A SWOT analysis explores the relationship between the environmental influences and the strategic capabilities of an organisation compared with its competitors.
(a) SWOT analysis for Pharmcare
Environmental change (opportunities and threats)
Healthcare
(b) Competitor SWOT analyses
Environmental change (opportunities and threats)
Healthcare rationing
1 What does the SWOT analysis tell us about the competitive position of Pharmcare with the industry as a whole?
2 How readily do you think executives of Pharmcare identify the strengths and weaknesses of competitors?
3 Identify the benefits and dangers (other than those identified in the text) of a SWOT analysis such as that in the illustration.
Prepared by Jill Shepherd, Segal Graduate School of Business, Simon Fraser University, Vancouver, Canada.
SWOT can also help focus discussion on future choices and the extent to which an organisa-tion is capable of supporting these strategies. A useful way of doing this is to use a TOWS matrix 30 as shown in Figure 3.6 . This builds directly on the information in a SWOT exercise.
Each box of the TOWS matrix can be used to identify options that address a different combina-tion of the internal factors (strengths and weaknesses) and the external factors (opportunities and threats). For example, the top left-hand box prompts a consideration of options that use the strengths of the organisation to take advantage of opportunities in the business environment. An example for Pharmcare might be the re-training of the sales force to deal with changes in pharmaceuticals buying. The bottom right-hand box prompts options that minimise weaknesses and also avoid threats; for Pharmcare this might include the need to develop its ICT systems to better service more informed patients. Quite likely this would also help take advantage of opportunities arising from changes in the buying structure of the industry (top right). The bottom left box suggests the need to use strengths to avoid threats, perhaps by building on the success of the healthcare education department to also better ser-vice informed patients.
3.5 MANAGING STRATEGIC CAPABILITY
The previous section was concerned with diagnosing strategic capability. This section con-siders what managers might do to manage and improve resources and capabilities to the strategic benefi t of their organisation.
One lesson that emerges from an understanding of the strategic importance of capabilities is that it can be diffi cult to discern where the basis of competitive advantage lies. Hence, Figure 3.6 The TOWS matrix
MANAGING STRATEGIC CAPABILITY 95
if managers are to manage the resources and capabilities of their organisation, the sort of analyses explained here, especially VRIO, value chain analysis and activity systems mapping, are centrally import ant. If capabilities are not understood at these levels, there are dangers that managers can take the wrong course of action. For example, managers in an industrial cleaning company undertook an activity mapping exercise. It revealed that the way their van drivers dealt with collecting often fi lthy garments from industrial premises was especially valued by customers. This had developed through custom and practice, competitors did not do it and the managers themselves were not aware of it explicitly until they did the exercise. The irony was that they were just about to outsource the van delivery service! They were about to lose control of one of their potential bases of competitive advantage for the sake of cost reduction. This demonstrates the signifi cance of diagnosing strategic capabilities. However, developing strategic capabilities that provide for competitive advantage can be extremely challenging as indicated by the strict criteria they need to fulfi l in section 3.3 above. The question, then, is what can managers do to create, extend or upgrade an organisation’s strategic capabilities after having diagnosed them? 31
There are several different ways in which managers might develop strategic capabilities:
● Internal capability development. Could capabilities be added or upgraded so that they become more reinforcing of outcomes that deliver against critical success factors? This might be done, for example, by:
● Building and recombining capabilities. Creating entirely new capabilities that provide for competitive advantage requires entrepreneurship and intrapreneurship skills. Managers can build managerial systems and a culture that promote capability innovation or form new venture units outside the rules of ordinary R&D and product development. 32 ● Leveraging capabilities. Managers might identify strategic capabilities in one area of their
organisation, perhaps customer service in one geographic business unit of a multina-tional, that are not present in other business units. They might then seek to extend this throughout all the business units. While this may seem straightforward, research has demonstrated that it can be rather diffi cult. 33 The capabilities of one part of an organisa-tion might not be easily transferred to another because of the problems of managing change (see Chapter 14 ).
● Stretching capabilities. Managers may see the opportunity to build new products or services out of existing capabilities. Indeed, building new businesses in this way is the basis of related diversifi cation, as explained in Chapter 7 .
● External capability development. Similarly, there may be ways of developing capabilities by looking externally. For example, this could be by developing new capabilities by acquisition or entering into alliances and joint ventures (see Chapter 10 ).
● Ceasing activities. Could current activities, not central to the delivery of value to customers, be done away with, outsourced or reduced in cost? If managers are aware of the capabilities central to bases of competitive advantage, they can retain these and focus on areas of cost reduction that are less signifi cant.