trends that possess the potential of having a significant impact the company’s strategy. An internal analysis helps the company to understand its business in depth and is based on the firm’s capabilities and resources (Richard & Abbas, 2009: p11). A good starting point for the company in identifying resources is to look at the intangible, tangible, and human resources at its disposal. Tangible resources are easy to identify, as well as evaluate. The firm’s physical assets and financial resources are valued in the financial statements. Intangible resources refer to resources that are largely invisible, but gain additional importance over time compared to tangible assets since they can be a major source of advantage when faced with competition. Such resources include image, brand, and technological assets like proprietary technology. Human capital or resources refer to productive services that man offers the company in the form of decision-making abilities, reasoning, knowledge, and skills. References Hartline, Michael. Marketing strategy. Mason: South-Western Cengage Learning, 2011. Hartung, Michael. Lean - Six Sigma Quality & Process Management for Managers & Professionals. Norderstedt: Books on Demand, 2010. Leontiades, James. Multinational corporate strategy : planning for world markets. Lanham: Lexington Bks , 2007. Pahl, Nadine. & Anne, Richter. SWOT Analysis - Idea, Methodology And A Practical Approach. München : GRIN Verlag GmbH , 2009. Pride, William. Marketing. Mason: South Western Cengage Learning, 2010. Richard, Nelson. & Abbass, Alkhafaji. Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. London: Routledge, 2009. Read More