1) Is the SWOT firm analysis tool an external analysis, an internal analysis or
ID: 359724 • Letter: 1
Question
1) Is the SWOT firm analysis tool an external analysis, an internal analysis or a blend between external & internal analysis?
a) First, explain the SWOT firm analysis tool
b)Then, take a position and explain why you support this position.
Question 2:
What is vertical integration?
a) Define this concept in your own words.
b) What type of vertical integration does the firm either in your own case study or any of the other case studies pursue? Furthermore, explain why the firm pursues this type of vertical integration in the first place (think of it in terms of advantages/disadvantages).
Question 2:
Describe how resources, capabilities and core competencies are related and how companies can achieve a sustained competitive advantage. You are encouraged to use an example.
Explanation / Answer
SWOT Analysis:
SWOT firm analysis tool is a blend of external and internal analysis.
First, let us see what SWOT stands for.
S--> Strengths'
W---> Weaknesses
O--> Opportunities
T--> Threats
Strengths part of the tools analyses what are the internal strengths of the company which help company succeed. For example, for a company it's strength could be relationship with its customers, product, etc.
Weakness part lists those in which the company lags or is not the best in the industry.
Strengths and weaknesses are internal analysis of the company. They differ from one company to another based on their internal things.
In Opportunities, external opportunities in the environment are examined which help the company to perform better or grow.
In threats, external threats which a company would face are listed.
Opportunities and Threats are external analysis since they depend on competitors, customers, industry they are operating in etc.
Vertical integration:
It is a strategy where a company expands its business operations into other parts of the supply chain or value chain associated with it. For example, a manufacturing company can acquire its raw material suppliers too.
Advantages :
> By vertically integrating, we have greater control over our value chain. Because of this, it is possible to develop and invest in the products that we offer to our customers.
> It reduces costs to greater extent. If suppose a company takes over its suppliers, one can save on margins shared earlier with suppliers, transportation costs. etc.
> Transcation costs are also lower. It is so because transactions are done between subsidiaries and central team.
> Quality can be better controlled
Disadvantages:
> Product variety might have to be compromised. If a significant development has to be changed in the product, it would be difficult because it has to implement the changes in almost all the levels of the chain
> When one part is affected , it affects the entire chain. For example, if it's rawmaterial supplying subsidiary is adversely affected, entire chain would suffer. When there is no vertical integration, company had an option to look for another supplier immediately.
Resources, capabilities and core competencies:
Resources are the source of a firms capabilities. If there are abundant resources, a company can develop better capabilities. Capabilities in turn are the source of core competencies. When resources are put to better and effiecient use, a company can gain capabilities. When capabilities are increased over time , they turn into core competencies. If core competencies are maintained, companies gain advantage over competition and they become a sustained competitive advanatge
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