The growing influence of customers on product design, increasing market dynamics, the negotiating power of suppliers, the decreasing half-life of product life cycles or political-legal and macroeconomic changes present companies with enormous challenges. In addition, the pressure of time, success and turnover tempt senior management to take ill-considered individual measures which may promise success in the short term, but are doomed to failure in the long term. Instead, before decisions are made, a well-founded analysis process is necessary that continuously weighs up opportunities and risks or strengths and weaknesses and embeds them in a corporate strategy that promises success.
The explosiveness and necessity of an instrument for the analysis of opportunities and risks or strengths and weaknesses can be well illustrated by current economic and political events, especially in the automotive industry, before the management tool of the SWOT analysis is explicitly discussed. [...]
At the beginning of this work a classification of the SWOT analysis in the process of the strategic management takes place, before then more near on the basic idea of this management tool is dealt with. The information from the environmental analysis in chapter 2.4 and enterprise analysis in chapter 2.5 flows into the illustration of a combined SWOT portfolio in chapter 2.6. After the presentation of the objectives and the consideration of advantages and disadvantages in chapter 2.8, a short summary of the results is given at the end of the thesis, as well as an assessment of the author with regard to the future relevance of the analysis tool as a starting point for strategic decisions in companies.
Table of contents
List of abbreviations
1 Problem statement
2 Swot analysis
2.1 Classification in the management control loop
2.2 Basic idea
2.3 Procedure
2.4 Environmental analysis: external opportunities and risks
2.4.1 Analysis of the global business environment
2.4.2 Industry analysis: Five-force model according to Porter
2.5 Company analysis: internal strengths and weaknesses
2.5.1 Value chain analysis according to Porter
2.5.2 Financial analysis
2.5.3 Benchmarking to identify potential competitive advantages
2.6 Illustration of a combined SWOT portfolio
2.7 Objectives of the SWOT analysis
2.8 Evaluation of the SWOT analysis
3 Management Summary
3.1 Summary
3.2 Outlook
Bibliography
List of abbreviations
or.: respectively
GF: Business
o.g.: above-mentioned
SWOT: Strengths-Weacknesses-Opportunities-Threats
1 Problem statement
The growing influence of customers on product design, the increasing market dynamics, the negotiating power of suppliers, the declining half-life of product life cycles or political-legal and macroeconomic changes pose enormous challenges for companies. In addition, time, success and sales pressure seduce the upper management to ill-considered individual measures that promise success in the short term, but are doomed to failure in the long term. Rather, a well-founded analysis process is necessary before decisions are made, which continuously weighs up opportunities and risks or strengths and weaknesses and embeds them in a promising corporate strategy.1
The explosiveness and necessity of an instrument for the analysis of opportunities and risks or strengths and weaknesses can be well represented in current economic and political events, especially in the automotive industry, before explicitly relying on the management tool of the SWOT analysis is received.
One and a half years after the international financial market and economic crisis, the economic situation in Germany seems to be improving again, despite the euro crisis. The German stock index broke through the significant threshold of 7,000 points at the beginning of December and is aiming for the 8,000 mark. The demand for labour also continues to rise2 and the Ifo Business Climate Index3 climbed in January with 110.3 points to the highest level since reunification.4
This economic upturn is making itself felt in the automotive industry. At the 11th International CAR Symposium in Bochum, for example, Daimler CEO Dieter Zetsche remarked:
"The reset button is being pressed again worldwide. We must not miss the CHANCE."
With a view to China, Zetsche expects a significant increase in passenger car demand. He argues that Germany must continue to focus on innovation and that omissions with regard to electromobility must be made up for.5
Automotive suppliers such as Schaeffler, Conti, ZF and Leoni, whose production operations are picking up speed again after two years of crisis, are benefiting from this development.6 In particular, the share value of the latter company, a globally active system supplier of wires, cables and electrical systems, recorded significant price increases in mid-January 2011.7 Years ago, Leoni recognized that offshore outsourcing in emerging markets such as India, Thailand, Singapore, Tunisia or Egypt represents a competitive advantage in order to withstand the increasing cost pressures. However, this requires a constant analysis of the political risks in the respective country of the outsourcing partner. The unrest in Egypt at the beginning of February 2011 had a direct impact on the supply chain, production and payment transactions at the local location and, of course, on leoni's share value.8
The current economic development, the optimism in the automotive industry, as well as the political events in Egypt illustrate how important it is that companies know opportunities and risks or strengths and weaknesses, continuously analyze them and base their own strategy on them. Strategic analysis forms the starting point for decisions in companies and sheds light on internal and external factors for success or failure.9
At the beginning of this work, a classification of the SWOT analysis in the process of strategic management, before the basic idea of this management tool is discussed in more detail. The information from the environmental analysis in Chapter 2.4 and company analysis in Chapter 2.5 flow into the mapping of a combined SWOT portfolio in Chapter 2.6 one. After presentation of the objective and consideration of advantages and disadvantages in Chapter 2.8, at the end of the work, a short summary of the results, as well as an assessment of the author with regard to the future relevance of the analysis tool as a starting point for strategic decisions in companies, takes place.
2 Swot analysis
2.1 Classification in the management control loop
The ideal process of strategic management, which is the Figure 1 is shown, is based on the following sub-steps: Strategic analysis, strategy formulation and selection, strategy implementation and success monitoring.10
Abbildung in dieser Leseprobe nicht enthalten
Figure Management control loop, own representation based on: Thommen (2008), P. 43.
In order to achieve objectives, management makes a number of decisions about competitive strategies. The decision-making basis for the right strategy selection is the Strategic analysis. It assesses the current and future position of the company.11 Special framework conditions with regard to industry and competition and a special competitive situation on the market require this independent analysis of development prospects and an assessment of opportunities and risks.12 In this process, the management analyzes the (external) corporate environment as well as the (internal) quality structures and creates prerequisites for the next phases in the management control loop.
The following section describes the SWOT analysis as a strategic analysis and synthesis tool. It consists specifically of two basic pillars, "namely the analysis of the environmental situation and the analysis of internal possibilities and limits."13 In strategic management, it forms the basis for strategic decisions.
2.2 Basic idea
The SWOT analysis is a method for investigating the current state in companies and predicts possible developments in the future.14 The acronym SWOT may refer to the first letters of the following English words: S trength, W eaknesses, O pportunities and T hreats. To German, SWOT means: Strengths, weaknesses, opportunities and risks. Accordingly, the SWOT analysis translates as strengths-weaknesses-opportunities-risks analysis. This analysis grid evaluates company-specific opportunities and risks and internal company strengths and weaknesses, as in Figure 2 depicted.15
Abbildung in dieser Leseprobe nicht enthalten
Figure Structure of the SWOT analysis / Kerth/Pütmann (2005), P. 179.
The SWOT analysis maps all the above-mentioned contents by means of a matrix. The task of the management is then to derive strategic recommendations for action from the SWOT analysis. Figure 2 clarifies how the analysis grid "resource-oriented thought patterns with market approaches"16 and contrasts internal company strengths and weaknesses with opportunities and risks from the company. In the application, after obtaining information, complex structures must be generalized and quantified.17
2.3 Procedure
The SWOT analysis is always carried out in 4 steps, which are carried out in Figure 3 are shown. First, an external environmental and industry analysis is carried out from which different opportunities and risks arise for the company. The second part consists of the internal value-added-oriented or customer-oriented company analysis. In this phase, the internal strengths and weaknesses are determined. The individual internal value drivers or resources apply18 to identify in the company and compare it with other competitors.19 A method for the identification of competitive advantages or disadvantages is, for example, benchmarking, which in Chapter 2.5.3 is explained in more detail.20
Abbildung in dieser Leseprobe nicht enthalten
Figure Procedure for the SWOT analysis, own presentation based on: Kerth/Pütmann (2005), P. 181.
The combination of strengths and weaknesses on the one hand and opportunities and risks on the other hand in a SWOT portfolio, as in Figure 3 ensures the derivation of strategies as a sound basis for the further process in strategic management.21
The procedure for the SWOT analysis is discussed in more detail in the following chapters. The procedure is based on the structure scheme in Figure 3.
2.4 Environmental analysis: external opportunities and risks
The SWOT analysis begins with the assessment of external opportunities and risks. The environmental analysis investigates the environment of a company for clues as to whether the current business operation is endangered or new opportunities open up in the near future. It is not limited to the immediate vicinity of the company, but also takes into account trends and trends of external environmental factors.22 Analytical objects that the company itself cannot influence, for example, represent political and legal framework conditions, the cultural environment, the macroeconomic situation or industry-specific influencing factors. When obtaining information, a distinction is made between two levels of analysis. The first level deals with the study of the global corporate environment and creates the framework for the second level of analysis. With the help of specific information, the industry analysis in the second stage makes statements about competitive conditions on the market.23 Both levels of analysis are subsequently delineated more precisely from each other.
2.4.1 Analysis of the global business environment
In the analysis of the global environment, macroeconomic, political-legal, socio-cultural, technological and natural factors are considered. Frame these influencing variables, as in Figure 4 presented, the company and at the same time the closer competitive environment.
Abbildung in dieser Leseprobe nicht enthalten
Figure Segments of general environmental analysis / STEINMANN/SCHREYÖGG (2005), p. 178.
When analyzing the macroeconomic environment the focus is on general economic development. A distinction must be made between national and international economic influence. Potential influencing factors are, for example, the development of economic growth, inflation rate, interest rates, unemployment rates and exchange rates. The characteristics of the individual components depend in turn on the development of the economy as a whole. The economic crisis in 2009, for example, not only affected international financial markets, but also led to a weakening of the german economy. Overall, it becomes clear that the careful observation of economic events is an integral part of any strategic analysis.24
The general political-legal framework are dictated by the state. Economic activity is bound by legal norms and rules. Particularly relevant are, for example, regulations on taxation, producer liability, corporate constitution or investment, patent and environmental regulations. International politics is as important in strategic analysis as national politics. When selling products in the United States of America, the stricter producer liability represents a considerable risk for German companies the socio-cultural environmental analysis plays a decisive role in strategic decisions. The focus is on the values, attitudes and behaviour of members of a society. If values or orientation patterns change, management must adapt to this change.25 The increasing demand for organic food, for example, was used by many entrepreneurs as an opportunity to reposition the market. Many neglect this area of analysis because demographic features or prevailing value patterns are elusive and have little quantifiable character.26
No other aspect of the environment undergoes as many changes as the technological environment . Modern information and communication technologies open up new opportunities for companies, but they also carry risks. The Internet makes some work processes more effective; but it makes the company more vulnerable from the outside.27
The last segment of environmental analysis deals with the natural or ecological environment. The increasing exploitation of resources and environmental pollution have contributed to the creation of a number of activities, programmes and regulations to protect the environment. In order to secure strategic potential for success, companies today rely primarily on environmentally friendly manufacturing processes, an environmentally oriented product policy and renewable energies. Corporate management must recognize the relevance of the ecological problem and use it as an opportunity.28
The brief explanations of the individual factors suggest the unmanageable abundance of potential influencing factors. For this reason, those influencing factors that are important for the later strategy formulation must be filtered. The broad-based selection process should cover as far as possible all developments and possible trends relevant to the company's goal.
The global environment includes, as in Figure 4 represented, the competitive environment. In the competition of an industry, forces arise that can also be grasped. An instrument of industry analysis is used in Chapter 2.4.2 described in more detail.
2.4.2 Industry analysis: Five-force model according to Porter
The structure of an industry provides information about the rules of the game in competition and helps the management to derive a suitable competitive strategy. In the second analysis level, the industry analysis identifies the most important influencing factors that are responsible for the respective competitive situation and derives opportunities and risks from this.29 With the help of suitable strategic measures, companies can then maintain or take on a competitive position in the long term and successfully assert themselves in their competitive environment.30
In the industry structure analysis, the five-force model according to Michael E. Porter (1983) was established. It examines the logic of the respective industry and provides information on the competitive intensity and dynamics as well as the profitability of a business segment (hereinafter: GF).31 Porter's basic concept is based on the recognition that the company's strategy must be based on its competitive environment and distinguishes five factors of competitive dynamics. Figure 5 divides these forces into potential new competitors, established competitors in an industry, threat of substitution products, the bargaining power of suppliers and customers.32
Abbildung in dieser Leseprobe nicht enthalten
Figure Factors of competitive dynamics according to Porter / Kerth/Püttman (2005), P. 169.
[...]
1 cf. Scheer et al. (2004), PP. 6-13.
2 cf. Profit (2010), P. 30.
3 Business Climate Index: Leading indicator for the assessment of the future economic development by companies in Germany and result of the economic survey carried out by the IFO Institute for Economic Research in Munich, cf. Roberts /Mosena/Winter (2010), P. 1.246.
4 cf. VDI News (2011), P. 4.
5 cf. Motor Information Service (2011).
6 cf. DVZ (2010).
7 cf. Hamburger Sparkassen / Analyses DAX 100 (2011).
8 cf. The Treasurer (2011), P. 1.
9 cf. Hungenberg (2010), P. 9.
10 cf. Thommen (2008), P. 43.
11 cf. Hungenberg (2010), P. 83.
12 cf. Hungenberg (2010), P. 75.
13 Steinmann/Schreyögg (2005), P. 172.
14 cf. Voigt et al. (2005), P. 11.
15 cf. Kerth/Pütmann (2005), P. 179.
16 Kerth/Pütmann (2005), P. 180.
17 cf. Kerth/Pütmann (2005), P. 180.
18 Resources: all means available for the production of goods and services, such as labour, material resources, mineral resources and energy sources, cf. Rittershofer, pp. 771f.
19 cf. Kerth/Pütmann (2005), P. 180.
20 cf. Ten Have et al. (2015), p. 379.
21 cf. Kerth/Pütmann (2005), P. 180.
22 cf. Steinmann/Schreyögg (2005), P. 173.
23 cf. Steinmann/Schreyögg (2005), P. 177.
24 cf. Hungenberg (2010), P. 94.
25 cf. Hungenberg (2010), P. 96.
26 cf. Steinmann/Schreyögg (2005), P. 181.
27 cf. Steinmann/Schreyögg (2005) P. 179.
28 cf. Hungenberg (2010), P. 96.
29 cf. Kerth/Pütmann (2005), P. 168.
30 cf. Ten Have et al. (2010), P. 265.
31 Business: field of activity of the enterprise determined by a particular product or service definable product-market combination, Weigert/Pepels (1999), P. 216.
32 cf. Kerth/Pütmann (2005), P. 168.
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