The firm will use a SWOT matrix to help it analyze its future growth plans in the industry. The SWOT matrix involves an analysis of strengths, weaknesses, opportunities and threats, which a firm faces in the industry. It will help the firm identify all advantages and threats it faces in the industry.
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The first column of the SWOT matrix indicates attributes which are beneficial to a firm’s growth plans while the second column shows attributes which are harmful to a firm’s growth in the market (Harris, 2012, p. 33).
Low costs. Competent staff. High quality production systems.
Inadequate skills, Low consumer loyalty, Weak brand power.
Low market share/penetration by major brands.
Slow market growth,Stringent investment regulations.
Figure 1 showing a SWOT matrix.
A BCG or a growth share matrix will make it possible for the firm to analyze its performance in the industry by focusing on different products and business units. This will help the firm allocate resources effectively to different units after assessing their performance in the market (Harris, 2012, p. 37).
Cash cows are business products that have a large share of a slow-growing market. They boost a firm’s profits even when other units perform poorly.Figure 2 showing a BCG/ Growth share Matrix.
Dogs are units which do not have a large market share and they do not contribute positively to a firm’s profits.
Question marks are units which have a high growth potential yet they make a firm incur a lot of expenses.
Stars are units that have a large market share in an industry with a high growth potential.
A SWOT matrix helps a firm understand its strengths and how it needs to exploit them to become more competitive in the market. It helps a firm identify specific areas of its operations that need more resources to help it achieve its objectives more effectively. A SWOT matrix helps a firm come up with an effective strategy that helps it assess the direction it is heading and what it needs to do to make its operations more competitive (Phadtare, 2011, p. 48).
A SWOT matrix does not provide a firm with adequate short term indicators to measure performance. It only focuses on the general aspects of a firm’s operations and fails to offer a detailed approach on how a firm can turn around its operations. It is also not suitable for a business that serves different markets with unique attributes (Phadtare, 2011, p. 51).
A growth share matrix makes it possible for a firm to understand which business units offer it a higher competitive edge in the market. This helps a company with diversified portfolios to assess the growth rates of each portfolio to come up with effective inputs to maintain positive performance in the long term. Therefore, a firm is able to identify its current and future profitability projections to determine the quality of its operations (Phadtare, 2011, p. 56).
The growth share matrix fails to show other elements in the industry that help a firm become more profitable in the long run. Some business units which are ranked as question marks may fail to live up to this expectation resulting in a lot of losses. The matrix supposes that profits obtained from cash cows helps to fund other units. This approach is not sustainable in the long term (Phadtare, 2011, p. 59).
The firm needs to use the SWOT analysis to identify operational strengths that make it more competitive in the industry. It needs to conduct a comprehensive market study to understand consumer behavior and needs of different market segments so as to develop products that satisfy needs of different customers.
It needs to define specific market niches to come up with an assessment on how they contribute to its objectives in the market. The firm also needs to use the growth share matrix to determine the performance of its individual units in different markets. The firm needs to define brand attributes of each product to find out how these attributes relate to its mission in the industry (Phadtare, 2011, p. 65).
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The firm will produce shampoos, lotions and air fresheners. It will incur one million dollars in its first year of operations.
|Product||First Year Strategy||Second Year Strategy||Third Year Strategy|
|Shampoos||Women of all ages in the local market||Saloons, beauty parlors, and customers||Regional market|
|Lotions||Both male and female clients||Partnerships with various retail chains||Partnerships with strong foreign brands|
|Air Fresheners||Domestic and corporate clients||Specific fragrance lines to cater for specific tastes||Sustaining consumer loyalty|
Figure 3 showing strategies to be used to position different products in the market.
The firm needs to ensure that it promotes all products in their specific markets without paying a lot of attention to cash cows and stars as shown by the growth share matrix. It needs to make these products have their own independent brand attributes to make them appeal to different consumer segments. This will help the firm diversify its markets to ensure its operations are not dependent on only one flagship brand.
Therefore, the firm needs to take advantage of all opportunities in different markets it serves. This will make it possible for its products to get a high level of brand recognition in the market (David, 2011, p. 172). This can be achieved through establishing strong relationships with customers in specific market segments the firm is active in.
The viability of opportunities as identified by the SWOT analysis will be measured by the way the firm performs in the market. For instance, the firm’s ability to run low cost operations will be assessed by analyzing the quality of its products. The impact of these low cost operations will be assessed after two years to determine if they have helped the firm achieve more profits.
The firm will engage consumers in its target markets to find out if products that are sold to them satisfy their expectations. A study will be done after two years to evaluate perceptions of consumers regarding the firm’s products. The growth share matrix will be used to identify which product deserves to be made a flagship brand after three years.
The product that registers the highest amount of profits and consumer loyalty will become the firm’s flagship brand. The firm will assess all products sold in their respective markets to find out their results (David, 2011, p. 175).
The firm will need to build close relationships with its customers to ensure that its strategies achieve desired impacts. The firm needs to improve the competitiveness of its operations to make its products more attractive to customers. An audit of the firm’s operations will help it determine specific units that need to be improved.
David, F. R. (2011). Strategic management: Concepts and cases. Upper Saddle River, NJ: Prentice Hall / Pearson.
Harris, N. (2012). Business economics: Theory and application. London: Butterworth Heinemann.
Phadtare, M. T. (2011). Strategic management: Concepts and cases. New Delhi: PHI Learning Limited.