Nowadays, there aremany Strategy Analysis tools to better define the strategy that a company mustundertake in order to better prepare for the competition. Among them, the SWOTand the BCG matrix make it possible to determine the efficiency and thepositioning of the company on the market.
During the strategicdiagnosis, using the SWOT Analysis is a verypractical tool to facilitate thinking. It is an indispensable tool in thestrategic planning process. It has the advantage of synthesizing the Strengthsand Weaknesses of a company with regard to the Opportunities and Threatsgenerated by its environment. The SWOT Analysis can create relevant strategiesto exploit a new potential or develop an existing deposit.
It also makes itpossible to anticipate a threat weighing against the company’s activity. Ituses two different axes: the internal one and the external one. The internalaxis identifies the current characteristics of the organization, seen asstrengths or weaknesses according to the exploited activities. It is effectivein sectors such as human resources, production, or even in finance. This axismakes is good to summarize the resources possessed and competing skills of thecompany against the competition, but does not determine a key factor to make itmore valued.
In the other hand, the external axis lists items that have apotential impact on the business. The opportunities show the businessenvironment and the potential areas to develop. As for the threats, theypresent current or future changes that may have a negative impact on thecompany’s activities. The factors of the external axis are independent and arerelated to the economic, demographic, technical, and political environment. Atypical mistake is to perform a SWOT Analysis at in an entire company, nomatter how big it is.
This model is only relevant in a specific strategic areaof activity inside the firm. The other useful toolduring the strategic planning is the Boston Consulting Group’s product matrix(BCG matrix). It allows the company to build and expand in the long term.Thanks to it, businesses are able to position themselves in their investment,as well as the development of the product on the market. The BCG matrix is??divided into four parts, deriving from the market share (cash generation) andthe growth rate (cash usage). The Growth/The Star is when the product has ahigh growth market and a high market share, means it is at the best of itsperformance.
When its market share falls, it positions itself in the Launch/QuestionMark phase where its market share is too small compared to the competition. Conversely,when the growth market falls, the product is in Maturity/Cash Flow. This is thetime when companies are investing to better reach the expanding market.
Finally, when both the growth market and the market share are in decline, theproduct is then in the Decline/Dog phase and risks being withdrawn from themarket because of its non-performance. Even if it is a simple tool, the BCGmatrix can be difficult to use in small businesses where the relative marketshare is too small to quantify. It is also based on the concept that marketshare can be achieved by spending more on the marketing budget. These two tools are effective for businessesdue to their arrangement in four phases that give a vision at a precise momentof the market. Both prepare for decision-making, and help maximizing theperformance and minimizing the damage in case of a decline. Nevertheless, giventhe speed at which a growing market may vary, the results of these analyzes maychange at any time.
Indeed, these are based on the accuracy of the results,itself dependent on the accuracy of the analysis on the short to medium andlong term, as well as the awareness of the internal and external environmentcan quickly change. That is why, a regular update of the analysis isrecommended.