SWOT Matrix

SWOT matrix is composed of 9 cells there are :

 Four key factors : S, W, O, T
 Four strategy cells : SO, WO, ST, WT
 One is always left blank( upper left cell)

SWOT matrix helps the manager to develop four types of strategies:

• SO ( strength – opportunity)strategies.
• WO ( weakness – opportunities) strategies.
• ST ( strength – Threat ) strategies
• WT( weakness- Threat) strategies
 SWOT MATRIX
Always Blank Strengths (S) Weaknesses (W)
1 1
2 2
3 List strengths 3 List Weaknesses
4 4
5 5
Opportunities(O) SO strategies WO strategies
1 1 1
2 2 2
3 List opportunities 3 Use strengths to take 3 Overcome weaknesses
4 4 Advantage of 4 By taking advantage of
5 5opportunities 5 opportunities

Threats (T) ST strategies WT strategies

1 1 1
2 2 2
3 List Threats 3 List the strengths 3 Minimize the weakness
4 4 to avoid threats 4 and avoid threats
5 5 5
 SO, WO, ST, WT strategies
1. SO strategies uses the firms internal strengths to take
advantage of external opportunities. All managers would like
their organizations to be in a position in which the internal
strengths can be used to take advantage of external trends
and events.
When the firm has major weakness it will strive to overcome
them and make them strengths.
When the company faces major threats it will seek to avoid
them in order to concentrate on opportunities.
2.WO strategies : aim at improving the internal weakness by
taking advantage of the external opportunities.
Sometimes key external opportunities exist but the firm has
internal weakness that prevent it from exploiting those
opportunities.
3.ST strategies use firm’s strength to avoid or reduce
the impact of external strengths
4. WT Strategies are defensive strategies directed at
reducing internal weakness and avoiding external
threats .An organization face d by numerous external
threats and internal weakness may indeed be in a
difficult situation.
Such firms may fight for its survival , merge , retrench ,
declare bankruptcy / liquidation
Matching Key external and Internal Factors to formulate alternative
strategies
Key Internal Factors Key External Factors Resultant strategies

Internal Working 20% annual growth in the Acquire cellphone Inc.

Capacity( an internal cell phone industry( external
strength) opportunity)

Insufficient Capacity(internal Exit of 2 foreign competitors Horizontal integration by

weakness) from industry( ( external buying competitors facilities
opportunity)

Strong R&D ( Internal Decreasing no of adult Develop new products for

strength) buyers (external threat) adults

Poor employee Strong union Develop new employee

morale( Internal Weakness) activity( external threat) benefits package.
 Environmental appraisal / ETOP
ETOP is technique available for environment analysis.

ETOP involves dividing the environment into different sectors and then
analyzing the impact of the each sector on the organization.

Strategists have to use their knowledge and experience to place the

different environmental issues where they mainly belong so that the
clarity can emerge.

The identification of environmental issues help the strategists to have a

good idea of where the environmental opportunities and threats lie.
 Environment Threat and Opportunity Profile (ETOP) foe a bicycle company
Environment sector Nature of Impact Impact on each sector

Market Industry growth rate is 7% to

8% ; for sports cycle growth
rate is 30%
Technological Technological up gradation
of industry in progress,
Import of machinery simple

Supplier Large no of suppliers and

importing raw materials
easy.
Economic Growing affluence among
the urban consumers
Political No significant factor

Socio Cultural Customer preference for

sports cycle
International Emerging threat from the
cheap imports from China .
• As observed from the example : the sports cycle manufacturing is an
attractive proposition due to the many opportunities operating in the
environment.
• The preparation of ETOP provides the strategists with a clear picture of
which sector have favorable impact on the organization and where does
the organization stands in respect to the environment.
• Such an understanding helps an organization in formulating appropriate
strategies to take advantage of the opportunities and counter the threats
in its environment.
 BCG Matrix
• The BCG matrix provides a framework for allocating resources among
different business units and allows one to compare many business units at
a glance.

• In the early 1970's the Boston Consulting Group developed a model for
managing a portfolio of different business units (or major product lines).

• The BCG growth-share matrix displays the various business units on a

graph of the market growth rate vs. market share relative to competitors.

• The BCG model is a well-known portfolio management tool used in

product life cycle theory. BCG matrix is often used to prioritize which
products within company product mix get more funding and attention.
• X axis : Relative market
share as an indicator of
relative competitive
position of a business
unit in a given industry.
• Y axis: Industry growth
rate : as an indicator of
relative industry
attractiveness
Star –
• The mission is to HOLD the
market share .
• a business unit that has a large
market share in a fast growing
industry and the objective is to
invest cash to maintain that
position.
• This cell corresponds closely to
the growth phase of the PLC.
• Stars may generate cash, but
because the market is growing
rapidly they require investment
to maintain their lead.
• A star will become a cash cow
when its industry matures.
• Eg Telecommunications, Hotel
industry.
Cash Cow –
• The mission " harvest" for short term
profits and cash flows.
• A business unit that has a large market
share in a mature, slow growing
industry.
• Since the units operate in low growth
or decline industries , they do not
need to reinvest all the cash
generated.
• Cash cows require little investment
and generate cash that can be used to
invest in other business units.
• In terms of PLC they are generally the
mature businesses.
• These businesses can adopt mainly the
stability strategies.
• Eg : Scooters for Bajaj Autos,
toothpaste for Colgate
• Question Mark (or Problem Child)
• The mission is to BUILD the market.
• A business unit that has a small market
share in a high growth market. They
require large amounts of cash to maintain
or gain market share.
• These business units require resources to
grow market share, but whether they will
succeed and become stars is unknown.
• These units are the major users of the
cash outlays are needed in the areas of
product development, market
development.
• No single set of strategies can be
recommended here , if co feels that it can
obtain a dominant market share , it may
select the expansion strategy otherwise
retrenchment strategy.
• Eg :
• Dog - a business unit that has a
small market share in a mature
industry.
• They neither generate nor
require large amount of cash
• In terms of PLC the dogs are the
products that are usually in the
late maturity or decline stage.
• Unless a dog has some other
strategic purpose, it should be
liquidated if there is little
prospect for it to gain market
share.
• Eg Photocopiers