An Introduction to Situation Analysis in Strategic Marketing

In search of Competitive AdvantageDr. William E. Baker

William Baker ConsultingMarketing StrategyCommunication StrategyBrandingAdvertising

Award Winning Author, Professor and Consultant619-402-3990, wbaker@uakron.edu

Google Scholar Page: https://scholar.google.com/citations?hl=en&user=If0w9hoAAAAJ

Evaluate Current

Performance

Scan External Environment

-PEST-Five Forces-Competition

Scan Internal Environment

-Culture-Resources-Capabilities

Select /Prioritize

-Opportunities-Threats

Select /Prioritize

-Strengths-Weaknesses

Evaluate Strategic Alternativ

es

Select and

Implement Best

Alternative

Situation Analysis

Summary

Generate Strategic Alternativ

es

Where is Your Competitive Advantage Within the Marketing Mix (it is almost always just one of the below)?

Product: Superior Benefit Delivery

Distribution: Superior Availability

Pricing: Lower Cost of Doing Business

T

Competitive Advantage:Where is Your Competitive Advantage in Terms of the Marketing Mix?

Promotion: Superior Ability to Reinforce Behavior

Relationships: Superior ability to customize

Firm StrengthsSources of Competitive Advantage

O What do you do better than anyone else? O What lowest-cost resources do you have access

to? O What intangible factors set you apart?O What combinations of strengths are difficult for

firms to copy?

O You can be competitive without a single strength but you cannot have a competitive advantage

Strengths and Weaknesses Identification What strengths and weaknesses relative to competitors

emerge from an audit of firm’s resources and capabilities?

Rank strengths and weaknesses by looking at scarcity, mobility and scopability as well as overall value/importance to customer.

How, if at all, can individual strengths be bundled to create aggregate strengths?

The Power of BundlingBundling resources and capabilities is key to maximizing scarcity and immobility.

Southwest Airlines:• Single fuel efficient aircraft, the Boeing 737• No reservation service• No food service• Labor contracts stipulate employees can perform multiple tasks• Lease inexpensive gates at airports or use secondary airports

Strength Outcomes: Lower Cost, Superior Scheduling

Firm Weaknesses Sources of Competitive Disadvantage

ASK yourself:O What are sources of disadvantage?O Where do competitors excel? O What intangible factors hurt you (e.g., image)?O What competitive strengths are difficult/impossible to

overcome?

O You May Not Have a Single Major Weakness But Not Enjoy Competitive Advantage

Environmental Threats and Opportunities

Unexploited or Under Exploited Situations

Opportunity-Threat Impact Map

Very Low

Very High

Low Impact

High Impact

Probability of Occurrence

Impact

Common Mistakes in SWOT

Strengths (Weaknesses)We have a good (bad) productWe have been in business a long (short) timeWe have strong (weak) imageWe have strong (weak) brand equity

    Opportunities that do not have a basis in some real or anticipated change in the external environment are not opportunities…ask yourself what in the environment is influencing your firm’s ability to do one of the following

We have the opportunity to increase salesWe have the opportunity to advertiseWe have the opportunity to innovate our product lineWe have the opportunity to improve customer satisfaction

 

Key Situations to Identify and Address

  1. A strength matched with an opportunity provides leverage (exploit the strategic window while you can) 

2. A strength matched with a threat is a vulnerability (monitor situation carefully)

 

3. A weakness matched with a threat provides a problem (strengthen weak links competitors may exploit)   4. A weakness matched with an opportunity is a constraint (inhibits your ability to exploit your opportunity) 

No Clear Leverage, Problems, Vulnerabilities, Constraints?  

1. Address the market in a manner that fits your strengths 

2. Address weaknesses by at least achieving acceptable performance

 

3. Assess threats for their ability to impact your core customers  

 4. Assess opportunities by their fit with your core competencies 

Competitive Intensity:The Most Misused Presumption in SWOT

• If the concept of “intense competition” is to make any sense, it cannot apply equally to all competitive scenarios.

• Truly “intense competition” drives profit margins towards zero.

• Firms with competitive advantages are more able to avoid this fate.

Competitive Intensity:The Herfindahl Index

Porter’s Five Forces:Opportunities/Threats to Firm Profitability

Porter’s ‘Five Forces’ are means to assess the probability that an industry’sprofits will be pressured downward through price competition

1. Intensity of Direct Competition

1. Ease of Entry

1. Presence of Substitutes

1. Supplier Power (ability to negotiate higher price to firm)

1. Customer Power (ability to negotiate lower price from firm)

Porter’s Five Forces:Opportunities/Threats to Firm Profitability

Porter’s ‘Five Forces’ are means to assess the probability that an industry’sprofits will be pressured downward through price competition

High LowProfits Profits

1.Intensity of Direct Competition Less More

1.Ease of Entry Hard Easy

1.Presence of Substitutes Few Many

1.Supplier Power (ability to negotiate higher price to you) Weak Strong

1.Customer Power (ability to negotiate lower price from you) Weak Strong