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Business Strategy: "This Is a Football", Part 2
In the previous article I discussed how Vince Lombardi's line "This is a football" was a return to the fundamentals. This series is a discussion of the very fundamentals of business strategy -- doing the necessary things to be able to develop a good strategy. The first article focused on developing a mission statement that becomes the guide for operations in an organization. This article looks at the firm taking an internal look for its own capabilities.
The Greek philosopher Socrates once said, "Know thyself." His reasoning behind this statement was a person who truly understands his or her own strengths and weaknesses will be able to function more successfully in life. The same is true in business. A firm that understands itself can develop strategies that capitalize on the firm's strengths while reducing the effect of the firm's weaknesses.
One method of accomplishing this internal understanding is the SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The first two are internal and the last two are external. Strengths and weaknesses are what is being discussed here. Hill and Jones state, "The central purpose of the SWOT analysis is to identify strategies that align, fit, or match a company's resources and capabilities to the demands of the environment in which the company operates."1
Pearce and Robinson define a strength as "a resource, skill, or other advantage relative to competitors and the needs of the markets a firm serves or expects to serve."2 A strength can be anything that provides a benefit to the firm. For example, a non-profit organization could have a leader that is excellent at fundraising. A manufacturer could have a supply chain that is far better than any other firm. A newspaper firm could have a printing machine that prints better quality than other firms in the region. All of these are strengths that can be used as an advantage.
No one likes to look at weaknesses and failures. However, ignoring weaknesses in business could lead to competitors taking advantage of them. Weakness, as defined by Pearce and Robinson, is a limitation or deficiency in resource, skills, and capabilities that seriously impedes a firm's effective performance."2 A local tire retailer cannot buy tires in the same volume as a national retailer and, therefore, may not get the volume discounts. One restaurant may not have as talented a chef as another. A dry cleaning firm may not have up-to-date equipment. All of these are weaknesses that need to be realized.
Robert Grant argues a resource of a firm may not be a strength or weakness or it could become both.3 Suppose an education institution had superior teachers, a great strength, so much so that many students enroll. At some point, the strength of superior teaching might turn into a weakness because there there is a finite number of faculty members and a finite amount of class space. On the other hand, some, arguing with Grant, might say that the superior teaching is a strength but the limitation in the number of teachers and classroom space is a weakness. Regardless of which argument one takes, the strength of teaching quality ultimately creates a weakness. This raises two points. First, while performing the SWOT analysis, a firm must be forward thinking and try to anticipate future weaknesses. Second, a SWOT analysis should be done periodically. The business environment changes continually and what one firm may have thought was a strength may have turned into a weakness.
In the last article I stated the firm must have a mission statement to govern is actions. In this article, I describe the second step to creating a business strategy is to find the strengths and weaknesses of the organization. What may happen as a result of performing this second step is the organization backs up and fine tunes its mission statement. One more step is taken toward creating a strategy. As Vince Lombardi implied with "This is a football", a firm cannot forget the basics.
Other Strategy Articles
- Business Strategy: "This Is a Football", Part 1
This article is the first in a series on developing a strategy. Developing a good mission statement forms the basis for everything the firm does.
- Business Strategy: "This Is a Football", Part 3
This article is third in a series about actions needing to be performed before creating a business strategy. Specifically, the firm needs to examine opportunities and threats in the market.
- Business Strategy: "This Is a Football", Part 4
This article is the conclusion of a four part series on laying the foundations before developing a business strategy. This development includes a mission statement and a honest SWOT analysis.
- Business Strategy: You Can't Play Baseball Blindfo...
Strategy is a life or death issue for organizations. Without strategy an organization has no sense of what actions to take.
1Hill, Charles & Jones, Gareth (1998). Strategic Management: An Integrated Approach. Houghton Mifflin: Boston.
2Pearce, John, & Robinson, Richard. (1991) Formulation, Implementation, and Control of Competitive Strategy (4th ed). Irwin: Boston.
3Grant, Robert (2008). Contemporary Strategy Analysis (6th ed). Blackwell Publishing: Malden, MA.