marketing assignment task 2
...lity Economic Factors Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macro economy: j Economic growth j Interest rates j Exchange rates j Inflation rate Social Factors Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include: j Health consciousness j Population growth rate j Age distribution j Career attitudes j Emphasis on safety Technological Factors Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include: j R&D activity j Automation j Technology incentives j Rate of technological change External Opportunities and Threats The PEST factors combined with external micro environmental factors can be classified as opportunities and threats in a Swot analysis. SWOT Analysis A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan: SWOT Analysis Framework Environmental Scan / Internal Analysis External Analysis / / Strengths Weaknesses Opportunities Threats | SWOT Matrix Strengths A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include: j Patents j Strong brand names j Good reputation among customers j Cost advantages from proprietary know-how j Exclusive access to high-grade natural resources j Favourable access to distribution networks Weaknesses The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses: j Lack of patent protection j A weak brand name j Poor reputation among customers j High cost structure j Lack of access to the best natural resources j Lack of access to key distribution channels In some cases, a weakness may be the flip side of strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment. Opportunities The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include: j An unfulfilled customer need j Arrival of new technologies j Loosening of regulations j Removal of international trade barriers Threats Changes in the external environmental also may present threats to the firm. Some examples of such threats include: j Shifts in consumer tastes away from the firm's products j Emergence of substitute products j New regulations j Increased trade barriers The SWOT Matrix A firm should not necessarily pursue the more lucrative opportunities. Rather, it 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 firm can overcome a weakness in order to prepare it 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 matrix (also known as a TOWS Matrix) is shown below: SWOT Matrix Strengths Weaknesses Opportunities S-O strategies W-O strategies Threats S-T strategies W-T strategies S-O strategies j Pursue opportunities that are a good fit to the companies’ strengths. W-O strategies j Overcome weaknesses to pursue opportunities. S-T strategies j Identify ways that the firm can use its strengths to reduce its vulnerability to external threats. W-T strategies j Establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats. Stakeholder Analysis What is it? A stakeholder analysis is a technique you can use to identify and assess the importance of key people, groups of people, or institutions that may significantly influence the success of your activity or project. You can use this technique alone or with your team members. Why use it...