Strategic Planning Tools: SWOT, Porter’s Five Forces, and Growth Share Matrix

Today, companies require proper planning in order to achieve success. They rely on various tools to better understand what’s happening in the business world and their markets. Many experts use SWOT analysis, Porter’s Five Forces, and the growth-share matrix in their studies. They allow businesses to improve their strengths, handle competition, and invest their time and efforts in strategic areas.

SWOT Analysis

The acronym SWOT represents Strengths, Weaknesses, Opportunities, and Threats. Therefore, firms can clearly see both their strengths, the areas they need to develop, and what is happening in the world around them.

Strength: Strengths are what the company succeeds in. For instance, when a company has excellent products or a famous brand.

Weakness: Areas where the company performs poorly are called weaknesses. It could be that the company offers low-quality customer service or dated technology.

Opportunities: These are potential prospects for the company to expand. New markets or new needs from customers are important.

Threats: Problems that come from the outside, such as threats, can harm you. These circumstances include other competitors appearing or laws being updated.

By using SWOT, a company discovers its strengths and weaknesses and decides its next course of action.

Porter’s Five Forces

This tool was devised by Michael Porter and supports businesses in seeing how others in their industry operate. It considers five major pressures that shape the difficulties or successes in profits for a business.

The five forces include

Competition: How many corporations are trying to get the attention of customers?

Threat from new entrants: Is it not difficult for businesses to begin in the industry and easily secure customers?

Power of suppliers: Does the supply industry influence the amount of control businesses have over pricing and products?

Power of customers: Customers have the power to ask for lower prices or request better-quality goods or services.

Threat of substitutes: Customers have other alternatives if they desire them.

Once these forces are understood, a company can prepare itself and increase its competitiveness.

3. Growth Share Matrix (BCG Matrix)

The Growth Share Matrix allows companies to decide what kinds of investments to make. The company’s business units are classified into four groups by considering the speed of market growth and each product’s market share.

 

These four groups are known as

Stars: These products are well-known and are sold in markets that are quickly expanding. They must invest a large amount now but can bring in a lot of money in the future.

 

Cash Cows: These are market leaders in their industry, though their markets are not growing fast. With a smaller investment, they earn continuous income.

 

Question Marks: These niche businesses operate in sectors with high growth rates. People might achieve their dreams of stardom or end up failing. Businesses are unsure of whether to invest more into developing their business.

 

Dogs: The sales of these products are small, and the markets for them are running slowly. Since they struggle financially, they can either be sold or closed.

 

This matrix allows a company to identify the products that will help it develop and earn money.

How These Tools Work Together

Using the three tools on their own is advantageous, but combining them brings the best outcomes for a company.

Thanks to SWOT analysis, the company analyzes both its advantages and disadvantages within the business as well as outside factors.

With Porter’s Five Forces, we can figure out how intense the competition is in the industry.

Using the Growth Share Matrix, you can recommend what to keep and what to cut in your business operations.

By using these tools, a company can create sensible strategies and enjoy growth.

Example: Apple Inc.

 

Let’s try to imagine the use of these tools in the case of Apple.

 

Apple is seen as strong due to its popular brand and devoted customers. The products from Apple could be more costly than those of some rivals. One example could be that people are buying more Apple Watches. Having competitors in the phone market could present a danger to the company.

Samsung is one of the companies that Apple competes with. Many potential competitors have a hard time competing because so many people are devoted to Apple. Some of Apple’s suppliers do have some influence, yet Apple also buys in big numbers. Apple’s designs have become so special that customers are willing to accept Apple’s terms. Some people use Android phones as an alternative.

Since the iPhone sells greatly in a rapidly growing market, it is designated as a star. Since the MacBook sells stably, it may develop into a cash cow. Apple TV is still being introduced, so it might not dominate yet. The old iPod has become a dog as sales have decreased.

Why Are These Tools Important?

The use of these tools benefits companies with:

 

●      Know for sure what they're good at and what they need to work on.

●      Learn more about the industry and other companies in it.

●      Choose the best places to spend your money and time.

●      Be cautious and get ready for whatever may happen.

●      Continue to improve the way they do business with customers.

 

If planning is poor, companies can easily squander their assets and fail to achieve success.

Conclusion

Using SWOT analysis, Porter’s Five Forces, and the growth-share matrix makes decision-making easier for businesses. They clearly show the company’s situation, including its relationships with others outside, and help throughout product or service management.

Any size company can benefit from using these tools, as they can greatly influence your plans for success. They support people in carrying out ideas and converting difficulties into new approaches.