SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.

By definition,
Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have
some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered
to be external factors over which you have essentially no control.

SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position
of the business and its environment. Its key purpose is to identify the strategies that will create a
firm-specific business model that will best align an organization’s resources and capabilities to
the requirements of the environment in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It views all positive and
negative factors inside and outside the firm that affect its success.

A consistent study of the environment in which the firm operates helps in forecasting/predicting
changing trends and also helps in including them in the organization's decision-making process.

An overview of the four factors (Strengths, Weaknesses, Opportunities, and Threats) is given
below-

Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission.
These are the basis on which continued success can be made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-versed in or what you
have expertise in, the traits and qualities your employees possess (individually and as a team),
and the distinct features that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization,
which include human competencies, process capabilities, financial resources, products and
services, customer goodwill, and brand loyalty.
Examples of organizational strengths are huge financial resources, a broad product line, no debt,
committed employees, etc.

Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. These weaknesses deteriorate influences on organizational success
and growth. Weaknesses are the factors that do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient research and
development facilities, narrow product range, poor decision-making, etc. Weaknesses are
controllable. They must be minimized and eliminated.
For instance - to overcome obsolete machinery, new machinery can be purchased. Other
examples of organizational weaknesses are huge debts, high employee turnover, complex
decision-making processes, narrow product range, large wastage of raw materials, etc.

Opportunities - Opportunities are presented by the environment within which our organization
operates. These arise when an organization can take benefit of conditions in its environment to
plan and execute strategies that enable it to become more profitable. Organizations can gain a
competitive advantage by making use of opportunities.
Organizations should be careful and recognize the opportunities and grasp them whenever they
arise. Selecting the targets that will best serve the clients while getting desired results is a
difficult task.
Opportunities may arise from the market, competition, industry/government, and technology.
Increasing demand for telecommunications accompanied by deregulation is a great opportunity
for new firms to enter the telecom sector and compete with existing firms for revenue.

Threats - Threats arise when conditions in the external environment jeopardize the reliability
and profitability of the organization’s business. They compound the vulnerability when they
relate to the weaknesses.
Threats are uncontrollable. When a threat comes, stability and survival can be at stake. Examples
of threats are - unrest among employees; ever-changing technology; increasing competition
leading to excess capacity, price wars, and reducing industry profits; etc.

Advantages

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it
involves a great subjective element.

It is best when used as a guide, and not as a prescription. Successful businesses build on their
strengths, correct their weakness and protect against internal weaknesses and external threats.
They also keep a watch on their overall business environment and recognize and exploit new
opportunities faster than their competitors.

SWOT Analysis helps in strategic planning in the following manner-

● It is a source of information for strategic planning.

● Builds organization’s strengths.
● Reverse its weaknesses.
● Maximize its response to opportunities.
● Overcome the organization’s threats.
● It helps in identifying the core competencies of the firm.
● It helps in setting objectives for strategic planning.
● It helps in knowing past, present, and future so that by using past and current data,
future plans can be chalked out.

SWOT Analysis provides information that helps in synchronizing the firm’s resources and
capabilities with the competitive environment in which the firm operates.
Limitations
SWOT Analysis is not free from its limitations. It may cause organizations to view
circumstances as very simple because of which the organizations might overlook certain key
strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses,
opportunities, and threats might be very subjective as there is a great degree of uncertainty in the
market.

SWOT does stress upon the significance of these four aspects, but it does not tell how an
organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis that are not in the control of management. These
include-

● Price increase;
● Inputs/raw materials;
● Government legislation;
● Economic environment;
● Searching for a new market for the product which is not having an overseas market
due to import restrictions; etc.

Internal limitations may include-

● Insufficient research and development facilities;

● Faulty products due to poor quality control;
● Poor industrial relations;
● Lack of skilled and efficient labor; etc

SWOT Table
Analysts present a SWOT analysis as a square segmented into four quadrants, each dedicated to
an element of SWOT. This visual arrangement provides a quick overview of the company’s
position. Although all the points under a particular heading may not be of equal importance, they
all should represent key insights into the balance of opportunities and threats, advantages and
disadvantages, and so forth.
The SWOT table is often laid out with the internal factors on the top row and the external factors
on the bottom row. In addition, the items on the left side of the table are more positive/favorable
aspects, while the items on the right are more concerning/negative elements.

How to Do a SWOT Analysis

A SWOT analysis can be broken into several steps with actionable items before and after
analyzing the four components. In general, a SWOT analysis will involve the following steps.

Step 1: Determine Your Objective

A SWOT analysis can be broad, though more value will likely be generated if the analysis is
pointed directly at an objective. For example, the objective of a SWOT analysis may focused
only on whether or not to perform a new product rollout. With an objective in mind, a company
will have guidance on what they hope to achieve at the end of the process. In this example, the
SWOT analysis should help determine whether or not the product should be introduced.

Step 2: Gather Resources

Every SWOT analysis will vary, and a company may need different data sets to support pulling
together different SWOT analysis tables. A company should begin by understanding what
information it has access to, what data limitations it faces, and how reliable its external data
sources are.
In addition to data, a company should understand the right combination of personnel to have
involved in the analysis. Some staff may be more connected with external forces, while various
staff within the manufacturing or sales departments may have a better grasp of what is going on
internally. Having a broad set of perspectives is also more likely to yield diverse, value-adding
contributions.

Step 3: Compile Ideas

For each of the four components of the SWOT analysis, the group of people assigned to
performing the analysis should begin listing ideas within each category. Examples of questions to
ask or consider for each group are in the table below.
Internal Factors

What occurs within the company serves as a great source of information for the strengths and
weaknesses categories of the SWOT analysis. Examples of internal factors include financial and
human resources, tangible and intangible (brand name) assets, and operational efficiencies.

Potential questions to list internal factors are:

● (Strength) What are we doing well?

● (Strength) What is our strongest asset?
● (Weakness) What are our detractors?
● (Weakness) What are our lowest-performing product lines?

External Factors

What happens outside of the company is equally as important to the success of a company as
internal factors. External influences, such as monetary policies, market changes, and access to
suppliers, are categories to pull from to create a list of opportunities and weaknesses.

Potential questions to list external factors are:

● (Opportunity) What trends are evident in the marketplace?

● (Opportunity) What demographics are we not targeting?
● (Threat) How many competitors exist, and what is their market share?
● (Threat) Are there new regulations that potentially could harm our operations or
products?
Companies may consider performing this step as a "white-boarding" or "sticky note" session.
The idea is there is no right or wrong answer; all participants should be encouraged to share
whatever thoughts they have. These ideas can later be discarded; in the meantime, the goal
should be to come up with as many items as possible to invoke creativity and inspiration in
others.

Step 4: Refine Findings

With the list of ideas within each category, it is now time to clean up the ideas. By refining the
thoughts that everyone had, a company can focus on only the best ideas or the largest risks to the
company. This stage may require substantial debate among analysis participants, including
bringing in upper management to help rank priorities.

Step 5: Develop the Strategy

Armed with the ranked list of strengths, weaknesses, opportunities, and threats, it is time to
convert the SWOT analysis into a strategic plan. Members of the analysis team take the bulleted
list of items within each category and create a synthesized plan that provides guidance on the
original objective.

For example, the company debating whether to release a new product may have identified that it
is the market leader for its existing product and there is the opportunity to expand to new
markets. However, increased material costs, strained distribution lines, the need for additional
staff, and unpredictable product demand may outweigh the strengths and opportunities. The
analysis team develops the strategy to revisit the decision in six months in hopes of costs
declining and market demand becoming more transparent.

Benefits of SWOT Analysis

A SWOT analysis won't solve every major question a company has. However, there are a
number of benefits to a SWOT analysis that make strategic decision-making easier.

● A SWOT analysis makes complex problems more manageable. There may be an

overwhelming amount of data to analyze and relevant points to consider when making a
 complex decision. In general, a SWOT analysis that has been prepared by paring down
all ideas and ranking bullets by importance will aggregate a large, potentially
overwhelming problem into a more digestible report.

● A SWOT analysis requires external consideration. Too often, a company may be

tempted to only consider internal factors when making decisions. However, there are
often items out of the company's control that may influence the outcome of a business
decision. A SWOT analysis covers both the internal factors a company can manage and
the external factors that may be more difficult to control.

● A SWOT analysis can be applied to almost every business question. The analysis can
relate to an organization, team, or individual. It can also analyze a full product line,
changes to a brand, geographical expansion, or an acquisition. The SWOT analysis is a
versatile tool that has many applications.

● A SWOT analysis leverages different data sources. A company will likely use internal
information for strengths and weaknesses. The company will also need to gather external
information relating to broad markets, competitors, or macroeconomic forces for
opportunities and threats. Instead of relying on a single, potentially biased source, a good
SWOT analysis compiles various angles.

● A SWOT analysis may not be overly costly to prepare. Some SWOT reports do not
need to be overly technical; therefore, many different staff members can contribute to its
preparation without training or external consulting.

What Is a Value Chain?

A value chain is a series of consecutive steps that go into the creation of a finished product, from
its initial design to its arrival at a customer's door. The chain identifies each step in the process at
which value is added, including the sourcing, manufacturing, and marketing stages of its
production.
A company conducts a value-chain analysis by evaluating the detailed procedures involved in
each step of its business. The purpose of a value-chain analysis is to increase production
efficiency so that a company can deliver maximum value for the least possible cost.

Understanding Value Chains

Because of ever-increasing competition for unbeatable prices, exceptional products, and

customer loyalty, companies must continually examine the value they create in order to retain
their competitive advantage. A value chain can help a company to discern areas of its business
that are inefficient, then implement strategies that will optimize its procedures for maximum
efficiency and profitability.

In addition to ensuring that production mechanics are seamless and efficient, it's critical that
businesses keep customers feeling confident and secure enough to remain loyal. Value-chain
analyses can help with this, too.

Components of a Value Chain

In his concept of a value chain, Porter splits a business's activities into two categories, "primary"
and "support," whose sample activities we list below.1 Specific activities in each category will
vary according to the industry.

Primary Activities

Primary activities consist of five components, and all are essential for adding value and creating
competitive advantage:

● Inbound logistics include functions like receiving, warehousing, and managing

inventory.
● Operations include procedures for converting raw materials into a finished product.
● Outbound logistics include activities to distribute a final product to a consumer.
● Marketing and sales include strategies to enhance visibility and target appropriate
customers—such as advertising, promotion, and pricing.
 ● Service includes programs to maintain products and enhance the consumer
experience—like customer service, maintenance, repair, refund, and exchange.

Support Activities

The role of support activities is to help make the primary activities more efficient. When you
increase the efficiency of any of the four support activities, it benefits at least one of the five
primary activities. These support activities are generally denoted as overhead costs on a
company's income statement:

● Procurement concerns how a company obtains raw materials.

● Technological development is used at a firm's research and development (R&D)
stage—like designing and developing manufacturing techniques and automating
processes.
● Human resources (HR) management involves hiring and retaining employees who will
fulfill the firm's business strategy and help design, market, and sell the product.
● Infrastructure includes company systems and the composition of its management
team—such as planning, accounting, finance, and quality control.

TOWS Matrix
The TOWS matrix analysis (Threats-Opportunities-Weaknesses-Strengths) is also known as
SWOT Analysis. We may also call the TOWS matrix, TOWS Analysis.
It is the abbreviation of threats, opportunities, strengths & weaknesses involved in a business
venture, project, or any other situation that needs a decision, is evaluated with the help of the
strategic planning tool of TOWS matrix analysis.

TOWS Matrix & TOWS Analysis Strategies

For the purpose of the formulation of the strategy, TOWS analysis is an important tool. Four
kinds of strategies are developed by the managers with the help of the matching tool of
(Threats-Opportunities-Weaknesses-Strengths) TOWS matrix of marketing.

On the basis of this analysis, you may easily develop successful strategies for your business after
seeing and analyzing your competitors deeply.
1. SO Strategies (Strengths-Opportunities)
2. WO Strategies (Weakness-Opportunities)
3. ST Strategies (Strengths-Threats)
4. WT Strategies (Weakness-Threats)

The matching of internal & external factors is the most difficult part of the TOWS Matrix.
When the objectives are identified, then the TOWS are ascertained & listed. Following is the
precise definition of the TOWS.
● Strengths: Those attributes of the business that are supportive in the accomplishment of
the objectives are regarded as strengths.
● Weaknesses: Those attributes of the business which are harmful to the accomplishment
of the objectives of the organization are regarded as weaknesses.
● Opportunities: Those external conditions which are supportive of the accomplishment of
the objectives of the organization are regarded as opportunities.
● Threats: Those external conditions which are harmful to the accomplishment of the
objectives of the organization are considered to be threats.

The Strengths & Weaknesses are internal factors of the organization like high production
capacity, lack of variety of products, etc. On the other hand Opportunities & Threats are external
factors for the organization like an increase in demand for a certain product due to changes in the
lifestyle of customers etc.
The Threats-Opportunities-Weaknesses-Strengths (TOWS Matrix) analysis can be much
subjective in nature. It is very difficult that two-person finds the same kind of results in the
TOWS analysis even when they are provided with a similar type of information about the
business organization along with its environment.
The TOWS matrix is regarded as a guide instead of any prescription. The validity of the analysis
is enhanced when each factor is added & weighted under some criteria.

1. SO Strategies:
It is the desire of every organization that it gets to benefit from its resources but the only way to
accomplish that desire is to use the potential strength in the availing of the external opportunity.
The opportunity for external resources is obtained from the internal strength of the business
organization which is in the shape of assets.
For example when an organization has a sound financial position then it becomes the strength of
the business organization which is used to avail the external opportunity of expanding the
business. This matching strategy of the strength of a strong financial position with the external
opportunity of expanding the business is referred to as the SO strategy.

2. WO Strategies:
The matching combination of weaknesses of the business organization with external
opportunities is included in the WO strategies. When the organization tries to overcome internal
weakness with the help of external opportunity WO strategy becomes useful.
For example, when an organization is facing a severe financial crisis then it becomes a weakness
which is matched with the external opportunity of a merger with a multinational company.

3. ST Strategies:
The external threats can be overcome with the help of effective ST Strategies. It is not necessary
that the organization should always face external environmental threats front to a front basis.
Different colleges adopt the ST strategy by opening new branches so that the competitive threat
can be overcome. Porter's Model also explains such kinds of threats.

4. WT Strategies:
It is the desire of every organization that it can overcome its weakness and reduce threats. WT
strategy is applied to remove the weaknesses which will overcome the external threats. It is hard
to pursue WT's strategy.
For example when an organization holds weak distribution channels then it results in the creation
of many problems for the organization. All these external problems can be removed by making
the distribution network of the organization strong enough.

Steps for Developing TOWS Strategies

A Threats-Opportunities-Weaknesses-Strengths (TOWS Matrix) is constructed in the following
eight steps.
1. Ranking of external opportunities
2. Ranking of external threats
3. Ranking of internal strengths
4. Ranking of internal weaknesses
5. Matching of internal strengths with the external opportunities & specification of the
results in the cell of SO strategies
6. Matching of the internal weaknesses with the external opportunities & specification of
the results in the cell of WO strategies
7. Matching of internal strengths with the external threats & specification of the results in
the cell of ST strategies
 8. Matching of the internal weaknesses with the external threats & specification of the
results in the cell of WT strategies

TOWS Matrix Example Of Apple

Here’s a representation of all the elements from a TOWS matrix example of Apple:

Strengths
● Apple Has High Standards Of Products And Services, Which Makes It The Most
Trusted Brand
● It Can Be Differentiated By Its Strong Brand Image
● The Organization Has High Liquidity And Profitability Owing To Its Massive
Financial Strength
● The Supply Chain Is Highly Sophisticated And Innovative
● Premium And Efficient Products Guarantee High Sales, High Profit Margins And A
Loyal Customer Base

Weaknesses
● Prices Are High And Don’t Aim To Compete With Other Brands
● Range Of Products Is Narrow
● Products And Services Are Exclusive And Hence Non-Compatible With Other Brands

Opportunities
● The Demand For Newer Electronic Gadgets, Especially Smartphones, Is Constantly
Growing, Irrespective Of The Prices

Threats
● Competitors Keep Emerging And Challenging Apple
● Manufacturing Costs Are Constantly Rising
● Personal Computer Sales Have Fallen Which Has Affected Apple’s Market Share

The TOWS matrix of Apple will put all these elements in the matrix to analyze each strategy of
the matrix.
TOWS Matrix Example Of Nestle
The TOWS matrix of Nestle had these elements listed:

Strengths
● Nestle Has A Vast Network Of Supply And Distribution Across The Country
● A Low-Cost Structure Ensures Affordable Products
● Its Large Asset Base Provides Nestle With Better Solvency
● It Has Huge Profit Reserves To Finance Capital Expenditures
● It Has A Diversified Workforce In Manufacturing And Qualified Professionals In
Management

Weaknesses
● Nestle Spends Less On Research And Development Compared To A Few Big Industry
Rivals
● It Has A High Cost Of Inventory
● Nestle Faces A Cash Flow Problem Due To Inadequate Management Of Cash
● The Organization Is Experiencing High Employee Turnover

Opportunities
● Nestle Can Use Technology To Automate Operations And Reduce Costs
● They Can Use The Internet And Social Media To Tap Into E-Commerce
● Increasing Population Means More Demand For Milk And Milk Products

Threats
● There’s A Growing Threat From Competitors Who Have A Technological Advantage
Over Nestle
● High Bargaining Power Of Suppliers Has Added To Costs
● Changing Consumer Tastes Put Pressure On The Organization To Evolve Constantly
TOWS matrix is a relatively simple yet useful tool when it comes to generating strategic options.
Understanding the meaning of TOWS analysis can allow managers to make intelligent decisions
in seizing opportunities and minimizing the impact of weaknesses and threats.

What Is Business Strategy?

A business strategy is the combination of all the decisions taken and actions performed by the
business to accomplish business goals and to secure a competitive position in the market.

It is the backbone of the business as it is the roadmap which leads to the desired goals. Any fault
in this roadmap can result in the business getting lost in the crowd of overwhelming competitors.

Importance Of Business Strategy

A business objective without a strategy is just a dream. It is no less than a gamble if you enter
into the market without a well-planned strategy.

With the increase in the competition, the importance of business strategy is becoming apparent
and there’s a huge increase in the types of business strategies used by the businesses. Here are
five reasons why a strategy is necessary for your business.

● Planning: Business strategy is a part of a business plan. While the business plan
sets the goals and objectives, the strategy gives you a way to fulfil those goals. It is
a plan to reach where you intend to.
● Strengths and Weaknesses: Most of the times, you get to know about your real
strengths and weaknesses while formulating a strategy. Moreover, it also helps you
capitalise on what you’re good at and use that to overshadow your weaknesses (or
eliminate them).
 ● Efficiency and Effectiveness: When every step is planned, every resource is
allocated, and everyone knows what is to be done, business activities become
more efficient and effective automatically.
● Competitive Advantage: A business strategy focuses on capitalizing on the
strengths of the business and using it as a competitive advantage to position the
brand in a unique way. This gives an identity to a business and makes it unique in
the eyes of the customer.
● Control: It also decides the path to be followed and interim goals to be achieved.
This makes it easy to control the activities and see if they are going as planned.

Business Strategy vs Business Plan vs Business Model

The business strategy is a part of the business plan which is a part of the big conceptual structure
called the business model.

The business model is a conceptual structure that explains how the company operates, makes
money, and how it intends to achieve its goals. The business plan defines those goals, and
business strategies outline the roadmap of how to achieve them.

Levels of Business Strategy

The business goal is achieved by the effective execution of different business strategies. While
every employee, partner, and stakeholder of the company focus on fulfilling a single business
objective, their activities are defined by various business strategies according to their level in the
organisation.

Business strategies can be classified into three levels –

Level 1: The Corporate Level

The corporate level is the highest and most broad level of the business strategy. It is the business
plan which sets the guidelines of what is to be achieved and how the business is expected to
achieve it. It sets the mission, vision, and corporate objectives for everyone.

Level 2: The Business Unit Level

The business unit level is a unit specific strategy which differs for different units of the business.
A unit can be different products or channels which have totally different operations. These units
form strategies to differentiate themselves from the competitors using competitive strategies and
to align their objectives with the overall business objective defined in the corporate level
strategy.

Level 3: The Functional Level

The functional level strategies are set by different departments of the units. The departments
include but are not limited to marketing, sales, operations, finance, CRM etc. These functional
level strategies are limited to day to day actions and decisions needed to deliver unit level and
corporate level strategies, maintaining relationships between different departments, and fulfilling
functional goals.

Key Components Of A Business Strategy

While an objective is defined clearly in the business plan, the strategy answers all the whats,
whys, whos, wheres, whens, & hows of the fulfilling that objective. Here are the key components
of a business strategy.

Mission, Vision, & Business Objectives

The main focus of a business strategy is to fulfil the business objective. It gives the vision and
direction to the business with clear instructions of what needs to be done, how it needs to be
done, and who all are responsible for it.
Core Values

It also states the ‘musts’ and ‘must nots’ of the business which clarify most of the doubts and
give a clear direction to the top level, units, as well as the departments.

Operational Tactics

Unit and functional business strategies get deep into the operational details of how the work
needs to be done in order to be most effective and efficient. This saves a lot of time and effort as
everyone knows what needs to be done.

Resource Procurement & Allocation Plan

The strategy also answers where and how will you procure the required resources, how will it be
allocated, and who will be responsible for handling it.

Measurement

Unless there are no control measures, the viability of a business strategy can’t be assessed
properly. A good business strategy always includes ways to track the company’s output and
performance against the set targets.

Business Strategy Examples

Creating A New Market

Hubspot developed an executed a perfect strategy where it created a market that didn’t even
existed – inbound marketing.

It created an online resource guide explaining the limitations of the interruption marketing and
informing about the benefits of the inbound marketing. The company even provided free courses
to help the target audience understand its offering better.
Buying The Competition

Facebook’s buy the competition strategy has been successful ever since the company was
launched. It focuses on buying the pioneer or the competition instead of creating the technology
of its own to compete with it. So far there have been many notable acquisitions by Facebook like
Instagram, Whatsapp, Oculus, etc. to increase its reach and user base.

Product Differentiation

Apple differentiated its smartphone operating system iOS by making it really simple as
compared to Android. This differentiated it and built its own followership. The company has
been following a similar strategy for its other products as well.

Cost Leadership

OnePlus launched its flagship product OnePlus 6T with similar features to iPhone X but at a
price which is less than half a price of iPhone X. This strategy worked for OnePlus making it the
top premium phone brand in India and other countries.

What is Diversification Strategy?

A diversification strategy is a method of expansion or growth followed by businesses. It involves

launching a new product or product line, usually in a new market. It helps businesses to identify
new opportunities, boost profits, increase sales revenue and expand market share. The strategy
also gives them leverage over their competitors.
The corporate diversification strategy or product diversification is a prominent approach
followed by large-scale businesses. However, diversifying products is usually risky and requires
extensive market research and analysis. There are three main types of product diversification –
concentric, horizontal, and conglomerate, based on the scope and approach undertaken.

The diversification strategy is often opted for by companies that have established a reputation
domestically. This gives them scope for growth and enables them to expand to new markets or
introduce new products. Usually, there are four approaches to product expansion that businesses
can follow.

The first strategy is market penetration, in which a company tries to increase an existing
product’s share in an existing market. This strategy has little risk as the company has already
studied the market and has experience operating in it.

The second approach is market development, where a company introduces an existing product in
a new market. This approach can be a little risky, as the company has to study the market’s
acceptance of the product and appeal to local tastes and preferences. For example, when
McDonald’s first came to India, its offerings faced heavy backlash. Therefore, McDonald’s had
to modify their offerings, add more vegetarian options, and remove beef recipes from the menu.
The third strategy is product development, in which companies introduce new products in an
existing market. This, too, can be a little risky regarding people’s acceptance of the product.
However, if the company has launched the product by recognizing a gap in the market, it will be
accepted. For instance, when people started turning to vegan diets in the United States, many
fast-food chains like Starbucks and Domino’s introduced vegan options.

The last strategy is diversification. Here, companies introduce new products to new markets.
This is the riskiest of all approaches, as the company has to study the product’s acceptance,
demand, and market situation. Hence, it is expensive too.

What is the Portfolio Analysis?

Portfolio Analysis is one of the areas of investment management that enable market participants
to analyze and assess the performance of a portfolio (equities, bonds, alternative investments,
etc.), intending to measure performance on a relative and absolute basis along with its associated
risks.

Reasons For Portfolio Analysis

A different purpose for conducting a business portfolio analysis in strategic management. The
three main reasons why management focuses on business portfolio analysis in strategic
management, which are:
1. Analysis

The organization’s first reason to conduct a portfolio analysis in strategic management is to

determine every product mix’s current position and determine which SBUs (strategic business
unit) need more or less investment. Management needs to create the organization’s entire
portfolio to analyze the present opportunities and threats to the market and the product.

2. Formulate Growth Strategy

Another aspect that management wants to formulate from the portfolio analysis in strategic
management is the growth strategy. According to other products and markets, they develop a
different strategy according to their potential threats and opportunities. Portfolio analysis in
strategic management helps in laying down the strategy of expansion as well

3. To Take Decisions Regarding Product Retention

Another reason for corporate portfolio analysis in strategic management is to determine the life
of the product i:e, to determine which product should be retained longer and which product
should be removed from the product line.

These are the three primary and basic reasons for the portfolio analysis in strategic management.

Business Portfolio Analysis

Business Portfolio Analysis in strategic management gives importance to the development of

strategies equal to the handling of investment portfolios. It is based on the theory of
organisational strategy build-up techniques.

Business Portfolio analysis in strategic management shows systematic ways to interpret product
and service that form a part of business portfolio analysis. The way in which the financial
investments of the firms are treated likewise the appropriate organisational activities should be
followed and the inappropriate ones should be disregarded.

Basically, business portfolio analysis forms a part of portfolio analysis in which the company
emphasizes that the corporate strategies form a significant part of the decision making for the
future accomplishment of the goals.

Process For Portfolio Analysis In Strategic Management

Portfolio analysis in strategic management process in an organization is as follows:

Step 1: Identify Lines Of Business

The first step of business portfolio analysis in strategic management is to identify all the current
business lines and strategic business units.

Step 2: Group Lines Of Business

An organization has three levels of business operation, which are:

 ● broad membership – directly support the objectives in the strategic plan
● support functions – deliver the core business benefits to members
● money-makers – the source of revenues which support core businesses

Step 3: Compare Core Businesses With Mission

After separating the activities, the next step in portfolio analysis in strategic management is to
compare the core starts with vision and mission and defined goals and objectives. The business
should directly support the statements. If the comparison differs, then companies should
discontinue allocating the resources in that sector.

Step 4: Define Products In Each Line Of Business

The next step of portfolio analysis in strategic management is to categorize each relevant product
line I;e, subdivide, and define each product relevant product line.

Step 5: Apply The Program Evaluation Matrix

The Program Evaluation Matrix helps in determining the fundamental question of portfolio
analysis in strategic management, which are:

● Good fit with our other programs?

● Easy to implement?
● Low alternative coverage in the marketplace?
● Is competitive position strong?

Step 6: Determine The Alternatives

At this stage, identification of alternatives is made i:e the competitors. Identification of similar
products and their coverage area in the market. And the coverage is classified into:

● Low coverage – few comparable programs offered elsewhere.

● High coverage –many similar programs are offered elsewhere.
Step 7 Determine Program Fit

Ideally, the association will be segregated into two types of programs:

1.Well-fitting, accessible programs where the association has a strong position and competes
aggressively for a dominant position.

2. Well-fitting, difficult programs with low coverage that the association has the unique, strong
capability to provide to essential stakeholders.

This is the repeat process of portfolio analysis in strategic management which takes place in an
organization.

Portfolio Management

Portfolio Management explains a process in which individuals’ investments are managed in

order to maximise their earnings given a definite time period. Also, it is kept in mind that the
invested capital is not exposed to market risk after one limit.

Initially, portfolio management is a way out of SWOT ( strength, weakness, opportunity, threat)
analysis of various investment avenues in comparison to investors’ risk appetite and goals. As a
result, this helps the investors to earn and protect them from favourable risks.

Objectives Of Portfolio Management

The objective of portfolio management is to select from different investment avenues that best
suits the investor depending on various demographic factors like income, time period, age and
risk.

● Risk optimisation
● Ensuring flexibility of portfolio
● Allocating resources optimally
● Maximising returns on investment
 ● Capital appreciation
● To improve the overall proficiency of the portfolio
● Protecting earnings against market risks

What is corporate parenting?

Corporate Parenting refers to the partnerships between the local authority departments, services
and associated agencies who are collectively responsible for meeting the needs of looked after
children, young people and care leavers. Local authorities should care about children in their
care, not just for them. Through good practice they can offer the same standards of support as
any reasonable parent.

Functional Level Strategy

How do you achieve your yearly organizational goals? Do you just set an annual figure and start
chasing it blindly? Or, do you set semi-annually, monthly, weekly, or even daily milestones?
Which one is the right way to achieve your long-term goals? Obviously, setting short-term goals
is a better approach to achieve bigger targets.

Moreover, you also need a strategy to manage these routine or day-to-day functional level tasks.
In business terms, you need a functional-level strategy.

What Is A Functional Level Strategy?

A functional level strategy is a plan of action to achieve short-term, routine, or day-to-day

business goals to support the corporate and business level strategies. Basically, a functional
level strategy helps a business to manage operational activities on a daily or routine basis.

It is important to note that a functional level strategy involves multiple operational or functional
areas such as marketing, HR, production, R&D, sales, etc., Moreover, every functional unit
generally develops its own functional strategies.

A functional level strategy must have the following ingredients

 ■ It should reflect the corporate and business level objectives/goals.
■ It must ensure an optimum allocation of resources in all functional areas/units.
■ Last but not least, a functional level strategy needs to maximize the coordination
between all functional areas to optimize their outcomes.

Why is Functional Level Strategy Important?

Functional level strategy is important for any organization because of the following reasons;

1. It works as steppingstones to achieve corporate and business-level objectives.

2. A functional level strategy helps in developing a layout to perform
day-to-day/routine business operations.
3. It acts as a binding force in any business; integrates different functional/operational
departments such as HR, marketing, sales, R&D, production, customer relationship,
etc.
4. Functional level strategies are more pragmatic/practical in nature and help in
dealing with every practical scenario at micro levels (in an organization).

Features of Functional Strategies

Here are some important features of a functional level strategy

■ In comparison to business or corporate strategies, functional level strategies are

short-termed.
■ It sets a layout as to what a business should do to make the grand strategy work.
■ The basic objective of every functional level strategy is to ultimately pursue the
corporate strategy.
■ It pertains to the department, function, and division of an organization.
■ Functional level strategies also deal with sub-functional areas (if any).
■ Every functional unit or department develops its functional strategy on the basis of
guidelines from the higher level.
 ■ Functional level strategies fall last in the hierarchy. They support business-level
strategy, which finally supports the corporate-level strategy.
■ Functional level strategies mainly focus on the external environment.
■ A functional level strategy may vary for the same organization in different
locations. i.e different business units/franchises in different areas/cities/states.
■ Functional strategies of every functional unit must have strong integration between
each other to fulfill overall corporate objectives.

Types Of Functional Level Strategies With Examples

There are major types of functional level strategies, including;

Marketing Strategies

Marketing has evolved as one of the most important functional units in any organization.
Although marketing is a vast field itself, it basically focuses on identifying the needs of a target
audience and then offering products or services to cater to those needs. A marketing strategy
consists of different parts, but a marketing mix (product, price, place, promotion) is arguably the
most important one.

Currently, there are a number of marketing techniques, including relationship marketing, social
marketing, place marketing, person marketing, direct marketing, etc.

Now, if an organization’s corporate levels strategy focuses on Quality, Delivery, and

Efficiency, here is how different organizational departments respond.

Example

Quality Offering helpful deliverables.

Delivery Timely reacting to the changing seasonal customer needs.

Efficiency Target the right audience for the coming/next marketing campaign.
Financial Strategies

Financial strategy deals with every section/area that comes under financial management. The
strategy mainly focuses on planning, acquiring, using, and controlling a corporation’s financial
resources. If we dig a little deeper, a financial strategy deals with issuing/raising capital, assets
acquisition, investments, budgeting, working capital management, application of funds, dividend
payment, etc.

Example

Inputting information and giving it to other functional units with minimum or

Quality
no errors.

Delivery Ensuring real-time data access.

Efficiency Automation of accounting/financing process.

Production Strategies

A production strategy manages everything related to the production process. This process
includes manufacturing system, supply chain management, logistics, and operational planning &
control. The core objective of a production strategy is

■ Maximizing the quality.

■ Minimizing the total cost of production.
■ Increasing quantity.

Example

Quality Production process’s quality improvement.

Delivery Minimizing time wastage.

 Efficiency Controlling/minimizing production process delays.

Human Resource Strategies

Human resource strategy in an organization deals with every single aspect related to the
organization’s workforce. The core function of any HR department is to work for employees’
development and help them with suitable working conditions and growth opportunities so they
can contribute to organizational goals. Apart from that, HR covers recruitment, training,
motivation, development, and retention of employees.

Example

Quality Regular training programs for skill improvement

Ensuring timely recruitment and hiring process to meet organizational

Delivery
workforce needs.

Efficiency Minimizing the costs of the recruitment/hiring process.

Research & Development Strategies

An R&D strategy mainly focuses on two things;

■ Innovation; developing new products
■ Making improvements in current products

A business needs to keep introducing new products and improve the current ones to implement
different business strategies such as market penetration, concentric diversification, and
product development. Generally, there are three R&D approaches to implement these strategies;

1. Be the innovator; introduce an unprecedented product

2. Produce low-cost products
 3. Be a smart, innovative follower; add more features and launch a similar but better
product than competitors.

Example

Quality Developing innovative products for a better customer experience.

Delivery Implement parallel design techniques to minimize time to market.

Efficiency Make R&D processes simpler.

Examples of Functional Strategies

Yahoo- Marissa Mayer’s Failure To Understand Company’s Functional levels

History

Yahoo (an industry giant in the past) hired a prominent and successful Google executive, Marissa
Mayer, hoping that she would change the fortunes for “struggling” Yahoo. Initially, the investors
strongly believed that she would be able to get the company out of “dark pits.” However, what
happened was completely against everyone’s expectations.

Out of many mistakes, Marissa’s biggest blunder was totally misunderstanding the corporation at
functional/operational levels. She did make proposals for different changes but underestimated
the resistance to these changes from Yahoo’s lower-level employees.

The Outcome

After all her efforts going in vain, she finally proposed the best solution; selling Yahoo. Verizon
acquired Yahoo (which was once a $135-billion company) for only $5 billion.

Conclusion
Yahoo ultimately saw its downfall because the company failed to integrate the functional level
strategies with corporate strategies proposed by Mayer.
What is research and development (R&D)?

Research and Development (R&D) is an integral part of any company's growth strategy. It
involves the analysis and exploration of ideas to create products or services that meet the needs
of current or potential customers.

R&D investments are essential for product innovation, strategic planning, market expansion,
process improvement, and product/service optimization, which are all necessary for a business to
remain competitive in today’s ever-evolving economy. Companies often collaborate with
universities and research institutes to conduct research on market trends and develop new
technologies that could be applied in their products or services.

The goal of such partnerships is to generate value by creating unique solutions that address
customer needs while improving efficiency, profitability and corporate reputation.

What are the benefits of R&D strategy for businesses?

An effective R&D strategy can provide numerous benefits to businesses, both in the short and
long-term. By investing in innovative products or services, businesses can gain a competitive
edge in their respective industries.

The introduction of new technology can also open up opportunities for businesses to reach out to
new customer segments, which can help increase profits. Additionally, investing in R&D can
also lead to improved efficiency and enhanced productivity, allowing businesses to save
resources and money by streamlining processes. Furthermore, research and development
activities often result in patents for the business, granting them exclusive rights on the use of the
product or process that was developed.

This prevents rivals from duplicating and profiting from the same innovation without permission.
Overall, an effective R&D strategy has the potential to create a great deal of value for businesses.

How can a business create an effective R&D strategy?

Businesses can create an effective R&D strategy by carrying out a comprehensive research and
development assessment.
This should include analyzing the current industry trends, identifying areas of opportunity, and
evaluating the potential for new products or services to capture new customer segments or
markets. Additionally, businesses should consider their current capacity for executing innovation
and consider ways to expand this capacity if necessary.

This assessment should provide insight into where to focus investments in order to take
maximum advantage of opportunities while minimizing risk and cost. Furthermore, businesses
should also look at how they can create feedback loops with customers to ensure that products
are meeting market demands.

By taking all these considerations into account when developing an R&D strategy, businesses
will be well-positioned to maximize profits through investing in innovations that drive value for
customers.

What challenges might a business face when implementing an R&D strategy?

One of the challenges that businesses may face when attempting to implement an R&D strategy
is the lack of resources and expertise.

Without a dedicated research and development team, organizations may lack necessary skills and
abilities to properly assess emerging technologies and make informed decisions on what
investments to make. Additionally, it can be difficult to allocate sufficient funding for these
initiatives without sacrificing other operational priorities such as marketing or customer service.

Another challenge is staying up-to-date with industry trends and new products or services as
technology evolves quickly; firms must continually invest in market research and stay abreast of
changes in order to remain competitive.

Lastly, organisations must ensure that their R&D efforts remain compliant with relevant legal
regulations, especially those related to patents and intellectual property rights.

How can a business measure the success of its R&D strategy?

Measuring the success of an R&D strategy is essential in order to determine if investments are
yielding adequate returns.
A business can measure success by evaluating the return on investment (ROI) from their
innovation initiatives. This calculation should take into account both direct and indirect costs
associated with research and development, such as personnel, equipment purchases, maintenance
expenses, etc. Additionally, organizations should track the number of patents granted, new
products or services launched, customer feedback or engagement on social media and overall
sales figures as well.

By tracking these metrics on a regular basis, businesses can gain a clear picture of what’s
working and what isn’t so that they can make necessary adjustments to their strategies.
Additionally, businesses can also benefit from conducting user surveys or focus groups to assess
customer satisfaction with products or services developed through R&D efforts.

Ultimately, by tracking data points like these along with ROI calculations, businesses will be
able to accurately assess the success of their R&D strategies over time.

How important is collaboration in developing an effective R&D strategy?

Collaboration is an integral part of developing an effective R&D strategy, as it allows for a

greater pool of resources to be drawn upon. By bringing together experts in their fields,
companies are able to brainstorm new ideas and approaches that would not have been possible
on their own.

In addition, collaboration can improve the quality of research results and insights by enabling the
sharing of information that may have been overlooked by one individual or group. By tapping
into different perspectives and experiences, businesses can develop more informed strategies that
better meet customer needs and demands.

Moreover, collaboration enables organizations to leverage expertise and knowledge from other
sectors which can aid in developing unique solutions, products or services that increase
competitive advantage. Finally, collaboration also facilitates faster time-to-market for new
products or services which reduces costs associated with delays.

Collaboration is thus key in uncovering innovative opportunities for businesses to explore in

order to achieve long-term value from their R&D efforts.
What is an operations strategy?

An operations strategy is a set of decisions an organization makes regarding the production and
delivery of its goods. Organizations may consider each step they take toward manufacturing or
delivering a product an operation, and all decisions regarding these various operations are the
operations strategy. An organization's operations strategy works in tandem with its overall
business strategy, helping the organization to achieve its long-term goals and improve
competitiveness in the marketplace.

For example, a company that produces and sells computers may have the following operations:

● Obtaining materials
● Working with suppliers
● Designing new computers
● Manufacturing computer designs
● Managing employees
● Delivering finished computers to sellers or consumers

Benefits of having an operations strategy

There are several benefits to having an operations strategy within your business or organization,
such as:

Employee efficiency

Operations strategies define the goals of different departments, which lets team managers and
employees know what they are working toward. An operations strategy can help to ensure any
employee that contributes to an operation uses their time and skills efficiently. In addition,
organization leaders can learn which departments are operating efficiently and which may need
improvement.
Resource management

Organizations often have a finite amount of resources, making it essential that they use them
efficiently. Operations strategies can help leaders determine which areas of the organization need
the most resources and how to best deliver those resources. By developing an operations strategy,
leaders can learn more about the costs of running different departments. They can then analyze
these costs and see if they are in line with the organization's overall goals.

Department cooperation

An operations strategy details how multiple departments within an organization work together.
By outlining this coordination, each department knows how it relates to the others. They can also
see how their individual department's goals are helping to achieve the overall goals of the
organization alongside the other departments. This is useful for improving decision-making and
helping employees in different departments feel like they are on the same team.

Elements of an operations strategy

The typical elements of an operations strategy are:

Products and assembly

Product operations managers look to streamline processes, such as team communication or

product assembly. They also analyze data regarding their products and use it to prioritize tasks.
For example, they may help product managers decide which elements of a product to build first.
Product operations teams work with departments such as manufacturing, customer support and
sales to help optimize the process consumers go through with the product, from researching to
becoming repeat customers.

Delivering and storing inventory

An inventory operations strategy is one that helps businesses decide how to order, maintain and
process their inventory. It looks for more efficient ways to deliver or store inventory, with the
goal of reducing costs and waste. An inventory operations strategy also aims to order the optimal
number of goods, maximizing storage capacity without wasting resources.

Supply chain optimization

The supply chain element of an operations strategy looks for ways to optimize the movement of
products from suppliers to distributors. It may do this in several ways, for example,
implementing faster communication technology or optimizing shipping amounts. In a supply
chain operations strategy, leaders decide on the structure of the supply chain and the activities of
each stage. They also decide where to make products and where to store them.

Quality of the final product

Quality operations aim to produce a satisfactory final product. This includes product testing and
analyzing customer feedback. They also check for consistency so their customers all receive the
same level of quality. In addition, quality operations managers analyze the operations that
contribute to production. For example, they ensure the organization is using the best materials for
a high-quality finished product. They constantly monitor the production process to ensure it is
leading to their desired quality outcomes.

Scheduling use of resources

Scheduling is the timing and use of resources, and this means ensuring the organization is using
its resources at the best possible time. This may include the best time to send out shipments of
products or which activities employees should focus on first.

A common challenge for those working in scheduling operations is finding a compromise

between competing goals in terms of shared resources. For example, both the product
development and customer satisfaction teams may want to conduct a focus group, but your
organization only has the resources to host one at a time. Within your operations plan, you would
determine the optimal scheduling for these two departments.

Facilities management

Facilities planning and management is the analysis of how the organization's current facilities
factor into the organization's goals. This part of your operations strategy determines if your
current facilities are performing as needed. In addition, it also discovers if your organization
needs new facilities and if so, it conducts a search to find the right ones.
Forecasting for planning

Forecasting operations is where an organization makes plans for the future. It uses data to make
assumptions about the future of the organization. For example, it may study current sales trends
to determine profits in a year. It then implements changes within the organization to ensure it is
always moving toward its goals. For example, if a forecaster determines a drop in sales because
of economic factors that may happen in six months, they may look for ways to reduce costs now
to prepare them for this situation.