STRENGTHS AND WEAKNESSES

A Fundamental Element of Strategic Planning

By Dana Baldwin
Listing of a company's strengths and weaknesses are a normal part of any attempt at
strategic planning for virtually all companies. No shock there! But, why do we
perform these analyses, and what do we expect to learn by doing them? To be sure the
company is headed in the right direction, a competent, thoughtful review and updating
of your strengths and weaknesses is a fundamental element of good strategic planning.
First, we must be sure we are actually doing the analysis of our strengths and
weaknesses properly. Some teams just get together and throw a bunch of ideas on the
page or flip chart, then go on to their next exercise. Little additional thought is given
to the importance or impact of strengths and weaknesses and the reasons for defining
them and analyzing them.
To set the stage for analysis of strengths and weaknesses, the team should first discuss
why the team is looking for them, what is being looked for, and what will be done
with the results when they have completed their work.
Why does your team want to determine what your strengths are? Simply put, your
strengths are those things that your company does well which help you perform your
jobs, deliver value to your customers and/or give you an advantage over your
competition. They are some of the cornerstones you use to build your business and to
build and maintain competitive advantages in the market place.
Why should your team determine your weaknesses? Most people answer that the team
needs to correct weaknesses in order to remain competitive and effective. The real
reason your team should determine what your weaknesses are is to get them out in the
open, with everyone in basic agreement that these are actually weaknesses, so the
team can determine what to do about each one, if anything.
Why wouldn't your team want to address and correct each weakness? There are other
considerations which must be taken into account.
First, we must recognize that we can't possibly be good at everything. For example:
Look at WalMart and Tiffany. WalMart appeals to mostly middle and lower economic
clientele. It is probable some of the people who might shop regularly at a fine store
like Tiffany would not regularly venture into a WalMart, and vise versa. What are
WalMart's strengths? Supply chain management and low prices on high volume

products. What are Tiffany's strengths? Upscale fine jewelry at high prices,
individualized service and appeal to the highest economic groups. What would happen
to WalMart if they tried to appeal to Tiffany's customers? And, what would happen to
Tiffany if they attempted to appeal to WalMart's customers? In both cases, they would
likely lose focus, change the business model to the point where they could well lose
their major customer base and suffer in the process. Each company focuses its efforts
to maximize results in its own core business, and does not get distracted into areas
where it may have limited appeal and expertise. This example helps to show that we
need to choose those characteristics (strengths) which help us build our business most
effectively and address only those critical weaknesses which truly interfere with or
prevent us from being successful.
Second, think about the relationship between strengths and weaknesses. Almost all
strengths have off-setting weaknesses of some kind. By correcting the weakness, we
may lessen the strength or eliminate it altogether.
For example, Shaquille O'Neal has one of the most powerful bodies ever to play the
game of basketball. He is a mountain of a man, 7'- 2" tall, weighing about 340 pounds,
with tremendous muscle mass. His game is pure power. He has little finesse, which is
not a criticism. His weakness, however, is his relative lack of speed. If he were to try
to defend against a guard playing 25 feet from the basket, the guard would likely be
able to dribble the ball around Shaq and drive to the basket easily. If Shaq wanted to
increase his quickness and speed - his apparent weaknesses - he would have to slim
down, probably to less than 250 pounds. While he would likely be much quicker
afoot, what strengths he currently has would be lost in the process? At 250 pounds, he
would be easily pushed around by other, heavier, stronger centers. In short, he would
lose the strengths that make him one of the premier players in the world by correcting
a perceived weakness. The conclusion from this is that your team must be very careful
to differentiate between weaknesses which must be corrected, and those which are the
natural off-shoots of the strengths on which you are building your business.
Third: Your team must be very careful to be objective in its analyses. It is easy to get
into a self-critical mode in which everything is a weakness, or, conversely, the team
may lead itself into a rosy scenario in which its strengths are overstated and
weaknesses understated. In every session, it is a positive idea to have an experienced
process leader with no vested interest in the process beyond assuring that the right
things are addressed, that conclusions are reached objectively and every effort is made
to assure the financial, physical and human assets of the company are used to obtain
the highest and best results for the company. We have found that some companies are
too introspective, and in looking out at the real world, think that they are the only ones
with problems and challenges. Others are just the opposite. They go blithely along,
thinking that they are doing very well, with little consideration of what is happening

in the real world. Your leader's job is to assure that the team's approach is fair,
balanced and objective, so each analysis obtains the best, real world result.
What areas of the company should be addressed? While this varies within each
company depending on what the company does and how it operates, generally, the
team should look at the overall company strengths and weaknesses as well as the
strengths and weaknesses of key areas within the company. It is important to look at
how each area interacts with the customer world, both inside and outside the
company, as well as analyzing the entity as a whole. Recognize that it may well
happen that some areas have different strengths or weaknesses when examined
individually, but the company performance may be totally different when viewed as
an integrated unit.
When you have laid the groundwork for your team to begin analyzing your strengths
and weaknesses by setting out expectations and limitations as discussed above, your
leader should throw the floor open for ideas. While there is no single list of
appropriate topics that is right for every company, a good list to consider should
include (but certainly not be limited to) the following:
At the whole company level:
People
Skills
Knowledge
Capabilities
Impact on others both inside and outside the company
Products and/or Services
Distinguishing features or lack thereof
Competitive advantages/disadvantages
Services or Features we 'wrap around' our product or service
Examples: Post sale service or pre-sale engineering
Quality
Speed of delivery
Installation and or service capabilities
Company
Reputation
Capacity
Responsiveness
Customer attitudes
Customer Perceptions
Attitudes towards customers
Follow through

For each of these areas which pertain to your whole company, you should ask:
What are the things we do which the customer values and will pay for?
Are there things we do which the customer values, but will not pay for? Why?
What do we do for the customer that ends up benefiting us both?
If many of our customer services or products result in a win-win situation for us
both, how can we exploit this to our mutual advantage?
How can we take advantage of this to gain or keep a competitive advantage over
our competition?
What resources do we have within or available to the company that will add
something to our relationships with our customers?
What features or benefits do we provide to our customers that are important to
them?
How can we use this to distinguish ourselves versus our competition?
How do outsiders see us and what do they perceive as being our strengths?
What do we provide that makes them want to continue to do business with us?
How can we build on this to sustain or improve our business?
What can we improve?
Are there changes we can make which will make a modest strength even stronger,
or which will add to our competitive position?
Will the customer value this and be willing to pay for it?
Is there anything we do poorly? How does this impact the customer?
Individual areas within the company which might be considered for our analysis of
strengths and weaknesses could include: (Each area should be considered based on the
particular company, its markets, competition, customers, products and services
offered.)
Marketing: How we build general and specific awareness of our company in the
minds of our potential customers.
Sales: Those direct activities which result in our customers ordering our products and
services.
Production Capabilities/Service Capabilities: Those activities which result in our
providing products and/or services to our customers.

Accounting, including A/R and A/P: While not usually included in strengths and
weaknesses in most analyses, we suggest that this area be included to the extent that it
impacts any interactions with customers. Done poorly, this area can be a major irritant
to customers, possibly resulting in loss of business and alienation of customer
personnel.
Administration: Does our leadership provide clear, unambiguous goals,
communicated effectively to everyone in the company? Do our leaders allow people
to function with an appropriate level of responsibility and authority, stepping in only
to help guide and assist, or do they micromanage, limiting initiative resourcefulness?
Human Resources: Does HR support the mission of the company effectively, with
good communication and even-handed administration of policies and benefits? How
does HR contribute to the effectiveness of the company?
Intangibles - such as responsiveness, flexibility, reputation, follow through on
commitments, etc.: Each of these depends on the type of company, the need for each
of these characteristics in the marketplace and within the company. Each should be
considered for its effectiveness both inside and outside the company.
Establishing where the company stands in terms of strengths and weaknesses is an
important component of the discovery phase of strategic planning, as it helps establish
the base for analysis and development of plans for the future of the company. Done
well, this analysis will help the strategic planning team develop effective plans for the
future course and direction of the company.
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SWOT Analysis
SWOT is an acronym used to describe the particular Strengths,
Weaknesses, Opportunities, and Threats that are strategic factors for a
specific company. A SWOT should represent an organizations core
competencies while also identifying opportunities it can not currently use
to its advantage due to a gap in resources.
The SWOT analysis framework has gained widespread acceptance because of its
simplicity and power in developing strategy. Just like any planning tool, a SWOT
analysis is only as good as the information that make it up. Research and accurate
data is vital to identify key issues in an organizations environment.
Assess your market:

What is happening externally and internally that will affect our company?

Who are our customers?

What are the strengths and weaknesses of each competitor? (Think

Competitive Advantage)

What are the driving forces behind sales trends?

What are important and potentially important markets?

What is happening in the world that might affect our company?

What does it take to be successful in this market? (List the strengths all
companies need to compete successfully in this market.)

Assess your company:

What do we do best?

What are our company resources assets, intellectual property, and people?

What are our company capabilities (functions)?

Assess your competition:

How are we different from the competition?

What are the general market conditions of our business?

What needs are there for our products and services?

What are the customer-market-technology opportunities?

What are the customers problems and complains with the current products
and services in the industry?

What If only. Statements does a customer make?

Opportunity an area of need in which a company can perform profitably.

Threat
A challenge posed by an unfavorable trend or development that would lead (in
absence of a defensive marketing action) to deterioration in profits/sales.
An evaluation needs to be completed drawing conclusions about how the
opportunities and threats may affect the firm.
EXTERNAL: MACRO- demographic/economic, technological, social/cultural,
political/legal MICRO- customers, competitors, channels, suppliers, publics
INTERNAL RESOURCES: the firm
Competitor analysis is a critical aspect of this step.

Identify the actual competitors as well as substitutes.

Assess competitors objectives, strategies, strengths & weaknesses, and

reaction patterns.

Select which competitors to attack or avoid.

The Internal Analysis of strengths and weaknesses focuses on internal factors that
give an organization certain advantages and disadvantages in meeting the needs of
its target market. Strengths refer to core competencies that give the firm an
advantage in meeting the needs of its target markets. Any analysis of company
strengths should be market oriented/customer focused because strengths are only
meaningful when they assist the firm in meeting customer needs. Weaknesses refer
to any limitations a company faces in developing or implementing a strategy (?).
Weaknesses should also be examined from a customer perspective because
customers often perceive weaknesses that a company cannot see. Being market
focused when analyzing strengths and weaknesses does not mean that non-market
oriented strengths and weaknesses should be forgotten. Rather, it suggests that all
firms should tie their strengths and weaknesses to customer requirements. Only
those strengths that relate to satisfying a customer need should be considered true
core competencies. (Marketing and Its Environment, pg 44)
The following area analyses are used to look at all internal factors effecting a
company:

Resources: Profitability, sales, product quality brand associations, existing

overall brand, relative cost of this new product, employee capability, product
portfolio analysis

Capabilities: Goal: To identify internal strategic strengths, weaknesses,

problems, constraints and uncertainties

The External Analysis takes a look at the opportunities and threats existing your
organizations environment. Both opportunities and threats are independent from
the organization. You can differenciate between strengths/weakness and
opportunities/threats is to ask this essential question: Would this be an issue if the
organization didnt exist? If yes, it is an issue that is external to the organization.
Opportunities are favorable conditions in an organizations environment that can
produce rewards if leveraged properly. Opportunities must be acted on if the
organization wants to benefit from them. Threats are barriers presented to
organization which prevent them from reaching their desired objectives.
The following area analyses are used to look at all external factors effecting a
company:

Customer analysis: Segments, motivations, unmet needs

Competitive analysis: Identify completely, put in strategic groups, evaluate

performance, image, their objectives, strategies, culture, cost structure,
strengths, weakness

Market analysis: Overall size, projected growth, profitability, entry barriers,

cost structure, distribution system, trends, key success factors

Environmental analysis: Technological, governmental, economic, cultural,

demographic, scenarios, information-need areas Goal: To identify external
opportunities, threats, trends, and strategic uncertainties

The SWOT Matrix helps visualize the analysis. Also, when executing this analysis it
is important to understand how these element work together. When an organization
matched internal strengths to external opportunities, it creates core competencies
in meeting the needs of its customers. In addition, an organization should act to
convert internal weaknesses into strengths and external threats into opportunities.

Focus on your strengths. Shore up your weaknesses. Capitalize on your

opportunities. Recognize your threats.
Identify

Against whom do we compete?

Who are our most intense competitors? Less intense?

Makers of substitute products?

Can these competitors be grouped into strategic groups on the basis of

assets, competencies, or strategies?

Who are potential competitive entrants? What are their barriers to entry?

Evaluate

What are their objectives and strategies?

What is their cost structure? Do they have a cost advantage or disadvantage?

What is their image and positioning strategy?

Which are the most successful/unsuccessful competitors over time? Why?

What are the strengths and weaknesses of each competitor?

Evaluate competitors with respect to their assets and competencies.

Size and Growth What are important and potentially important markets? What are
their size and growth characteristics? What markets are declining? What are the
driving forces behind sales trends?

Profitability For each major market consider the following: Is this a business are in
which the average firm will make money? How intense is the competition among
existing firms? Evaluate the threats from potential entrants and substitute products.
What is the bargaining power of suppliers and customers? How attractive/profitable
are the market now and in the future?
Cost Structure What are the major cost and value-added components for various
types of competitors?
Distribution Systems What are the alternative channels of distribution? How are
they changing?
Market Trends What are the trends in the market?
Key Success Factors What are the key success factors, assets and competencies
needed to compete successfully? How will these change in the future?
Environmental Analysis An environmental analysis is the four dimension of the
External Analysis. The interest is in environmental trends and events that have the
potential to affect strategy. This analysis should identify such trends and events and
the estimate their likelihood and impact. When conducting this type of analysis, it is
easy to get bogged down in an extensive, broad survey of trends. It is necessary to
restrict the analysis to those areas relevant enough to have significant impact on
strategy.
This analysis is divided into five areas: economic, technological, political-legal,
sociocultural, and future.
Economic What economic trends might have an impact on business activity?
(Interest rates, inflation, unemployment levels, energy availability, disposable
income, etc)
Technological To what extent are existing technologies maturing? What
technological developments or trends are affecting or could affect our industry?
Government What changes in regulation are possible? What will their impact be on
our industry? What tax or other incentives are being developed that might affect
strategy development? Are there political or government stability risks?
Sociocultural What are the current or emerging trends in lifestyle, fashions, and
other components of culture? What are there implications? What demographic
trends will affect the market size of the industry? (growth rate, income, population
shifts) Do these trends represent an opportunity or a threat?
Future What are significant trends and future events? What are the key areas of
uncertainty as to trends or events that have the potential to impact strategy?
Internal Analysis Understanding a business in depth is the goal of internal
analysis. This analysis is based resources and capabilities of the firm.
Resources A good starting point to identify company resources is to look at
tangible, intangible and human resources.

Tangible resources are the easiest to identify and evaluate: financial resources and
physical assets are identifies and valued in the firms financial statements.
Intangible resources are largely invisible, but over time become more important to
the firm than tangible assets because they can be a main source for a competitive
advantage. Such intangible recourses include reputational assets (brands, image,
etc.) and technological assets (proprietary technology and know-how).
Human resources or human capital are the productive services human beings offer
the firm in terms of their skills, knowledge, reasoning, and decision-making abilities.
RESOURCE

MAIN CHARACTERISTICS

KEY INDICATORS

Tangible
Financial

Physical

The firms borrowing capacity

and its internal funds generation
determines its capacity to
weather fluctuations in demand
and profits overtimes.

Debt to equity ratio

Ration of net cash to

capital expenses

Credit rating

The physical resources related to

plan, equipment, assets,
technology, raw materials.

Resale value of assets

Age of capital equipment

Flexibility of PPE

Brand recognition

Price premium over

competing brands

Percent of repeat buying

Level and consistency of

company performance

Educational, technical
and professional
qualifications of
employees

Intangible
Technological

Stock of technology in the form

of proprietary technology
(copyright, patents, trade
secrets) and expertise in the
application of technology (knowhow).

Reputation

Reputation with customers

through the ownership of brands,
established relationships with
customers, reputation of the
firms products and
services.Reputation of the
company with suppliers,
employees, etc.

Human Resources Training and expertise of

employees determine the skills
available to the firm.Adaptability
of employees determines key
aspects of strategic flexibility of

the firm.Commitment and loyalty

of employees determines the
capacity of the firm to attain and
maintain competitive advantage.

Compensation relative to
industry

Record of labor disputes

Employee turnover

Capabilities
Resources are not productive on their own. The most productive tasks require that
resources collaborate closely together within teams. The term organizational
capabilities is used to refer to a firms capacity for undertaking a particular
productive activity. Our interest is not in capabilities per se, but in capabilities
relative to other firms. To identify the firms capabilities we will use the functional
classification approach. A functional classification identifies organizational
capabilities in relation to each of the principal functional areas.
Functional Area
Corporate

Capability

Financial
management

Expertise in strategic
control

Effectiveness in
motivating and
coordinating business
units

Management of
partnerships

Overall company
management/
resource
management

Information Management

Comprehensive and
effective information
system that can be
used for managerial
decision making

Research and Development

Capability in basic
research

Product Design

Design capability

Marketing

Brand management

and promotion

Sales and Fulfillment

Promotion and
exploiting reputation
for quality

Understand of and
responsiveness to
market trends

Effectiveness in
promoting and
executing sales

Efficiency and speed

of fulfillment

Quality and
effectiveness of
customer service