SWOT and BCG – Let the Anaysis Begin
January 25, 2009
In “Principles of Marketing,” when there is a need to conduct an in-depth analysis to determine the vitality and viability of an organization’s grand strategic vision, a SWOT Analysis is the most popular de facto Strategic Analysis tool according to Phillip Kotler. In a steady hand, it is a tool for dissecting the controllable (Strengths & Weaknesses) and uncontrollable (Opportunities & Threats) forces at play both internally and externally at a high level. The result will be more potently effective if used in conjunction with the Boston Consultant Group (BCG) Matrix, a lesser-known counterpart that will enable better comprehension strategically in both the micro- and macro-level.
It would be easy to combine the data from SWOT Analysis and BCG Matrix tools since both share many similarities and are normally presented as a grid template comprised of four sections with relevant headings. (Example: For SWOT Analysis — Strengths, Weaknesses, and Opportunities & Threats, and for BCG Matrix — Stars, Question Marks, and Cash Cows & Dogs.) It is important to list clearly the questions, discussion points, and examples within the relevant section of the template grid. By analyzing the list of questions, we would be able to determine the strategic path for an organization; however, the result will differ depending on an individual or a group of people.
An example of differing opinion is illustrated in the confusing scenario in which Kawasaki’s (The Art of the Start, p. 20) suggestion to kill the Cash Cows, which are considered sacred in many companies — big or small strategically. BCG Matrix indicates that Cash Cows are a product or business unit holding the largest market share and requiring minimum investment to maintain profit margin (www.bcg.com). In essence, it is actually an opportunity component in a SWOT Analysis. No individual in the right frame of mind would do it. It is a consensus that managing a product/business unit requires talent as market forces will be the key ingredient in evaluating the strategic direction. In addition, there is a constant need for continuous improvement, identification of new markets, and enhanced development. Product/Business Unit cycle is never certain due to volatility in market dynamism. Of necessity, start-up must reinvent itself in order to be at the forefront of the other competitors. This scenario might play a part in shifting the Cash Cows dynamic to the status of a Star portfolio (Kotler and Armstrong, 2003). Rather than killing the Cash Cows (p.20), why doesn’t the author propose to develop a new product/business unit to augment the Cash Cows portfolio? This new process will definably face hardship at the very beginning but, again, Kawasaki is the author of “The Art of the Start.” Go figure!
For an organization to grow organically and strategically, it must identify itself to be either a leader (Star & Strength) or a follower (Question Mark & Weakness). Let’s take Honda Motor Corporation as the prime example. Saichiro Honda started in a small bicycle repair shop before his start-up company grew into a motorcycle company. Throughout the growth period, the company did not limit itself only to automobiles and robotics. Their most recent investment in jet engine manufacturing is taking baby steps to fruition. Honda is a mobility company that deals in the transportation of precious human cargo. The Power of Dreams is their tag line, which clearly portrays the company’s commitment to new technological advancements (www.Honda.com). Honda never envisioned itself as an automobile company, which is it main Strength (Star), but as a people mover. The company’s main source of profitability (Opportunities and Cash Cows) is their use of technology, innovation, and creativity in pinpointing new markets for its range of products.
Ultimately, the result for all Strategic Analysis tools, such as SWOT Analysis and BCG Matrix, is purely subjective because of the dynamic market forces that work in very mysterious ways. Relative to the business continuity standpoint, it is certainly an advantage to utilize tools such as a SWOT Analysis and BCG Matrix to provide an organization the guidance necessary to navigate to greener pastures and, along the way, avoid the pitfalls misdirection.
Kotler, Phillip and Armstrong, Gary (2003). “Principles of Marketing”. Prentice Hall: USA
Kawasaki, Guy (2004) “The Art of the Start”. Portfolio: USA