Introduction to

Engineering
Management
ENGG 406 – CHAPTER 1

Engr. Darlene Gayle Dela Fuente, MSEM

Industrial Engineering Department

College of Engineering, Architecture and Fine Arts

Batangas State University - Alangilan

Learning Describe the origins of engineering
Describe
Objectives: management.

Explain the concept and principles of

Explain
engineering management.

Illustrate the role of engineers in engineering

Illustrate
management activities.
The Functions of Engineer
1. The production of more food for a fast-growing
world population;
2. The elimination of air and water pollution;
3. Solid waste disposal and materials recycling;
4. The reduction of noise in various forms;
5. Supplying the increasing demand for energy;
6. Supplying the increasing demand for mobility;
7. Preventing and solving crimes; and
8. Meeting the increasing demand for
communication facilities
Typical Engineering Activities
1. Research – process of learning about 6. Sales – engineer assists the company’s
nature and codifying this knowledge
customers to meet their needs.
into usable theories.
7. Consulting – engineer works as
2. Design and Development of consultant of any individual
products/processes 8. Government – performing any of the
3. Testing – engineers works in a unit various tasks in regulating, monitoring
where new products or parts are tested and controlling the activities of various
for workability. institutions.

4. Manufacturing – in charge of 9. Teaching – employment in a school and

production is assigned as a teacher of engineering
10. Management – assigned to manage
5. Construction – either directly in charge
groups of people performing specific
of the construction personnel or may
tasks.
have responsibility for the quality of the
construction process.
Historical Development
of Engineering
Management
Concept and the
Principles of Engineering
Management
Engineering.
“engineering is the means by which people
make possible the realization of human dreams
by extending their reach in the real world.”
Engineers.
“The key attribute for engineers is the direct
application of that knowledge and experience.”
Management.
“creative problem-solving process of planning,
organizing, leading and controlling an
organization’s resources to achieve its mission
and objectives.”
Concept and the Principles of
Engineering Management
Management Definitions

Manage -> “to handle”

General sense: taking control, taking charge, or directing.

Management was originally a noun used to

process for managing, training,
indicate the
or directing.
Management Levels
Management Levels
First-line managers directly supervise non-
managers.
 responsible for carrying out the plans and
objectives of higher management
 make short-range operating plans
 assign tasks to their workers
 supervise the work that is done
 evaluate the performance of individual workers

They must provide the linking pin between upper

management and the working level , representing
the needs and goals of each to the other.
Management Levels
Middle managers carry titles such as plant
manager, division head, chief engineer, or
operations manager.
 make plans of intermediate range to
achieve the long-range goals set by
top management.
 establish departmental policies
 evaluate the performance of
subordinate work units and their
managers
 integrate and coordinate the short-
range decisions and activities of first-
line supervisory groups to achieve the
long-range goals of the enterprise.
Management Levels
Top managers bear titles such as
chairman of the board, president, or
executive vice president.
 responsible for defining the
character, mission, and objectives
of the enterprise
 must establish criteria for and
review long-range plans
 evaluate leading management
personnel to gauge their
readiness for promotion to key
executive positions
Managerial Skills
Technical Skills – lowest level managers have the
greatest need for technical skills.

Interpersonal skills – important at every

management level, since every manager
achieves results through the efforts of other
people.

Conceptual skills – represent the ability to “see

the forest in spite of the trees” discern the critical
factors that will determine an organization’s
success or failure.
What is
Engineering
Management?
Engineering Management

 Direct supervision of engineers or of

engineering functions

 Or, application of quantifiable methods

and techniques to practice of
management

these narrow definitions fail to include many of the

management activities engineers actually perform in
modern enterprises
What is Engineering Management?

“Engineering management is the art and

science of planning, organizing, allocating
resources, and directing and controlling
activities that have technological component.”
- American society for Engineering
Management
What is Engineering Management?

“Engineering management is designing operating, and

continuously improving purposeful systems of people,
machines, money, time, information , and energy by
integrating engineering and management knowledge,
techniques, and skills to achieve desired goals in
technological enterprise through concern for
environment, quality, and ethics.”

- Omurtag (1998)
What is Engineering Management?

“Engineering management is the discipline

addressed to making and implementing decisions
for strategic and operational leadership in current
and emerging technologies and their impacts on
interrelated systems.”

- IEEE (1990) and Kocaoglu(1991)

Needs for Engineers in Management
• Really understand the business. • Spend more time on strategic
• Understand both the technology thinking about the future as they
that is driving the business today rise higher in the corporation
and the technology that will • Are dedicated to solving a
change the business in the future. customer’s problem or satisfying a
• Treat research and development as need,
an investment to be nurtured, • Place a premium on innovation.
rather than an expense to be
minimized.
Why study Engineering
Management?

“The engineering manager is distinguished from

other managers because he [or she] possesses
both an ability to apply engineering principles
and a skill in organizing and directing people
and projects.”
- Prentice Hall, 2006
 Engineering Management Functions

(forecasting, setting
objectives, action planning,
administering policies,
Planning establishing procedure)
(setting performance
standards, evaluating/
documenting/
correcting performance)

Controlling Organizing

(selecting organizational
structure, delegating,
establishing working
relationship) Figure 1-2. The engineering management education program.
(deciding, (From Daniel L. Babcock, “B.S. and M.S. Programs in Engineering
communicating, Management,” Engineering Education, November 1973, P. 102).
motivating, selecting/ Leading
developing people)
Nature of Managerial Work
 How would faulty designs produced or
approved by engineers today affect their Why is it so important for an engineer
career? Provide examples from news today to have knowledge of multiple
reports or case studies you have come disciplines in addition to his field of
across. Was the situation any different for expertise?
engineers in ancient times?

Discussion What are the different roles that an

engineer needs to play in a firm in What are some different types of
Questions addition to the traditional roles of design, managers and how do they differ?
development, and testing?
Decision Making
ENGG 406 – CHAPTER 2

Engr. Darlene Gayle Dela Fuente, MSEM

Industrial Engineering Department

College of Engineering, Architecture and Fine Arts

Batangas State University - Alangilan

 Understand
Learning • Understand different types of decisions.
Objectives:
Explain
• Explain the process of decision making.

Demonstrate
• Demonstrate problem-solving abilities and
rational effective decision making to address
organization challenges.
Nature of Decision Making

Decision making
“the process of identifying and choosing alternative
courses of action in a manner appropriate to the
demands of the situation.”

“is the heart of all the management functions.” – Nickels

“the process of deciding about something important,

especially in a group of people or in an organization.” –
Oxford Advanced Learner’s Dictionary
How do you
decide?
Types of Problems and Decisions

1. Well-Structured Problems and

Programmed Decisions. The goal of
the decision maker is clear, the
problem is familiar, and information
about the problem is easily defined
and complete.
Programmed decisions also known as
routine decisions involve standard
decision procedures and entail a
minimum of uncertainty.
Types of Programmed Decisions

a) Organizational decisions
b) Operational decisions
c) Research decisions
d) Opportunity decisions
Types of Problems and Decisions

1. Poorly Structured Problems and

Nonprogrammed Decisions. Problems
that are new or unusual and for which
information is ambiguous or
incomplete.

Nonprogrammed decisions also called as

nonroutine decisions are unique and
nonrecurring, often involving incomplete
knowledge, high uncertainty, and the use of
subjective judgment or even intuition, where
no alternative can be proved to be the best
possible solution to the problem.
Decision Making Process
Decision Making Process

Identify the
Problem
Evaluate and
adapt Analyze the
decision environment
results

Decision
Articulate
Implement
Decision Making problem or
opportunity
Process

Develop
Make a
viable
Choice
alternatives

Evaluate
Alternatives
Decision Making Conditions
1. Certainty – a manager can make accurate decisions
because the outcome of every alternative is known.
Linear Programming is a common technique for this
kind of decision making.

2. Risk – the decision maker can estimate the likelihood

of certain alternatives or outcomes.

3. Uncertainty – the decision maker can choose among

several possible approaches for making the decision.
The choice of alternative is influenced by the limited
amount of information available to the decision maker.
Tools and Techniques for
Making Better Decisions

1. Decision Tree Diagram can be used by a

manager to graphically represent which
actions could be taken and how these
actions relate to future events.
Tools and Techniques for Making
Better Decisions
1. Delphi Technique is a method used to estimate the
likelihood and outcome of future events.
2. Nominal Group Technique (NGT) it was developed to help
with group decision making by ensuring that all members
participate fully.
3. Payback Analysis is a technique generally used in financial
management.
4. Marginal Analysis weighs the benefits of an input or activity
against the costs.
5. SWOT Diagram, when organization is planning to make a
significant change in their business. A SWOT Analysis can
help manager identify the forces that influence a strategy,
action, or initiative.
SWOT Diagram

A SWOT analysis examines both internal and external

factors – that is, what's going on inside and outside your
organization.
When do you use SWOT?
1. Explore possibilities for new efforts
or solutions to problems.
2. Make decisions about the best path
for your initiative.
3. Determine where change is
possible.
4. Adjust and refine plans mid-course.
Tools and Techniques for Making
Better Decisions
1. Decision Matrix is similar to a pros/cons list, but it allows
decision maker to place a level of importance on each
factor.

Steps to create decision matrix:

1. List decision alternatives as rows
2. List relevant factors as columns
3. Establish a consistent scale to assess the value of each
combination of alternatives and factors
4. Determine how important each factor is towards making
your final decision and assign weights accordingly
5. Multiply your original ratings by the weighted rankings
6. Add up the factors under each decision alternative
7. The option that scores the highest wins
Pareto Diagram
Pareto Diagram

• used for the selection of a limited number of tasks that produce

significant overall effect.
• uses the Pareto Principle (also known as the 80/20 rule) the idea
that by doing 20% of the work you can generate 80% of the
benefit of doing the whole job.
• This is also known as the vital few and the trivial many.
Discussion Question
List a few examples of routine
Give an example of a time decisions apart from the
when you had to keep from examples mentioned in this
speaking or making a decision chapter. How do you think
because you did not have engineers can learn to handle
enough information. nonroutine or unstructured
situations?

What steps do you follow to Give an example of a time

study a problem before when you had to be relatively
making a decision? quick in coming to a decision.

What was your most difficult

decision in the last 6 months?
What made it difficult?
Planning/
Coordinating
Technical Activities
ENGG 406 – CHAPTER 3

Engr. Darlene Gayle Dela Fuente, MSEM

Industrial Engineering Department

College of Engineering, Architecture and Fine Arts

Batangas State University - Alangilan

 Learning Objectives:

1 2 3 4

Define the meaning Determine the Assess the planning Write an effective
of planning planning roles of activities operational plan for
technical activities in
Engineering
business organization.
Managers
Foundation of
Planning
Types of Planning
 Management Pyramid

“What do we do?”
“For whom do we do it?”
“How do we excel?”
Deploy Strategic Goals Strategic
(a) How to deal with changes
in competitors’ policies? Planning Structure
(b) How to deal with changes
in the demand for products?
(c) How to increase
Measure
Tactical
company’s share in the
market?

What are the operational

Operational
Implement and
guidelines for performing
achieve deliverables
specific work?
via initiatives
How do we measure our
progress?
Vision and
Mission
Difference of Vision
and Mission

• A mission statement
focuses on today and what
an organization does to
achieve it.
• A vision statement focuses
on tomorrow and what an
organization wants to
ultimately become.
Planning Roles of
Engineering Managers

a) Time Management – need to plan and

prioritize their personal daily tasks
b) Projects and Programs – need to plan
projects and programs assigned to them
by upper management.
c) Corporate Know-How – maintaining and
enhancing its competitiveness in the
marketplace
d) Proactive Tasks – busy resolving
conflicts that may arise from
disagreements in task priorities
Planning Concepts
Tools for Planning
1. Market Research
2. SWOT Analysis
3. Financial What-if Analysis and Modeling
4. Scenario Planning
5. Performance Benchmarks
6. Technology forecasting
7. Product Life-Cycle Analysis
Market Research

• Demographics • Life stages

• Psychographics • Geography
• Lifestyle • Behaviour
• Belief and values • Benefit

• Criteria size • Accessible

• Difference • Focus on different
• Money benefits

• 4Ps (Product, Price, Place,

and Promotion)
Financial What-if Analysis and Modeling

• What-if analyses are readily performed to discover the sensitivity

of the company’s financial performance relative to the changes of
specific input variables.
1. Income statement
2. Balance Sheet
3. Funds flow statement

• Financial Models is used to assist in raising capital, making

acquisitions, budgeting and forecasting, and in valuation
practices
Scenario Planning

• Scenario planning defines the major forces that may move a

company in different directions, maps out a small number of
alternatives futures (scenarios),

• Scenario planning is identifying a specific set of uncertainties,

different “realities” of what might happen in the future of your
business.
Methods of developing scenario

1. Define the scope

2. Identify the major stakeholders
3. Identify basic trends
4. Identify uncertainties
5. Construct initial scenario themes
6. Check for consistency and
plausibility
7. Develop learning scenarios
8. Identify research needs
9. Develop qualitative models
10. Evolve toward decision scenarios
Performance benchmarks
Performance Benchmarks

• Customer related measures

• Process related measures
• Financial measures
• Employee related measures
• Competition related measures
Performance Benchmarks
1. Product defects
2. Just-in-time delivery (JIT)
• Customer related measures 3. Life-cycle product cost
4. Customer satisfaction score (CSAT)
• Process related measures 5. Order processing efficiency

• Financial measures
• Employee related measures
• Competition related measures
Performance Benchmarks

• Customer related measures 1. Labor hours per product

2. Quality standards
• Process related measures 3. Initiation of product design and
development to product delivery
• Financial measures 4. Core competence development

• Employee related measures

• Competition related measures
Performance Benchmarks

• Customer related measures

• Process related measures 1. Gross margin
2. Return on equity
• Financial measures 3. Market share percentage
4. Net income-to-sales ratio
• Employee related measures 5. Current ratio

• Competition related measures

Performance Benchmarks

• Customer related measures

• Process related measures
• Financial measures
1. Turnover ratio
• Employee related measures 2. Employee satisfaction score
3. Development expenses per employee
• Competition related measures
Performance Benchmarks

• Customer related measures

• Process related measures
• Financial measures
• Employee related measures
1. Market share
• Competition related measures 2. Cost of innovation
3. Acquisition cost per new customer
Have you heard about Industry 4.0?
Industry 4.0

Takes the emphasis on digital technology from recent decades to a

whole new level with the help of interconnectivity through the
Internet of Things (IoT), access to real-time data, and the
introduction of cyber-physical systems.
Technology forecasting
• companies whose products are composed of high-
technology components.
• constantly examine, monitor, and apply emerging
technologies to enhance business performance.

1. Internet of Things (IoT)

2. Blockchain technology
3. Social Media practices
4. Artificial Intelligence & Machine Learning
5. Adaptive Manufacturing Technology
Product Life-Cycle Analysis
Every product has a life cycle that moves
typically through the stages of initiation,
growth, market saturation, and decline
Planning of
Activities
Forecasting
To estimate and predict future conditions
and events (e.g., technology, products, marketplace -
customers, competition and economy, global supply
chains, manpower, capital and facilities)
Steps to Forecast
1. Identify - critical success factors for achieving company
goals
2. Determine forecasting horizon as short term (1 year),
intermediate term (2 to 5 years) or long term (5 to 10
years).
3. Select forecasting techniques (e.g., trend analysis, statistics,
intuition, judgment)
4. Forecast future states and their probability of occurrence
5. Prepare forecast, as well as the pertinent database
6. Adjust forecast regularly to incorporate pertinent changes
related to assumptions
7. Assure understanding and acceptance by all parties
affected by the forecast
Forecasting Approaches
Qualitative Methods
- consist mainly of subjective inputs

Quantitative Techniques
- involve either the extension of historical data or the
development of associative models
- avoid personal biases
Quantitative Method
predict future revenues,
expenses, and capital
costs for a business.
Uses historical data
helps to define
potential obstacles and
opportunities.
 Action planning
• The process of establishing
specific objectives, action steps,
and a schedule and a budget
related to a predetermined
program, task, or project.
Action Planning
Steps
Action Planning Steps
Analyze Analyze Critical needs,

Set Objectives (what results to be

Set
accomplished),

Define Define metrics to measure performance,

Specify actions steps (sequence and

Specify
priority of tasks to perform),

Create a schedule, determine dates of task

Create
initiation and completion,

Develop Develop a budget (resources to allocate)

 Policy Why do I need to do this? (Identifies
issues and scope)

Standard What is required? (assigns quantifiable

measures)

Procedure How do I do it? (establish proper

steps to take)
Policies

• directives, promulgated to address repetitive

questions and issues of general concern

Purposes of Policies
• Save management time and efforts, as they address
the common and repetitive questions of interest to
a large number of employees (policy manuals, web
posting)
• Capture the distilled experience and past learning
of the company
• Facilitate delegation (administered by the
secretaries, or human resources group)
Characteristics of effective Policies
• applies uniformly to the organization
• Being relatively permanent, when in force
• fosters the objectives of the company
• frees managers and employees to focus on
important matters
• encourages effective teamwork by reducing
disagreements, conflicts, and differences in
interpretation
• issued by top management or authorized
managers with perspective, balance, and
objectivity.
 Policy Why do I need to do this? (Identifies
issues and scope)

Standard What is required? (assigns quantifiable

measures)

Procedure How do I do it? (establish proper

steps to take)
Establishing Procedures
• Procedures are standardized (tried-and-
true) method of performing work

Importance of Procedures
1. Preserve the “best” way to perform repetitive
work (efficiency-focused)
2. Provide the basis for method improvements
3. Insure standardized action (quality control,
resource conserving, work reproducibility)
4. Simplify training
5. Save corporate memory (know-how, knowledge,
heuristics, proven practices)
Developing Procedures

• (1) Concentrate on critical repetitive work of time-consuming and high

demand nature
• (2) Chart the work (inputs, workflow, outputs, skills, resources)
• (3) Study work characteristics (Why is it necessary? What results to
get? When is best time, where is best place, and who is best person to
develop it?)
• (4) Propose procedures (keeping to a minimum to avoid being
restrictive, and enable its consistent administration)
• (5) Define regular improvements to procedures
• (6) Formulate procedures and communicate widely to assure
understanding and acceptance by all involved
Strategies for Managing Technology

1. Assumptions
2. People
3. Benefit versus Cost
4. Small but Sure steps
5. Change in Future
6. Commitment
Organizing
ENGG 406 – CHAPTER 4
Engr. Darlene Gayle D. Dela Fuente, MSEM

Industrial Engineering Department

College of Engineering, Architecture and Fine Arts

 Select appropriate
type of organizational
Explain different
structure for
organizational
managing business
Learning structures
successfully in a global
context.

Objectives Describe the

Describe the use and
differences in line and
value of teams
staff relationships
CHAPTER 4

Management Functions
Leading

Planning Decision Making

Organizing

Controlling
Nature of Organizing

Legal forms of
Organization

Sole Limited Liability

Partnership Corporations Cooperatives
Proprietorship Company (LLC)
Sole Proprietorship

Advantages Disadvantages

A business owned and operated by Owner received all profits Owner receives all losses
one person.
 Few legal restrictions Low organizational cost Unlimited liability
 Owner forced to make all Income taxed as personal Limited fundraising ability can
decisions income of proprietor inhibit growth
 Profits taxed once Independence Limited skills and management
expertise
Ease of dissolution Few long-range opportunities
and benefits for employees
Partnership
Advantages Disadvantages

More expertise and managerial Potential of conflicts between

• an “association of two or more skill available partners
partners to carry on as co- Relatively Low organizational Unlimited liability
owners of business for profit” cost
(Uniform partnership Act)
Income taxed as personal Difficult to achieve large-scale
Two or more partners income of partners operations
Easy to organize Fundraising ability is enhanced Difficult to liquidate between
Partners do individual tax by more owners partners
Unlimited liability for
partners debts
 • Limited Liability Company (LLC):
Owners, called members, have
limited personal liability for the
debts and actions of the LLC
Owners have limited personal
liability
Only taxed once

Limited Liability Company (LLC)

Corporations Advantages Disadvantages

Limited liability protects owners Double taxation because both

form losing more than they corporate profits and dividends
legal entities owned by invest paid to owners are taxed,
shareholders, who in general although the dividends are
have no liability beyond the taxed at a reduced rate

loss of the value of their stock. Can achieve large size due to
marketability of stock
More expensive and complex to
form
Owned by shareholders Receives certain tax advantages Subject to more government
No liability beyond stock regulation
Taxed twice Greater access to financial Financial reporting requirements
resources allows growth make operations public
Subject to many state and
federal controls Ownership is readily
transferable
Cooperatives

• Cooperatives are special type of organization owned

by users or customers, to whom earnings are
usually distributed tax-free in proportion to
patronage.
Owned by users and customers
Usually tax free
 Types of
Business
Ownership
Summary
 process of assembling the people, organizing resources, and
Organizing defined distributing the planned work necessary to carry out the
managers’ plan.

According to Weihrich and Koontz, organizing is:

1. The identification and classification of
required activities
2. The grouping of activities necessary to
attain objectives
3. The assignment of each grouping to a
manager with the authority (delegation)
necessary to supervise it
4. The provision for coordination
horizontally and vertically in the
organization structure.
Narrow Spans of Wide Spans of
Control Control
There is closer relationship Employees work with
between manager and little supervision;
subordinates;
Spans of
Here is less delegation of There is a high level of Control
authority; delegation of authority
The number of people
Controlling activities are Controlling lighter; and reporting directly to each
tighter; and manager.
There is more time for There is less time for
rewarding behavior. rewarding behavior.
Effective Span of Control
• Studies of effective spans have identified
the following conditions as affecting the
number of people a manager can effectively
supervise:
Subordinate training
Nature of jobs
Rate of change of activities and
personnel
Clarity of delegation
Staff assistance
Types of Authority

LINE AUTHORITY – A MANAGER’S STAFF AUTHORITY – A STAFF FUNCTIONAL AUTHORITY – A

RIGHT TO TELL SUBORDINATES WHAT SPECIALIST’S RIGHT TO GIVE ADVICE TO SPECIALIST’S RIGHT TO OVERSEE
TO DO AND THEN SEE THAT THEY DO A SUPERIOR. LOWER-LEVEL PERSONNEL INVOLVED
IT. IN THAT SPECIALTY, REGARDLESS OF
WHERE THE PERSONNEL ARE IN THE
ORGANIZATION.
Line and Staff
Functions and
Relationships
 • Line. relationships are
superior–subordinate
relationships and can be traced
in a “chain of command” from
the organization president
through a succession of levels of
managers to the lowest worker.

• Staff: Advisory in nature, degree

of influence may vary:
• Provide advice on request

Line and Staff Functions • Recommendations when

appropriate

and Relationships • Must be consulted by line

but have no direct authority
• Concurring authority – veto
authority over line
 • Functional: Specialized authority as binding
as line authority, Usually procedural
• Budget formats
• Computer systems
• Cafeteria

Line and Staff Functions and

Relationships
• Service: are “facilitative activities” that are
centralized support functions
• Custodial
• Security
• Medical
 Organizations are divided into
smaller units ( a process called or

Traditional departmentalization) by using a

number of approaches .

Organizational
Structure The resulting pattern is referred to
as the organizational structure.
 Types of
Organizational
Structure

Product or
Functional Matrix
market
 Advantages Disadvantages
Permits hierarchy of Encourages excessive
skills centralization

Functional Facilitates Delays decision

Organization specialization making
Simplifies coordination Compounds
communication line
> group people loss
performing similar activities Permits use of current Restricts development
into departments
technologies and of managerial skills
equipment
Limits personal
growth
 When to use
Functional
Organization
 Organizations with high relative
stability of workflow and limited
product diversity - certain
manufacturing operations, process
industries
Startup companies
Organizations with narrow product
ranges, simple marketing pattern
and few production sites
group people into
project teams on temporary
Product or Market
assignments Organization
Advantages Disadvantages
flexible and responsive to change. high possibility of duplication of resources
across divisions.
provides a high concern for customer’s less technical depth and specialization in
needs. divisions.
provides excellent coordination across poor coordination across divisions.
functional departments.
easy pinpointing of responsibility for product less top management control.
problems
emphasis on overall product and division competition for corporate resources.
goals.
opportunity for the development of general
management skills is provided.
 Product or Market
Organization
Advantages Disadvantages
flexible and responsive to change. high possibility of duplication of resources
across divisions.
provides a high concern for customer’s less technical depth and specialization in
needs. divisions.
provides excellent coordination across poor coordination across divisions.
functional departments.
easy pinpointing of responsibility for product less top management control.
problems
emphasis on overall product and division competition for corporate resources.
goals.
opportunity for the development of general
management skills is provided.
 create a dual hierarchy in which functions and

Matrix
projects have equal prominence

Organization Advantages Disadvantages

more efficient use of resources than the frustration and confusion from dual
divisional structure. chain of command.

flexibility and adaptability to changing high conflict between divisional and

environment. functional interests.

development of both general and many meetings and more discussion

functional management skills are present. than action.

interdisciplinary cooperation and any need for human relations training for
expertise is available to all divisions. key employees and managers.

enlarged tasks for employees which tendency for power dominance by one
motivate them better. side of the matrix.
Workplace Culture Differences
1. Person Culture and Market Culture
2. Adaptive Culture and Adhocracy Culture
3. Power Culture, Role Culture, and Hierarchy Culture
4. Task Culture and Clan Culture
How and Why Does
Organization Culture Change?
Six Guidelines for Culture Change:
1. Formulate a clear strategic vision.
2. Display top-management commitment.
3. Model culture change at the highest level.
4. Modify the organization to support
organizational change.
5. Select and socialize newcomers and
terminate deviants.
6. Develop ethical and legal sensitivity.
Discussion
Questions
 Discussion Questions

You have begun a small but growing business.

What advantages and disadvantages should you
consider before changing it from a sole
proprietorship to a corporation?

Discuss the strategy you propose to use in your

personal career to assure you will remain in
demand in a changing, competitive world.
Staffing: Human Aspects
of Organizing ENGG 406 – CHAPTER 5

Engr. Darlene Gayle D. Dela Fuente, CLSSGB, MSEM

Department of Industrial Engineering
College of Engineering, Architecture and Fine Arts
Learning Objectives:

Describe the steps in staffing Examine how the applicants are

technical organizations. selected and hired in an organization.
 1 • Human resource planning

2 • Recruitment

3 • Selection

4 • Induction and Orientation

Staffing
Procedures 5 • Training and development

6 • Performance appraisal
• Employment decisions (monetary rewards,
7 transfers, promotions and demotions)

8 • Separations
Human Resource
Planning
Aka “Manpower Planning,” process of
forecasting the future human resource
requirements of the organization

determining as to how the existing human

resource capacity of the organization can
be utilized to fulfill these requirements.
 Analyzing the current manpower inventory.

Creating future manpower forecasts.

Human resource • Expert forecast – This includes informal decisions,
formal expert surveys and Delphi technique.
planning may • Trend Analysis – Manpower needs can be
projected
involve the • Work-study method – This method uses time and
following motion study to analyze and measure work.
Developing Employment Programmes.
procedures:
Design training programmes.

Evaluation and Control.

Recruitment
• “The term recruitment applies to
the process of attracting
potential employees of the
company.” – Mc Fariand
• “Recruitment is the process of
searching prospective employees
and stimulating them to apply for
the jobs in the organization.” –
Flippo
Sources of
Recruitment

1. Internal source or from

within the organization.
2. External sources of
recruitment from
outside. (e.g.,
newspaper, agencies,
referrals, recruitment
from colleges/
universities, direct,
competitors).
 1. Receiving and screening the
application.
2. Sending the Blank application
form.
3. Preliminary Interview.
Selection 4. Administering Tests (psychological
tests, & physical examination)
5. Checking References on
Investigation of Previous History.
6. Interviewing.
7. Final Selection.
Induction and Orientation
• introducing the hired applicant to
the policies and values of the
organization as a whole
• the specific requirements of the
person’s new department and job.
• most organizations of any size will
provide every employee with a
current edition of an employee’s
handbook describing benefit
programs.
• the new employee will be assigned
directly to a department and
supervisor.
Training and
Development
Performance
Appraisal

• systematic evaluation of the

performance of employees and
understanding the abilities of a person
for further growth and development.
Performance Appraisal
• It is the judgment of an employee’s performance in a job. It is also
called a merit rating.

Objectives of performance appraisal:

• To help a manager to decide the increase in pay on grounds of merits.
• To determine the future use of an employee
• To indicate training needs.
• To motivate the employees to do better in their present job.
• To contribute to the growth and development of an employee.
• To identify employees for deputation to other organizations
• To help in creating a desirable culture and tradition in the organization.
• To nominate employees for training programs.
Performance Appraisal
 Employment Decisions

MONETARY PROMOTION TRANSFER DEMOTION

REWARD
Employee
Separation

• It means separating the

employees from their job.
• Separation is either a
voluntary or involuntary
termination of an
employee.
 Conclusion
• Staffing is the management
function devoted to acquiring,
training, appraising, and
compensating employees.
• People are the organization's most
important resource.
• Staffing is crucial to the success of
all organizations.
BUILD YOUR RESUME
 • Why should we hire you?
• What can you contribute to the
company?
• How do you deal with pressure or
stressful situations?
• How do you manage deadline
pressure?
• In your most recent role, was there
Let’s try to a time when you had to overcome
a significant challenge?
answer these
hiring questions
Don’t be afraid to ASK
questions!
• How many people work in this
office/department?
• Why is this position available?
• Do you provide professional
development opportunities?
• What is the typical work week?
• What are the biggest challenges
of this job?
 Questions NOT to ask in an Interview

WHAT DOES THIS IF I GET THE JOB, WHEN CAN I CHANGE MY DID I GET THE JOB?
COMPANY DO? (DO CAN I TAKE TIME OFF FOR SCHEDULE IF I GET THE (DON'T BE IMPATIENT.
YOUR RESEARCH AHEAD VACATION? (WAIT UNTIL JOB? (IF YOU NEED TO THEY'LL LET YOU KNOW.)
OF TIME!) YOU GET THE OFFER TO FIGURE OUT THE
MENTION PRIOR LOGISTICS OF GETTING
COMMITMENTS.) TO WORK, DON'T
MENTION IT NOW.)
Discussion Questions
Discussion Questions

WHY STAFFING AN WHAT ARE THE

IMPORTANT ACTIVITY? ACTIVITIES
UNDERTAKEN IN
STAFFING?
Communication
in Organization
ENGG 406 – CHAPTER 6

Engr. Darlene Gayle D. Dela Fuente, CLSSGB, MSEM

Department of Industrial Engineering
College of Engineering, Architecture and Fine Arts
 Evaluate the basic communication skills

Identify the barriers to communication

Learning
Objectives Recognize the importance of
management information system

Demonstrate general communication

skills to manage complex engineering
problems in a team project environment.
Regulating skills
• Opening the
conversation, setting
goals
• Goal evaluation
• Closing the
conversation
 Listening Skills
Non-selective Selective listening
listening skills;
attentive behavior
Nonverbal Asking questions
behavior (e.g., facial
expression, eye contact,
body posture, encouraging
gestures,)

Minimal Paraphrasing
encouragers
Reflection of
emotions
Concreteness
Summarizing
 Sender skills – Sender skills –
initiative reactive
Giving information Refusing

Making requests and Reacting to criticism

Sender skills giving instructions

Giving criticism
Situation clarification
Communication
Process
 Develop
Transmit an idea Message

Provide
Encode
feedback
A Model of
Use
Communication Message Communication
Process Process
Accept Transmit

Decode Receive

Receiver
 • Personal Barriers – communication arising
from the communicator’s characteristics.
• Physical Barriers – interferences to effective
The Barriers to communication occurring in the
environment
Communication • Sematic Barriers – interference with the
reception of a message that occurs when the
message is misunderstood even though it is
received exactly as transmitted.
Types of Communication
Types of
Communication
1. Verbal Communication
2. Written Communication
3. Non-verbal Communication
• Body Language
• Eye contact
• Facial expressions
• Posture
• Touch
Management Information
System
Management
Information
System (MIS)
• A computerized system dedicated to
 storing data.
 obtaining data.
 formatting data.
 manipulating data.
 presenting data.
• The data is extracted from the MIS
databases and communicated as
information to managers when and
as needed.
Manufacturing Marketing

Management
Finance Personnel
Information System

Research and
Engineering
Development
1. To provide a basis for the analysis of early warning signals
that can originate both externally and internally
2. To automate routine clerical operations like payroll and
inventory reports
3. To assist mangers in making routine decisions like
scheduling orders, assigning orders to machine, and
reordering supplies
4. To provide the information necessary for management to
make strategic or non- programmed decisions.
 A Useful Guide to
SWOT Analysis

A Useful Guide
to
SWOT Analysis

Published by Pansophix Online

Sterling House, 10 Wheatcroft Business Park,

Landmere Lane, Edwalton, Nottingham, NG12 4DG

Written by Alan Sarsby

This edition published November 2012 (a)

Copyright © 2012 Alan Sarsby

ISBN 978-1-906460-89-1

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Notice of Rights…
All rights reserved. No part of this Useful Guide may be reproduced in any
form, by photocopy, microfilm, or by any other means, or incorporated into
any information retrieval system, either electronic or mechanical, without
the express written permission of the copyright owner. For information
regarding permission for reprints or excerpts, contact Pansophix at
[email protected].

Notice of liability…
The information contained in this Useful Guide and on the Pansophix
website is distributed on an “as is” basis, without warranty. While
reasonable steps have been taken in the preparation of this Useful Guide,
neither the author nor Pansophix shall have any liability to any person or
entity regarding any loss or damage caused or alleged to be caused directly
or indirectly by the instructions contained in this Useful Guide.

Trademarks notice…
All trademarks are acknowledged as the property of their respective owners
and are used in this publication in an editorial sense.

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 A Useful Guide to
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1 Introducing SWOT ............................................................. 6

1.1 Four boxes 6
1.2 This Useful Guide 6
1.3 What has SWOT ever done for us? 6
1.4 Does SWOT lead to a strategy? 8

2 The SWOT framework ........................................................ 9

2.1 Illustrating SWOT 9
2.2 In control — internal and external 10
2.3 Impact — helpful or harmful 11
2.4 SWOT quadrants 11
2.5 A Context … is vital 14
2.6 Summary 15
2.7 Exercises 15

3 Creating strategic responses ............................................17

3.1 Beyond the four boxes 17
3.2 SWOT becomes TOWS 17
3.3 Match and convert 18
3.4 The four generic strategies 20
3.5 Summary 22
3.6 Exercises 22

4 Strategy development.......................................................23
4.1 The surrounding method 23
4.2 Define the context 25
4.3 Purpose 26
4.4 Discovering Opportunities and Threats 26
4.5 Identifying Strengths and Weaknesses 27
4.6 Match and Convert 28
4.7 Use TOWS to select a strategic approach 29
4.8 Reality — Testing the decisions 30
4.9 Deployment 31
4.10 Summary 32
4.11 Exercises 33

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5 Examples and case studies ...............................................34

5.1 The coffee shop 34
5.2 Personalisation and Individual Budgets 34
5.3 Deciding to start a new business 35
5.4 Wi-Fi in a Fast-food Restaurant 35

6 Summary ..........................................................................36
6.1 SWOT checklist 36
6.2 Avoiding the waste of time 36

7 Exercises ..........................................................................37

Appendices ............................................................................38
Appendix 1 — Alternative drawings of SWOT 39
Appendix 2 — Identifying Opportunities and Threats using PESTEL 41
Appendix 3 — Identifying Strengths and Weaknesses 43
Appendix 4 — Case study: the coffee shop 45
Appendix 5 — Case study: a charity in the care sector 47
Appendix 6 — Case study: self-employment 50
Appendix 7 — Case study: Wi-Fi in the Basic Burger Bar 53
Appendix 8 — Weighting the factors 55

Feedback ...............................................................................56

About the author ...................................................................57

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1 Introducing SWOT
1.1 Four boxes
SWOT is a popular 4-box strategy analysis and strategy development
model. The acronym SWOT is derived from …

 Strengths

 Weaknesses

 Opportunities

 Threats.

SWOT has been around for decades and could lay claim to being the most
widely used strategy tool in modern times. It is used by industry,
commerce, charitable and voluntary organisations. In higher education,
SWOT is often a key part of business studies and MBAs. If you have ever
applied for a business bank loan, it is likely that the bank would want to see
a SWOT analysis or something similar.

1.2 This Useful Guide

The goal of this Useful Guide is …

 To introduce SWOT as a useful strategy tool,

 To help you carry out a SWOT analysis that is robust and relevant,

 To guide you around its pitfalls, so that you can create a strategic
direction for you or your organisation.

This Useful Guide is a book about SWOT as a strategy analysis tool; it is not
a Useful Guide to Strategy; that is a separate subject. A future Useful Guide
is expected to cover a wider view of strategy.

1.3 What has SWOT ever done for us?

With due acknowledgement to the Monty Python team and their famous
phrase, it is worth reviewing the benefits and limitations of the SWOT
strategy tool before rushing headlong into the theory and deployment. Let’s
start with the advantages …

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Advantages

SWOT has many advantages, a few of which are …

 It is easy to understand — a simple diagram and no mathematics.

 It is applicable to many levels in an organisation — from an

individual, a team, a business unit or division, up to the corporate
strategy.

 It can be applied at many different depths from quick and easy, to

highly detailed.

 With proper use, it can be linked to corporate objectives and to

strategy deployment.

 Being highly visual, it is easy to communicate.

Disadvantages — Despite its popularity and the advantages above, SWOT

has several disadvantages …
 It is tempting to undertake SWOT analysis using qualitative or
subjective (anecdotal or hearsay) rather than quantitative data.

 Issues are easily expressed as broad generalisations rather than

specifics.

 Easily biased by perceptions, personality types and preferences.

 Data collection, evaluation, and decision-making are easily

confused.

 It is often drawn incorrectly; this has an impact especially when

the underlying principles are ignored.

 The surrounding method is often ignored (or worse, being unaware

that there is a surrounding method).

The disadvantages have led to SWOT also being known by a different and
derogatory acronym — a Significant Waste Of Time — especially when led
by an unskilled facilitator. When used well, SWOT is a useful aid to your
thinking. It directs your attention to aspects of strategic thinking that may
be subconsciously ignored.

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What you get from a SWOT analysis is an awareness of the issues that
impact you or your business and help you form a list of actions (including
things to avoid). SWOT helps you think and in turn informs your decisions.
SWOT cannot make your decisions for you, nor can it guarantee success.

Remember, SWOT is a tool and only one of many strategy-making tools in

your toolbox. Your SWOT tool is only as good as its operator. You still have
to do the work, you still have to interpret the analysis, and you still have to
make decisions.

1.4 Does SWOT lead to a strategy?

Not always. It is dangerously easy to undertake a SWOT analysis that does
not result in a strategy, often due to a lack of understanding of what a
strategy is. This Useful Guide is not about strategy in general, but to make
SWOT useful, we need to introduce a basic definition and keep this in mind
as we work through this Useful Guide to SWOT analysis.

For our purpose, a strategy gives you a point of advantage or a point of

distinction.

Strategic conversations — In many ways, the underlying value of SWOT is

the strategic conversations encouraged by the analysis.

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2 The SWOT framework

2.1 Illustrating SWOT
SWOT is commonly drawn as shown in Figure 1. You can be creative about
how it is drawn and alternative illustrations of SWOT are shown in
Appendix 1.

Figure 1 — The basic SWOT diagram.

The axes are important in SWOT because they define the content of the four
boxes, S (Strengths), W (Weaknesses), O (Opportunities), and T (Threats).
Indeed a common error in SWOT analysis is to ignore the axes and place
information in the wrong box!

SWOT has its own jargon and we should introduce some of it before
proceeding further. A factor is SWOT jargon for data or information. SWOT is
predominately a data and information gathering framework which records
input factors. In practical use, the four boxes each hold a list of factors,
typically as a bullet-point list.

Note — to create outputs, SWOT needs to be redrawn to generate

strategies that address the input factors. This is covered in §3.

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2.2 In control — internal and external

The rows in SWOT diagram, Figure 2, distinguish between the factors you are
in control of and those you are not. In SWOT jargon, the factors you control
are Internal factors, and those you do not control are External factors.

Internal factors
Internal factors are those that you or your organisation have control
over. Strengths and Weaknesses are internal factors.

External factors
External factors are those which you or your organisation has little or no
control over. Opportunities and Threats are external factors.

Whether a factor is a Strength or a Weakness, and likewise whether a factor

is an Opportunity or a Threat, depends on the context and purpose of the
SWOT analysis. Context is vitally important in a SWOT analysis; this is
covered in more detail in §2.5.

Figure 2 — Are you in control of the factor?

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2.3 Impact — helpful or harmful

The columns in the SWOT diagram distinguish between factors that are
helpful, and those that are harmful in respect of your SWOT objective.
 Helpful
Helpful factors are those that assist your success.
Strengths and Opportunities are helpful.

 Harmful
Harmful factors are those that impede or block your success.
Weaknesses and Threats are harmful.

Remember, whether a factor is helpful or harmful depends on the objective

of your SWOT analysis.

Figure 3 — Helpful or harmful (with reference to the objective).

2.4 SWOT quadrants

Each of the four SWOT boxes is the product of the axes. Each box is
introduced below, but only in brief because the context of the SWOT analysis
has a strong impact on where a factor is assigned. (For example, a Strength
in one context may be a Weakness in another.)

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2.4.1 Strengths
Strengths are internal and
helpful. Strengths are factors that
support an Opportunity or
overcome a Threat to give you
advantage. Strengths may
include …
 Financial strengths. A robust
balance sheet, good cash flow
and good credit rating.

 Technological and production

advantages (Plant, machines Figure 4 - Strengths Quadrant.
and associated techniques).

 Customer service advantages

in marketing, sales and
reputation.

 Talented, dedicated and well

trained employees.

2.4.2 Weaknesses
Weaknesses are internal and
harmful. Weaknesses are factors
of your business that mean you
are unable to take advantage of
an opportunity, or are vulnerable
to a Threat. Weaknesses may
include …
 Financial weaknesses such as
high debt ratios.

 Old or inflexible technology.

 Customer service weaknesses, Figure 5 — Weaknesses Quadrant.

for example, long delivery
times or poor customer
communications.

 Skills shortages or poor

employee morale.

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2.4.3 Opportunities
Opportunities are external factors
over which you have no control
and are helpful.

Opportunities arise from many

sources: for example, competitors
withdrawing from the market, new
social trends, and technological
innovations. Even apparently
restrictive legislation may be
viewed as an opportunity if it
inhibits your competition. Figure 6 — Opportunities quadrant.

Opportunities may be tangible

(products and features) or
intangible such as enhancing
reputation or extending your
influence.

2.4.4 Threats
Threats are external factors over
which you have no control and are
harmful.

Threats come in many guises, for

example, a new competitor,
restrictive regulation, hostile
takeovers.

Threats may also appear as

tangible or intangible. A tangible
threat may be a hostile takeover Figure 7 — Threats quadrant.
bid, restrictive legislation or even
theft (of property and assets).
Intangible threats include, for
example, the inability to secure
licences (in many forms) or
potential loss of reputation or
brand damaging factors.

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2.5 A Context … is vital

As the old saying goes, one person’s meat is another’s poison. A factor may
exist in several places on a SWOT analysis. To position a factor correctly
within a SWOT analysis requires a context.

A few examples may demonstrate the importance of context …

 You may have the skills in using off-the-shelf software, in which

case the skill could be a Strength. However the software could be a
Threat if it is mission-critical and the external developer doesn’t
include the functions that you need.

 Your proprietary software does what you want it to do, and hence
may be a Strength. But the cost of maintaining proprietary
software could be expensive and may be a Weakness.

 Your billing system may be robust and reliable, so in the context of

regulatory standards for billing and invoicing, it is a Strength. But
in the context of an Opportunity that requires flexible invoicing,
your robust billing system may be a Weakness.

 A substantial cash reserve may be superficially seen as a Strength

and, with no further consideration, would therefore appear as a
bullet point in the list of Strengths. However, this same cash
reserve would make for an attractive take-over target in the
context of a hostile business climate. So in that context excess
cash may be a Weakness and possibly a Threat.

Context is critical to the effective use of SWOT. A good quality SWOT analysis
starts with understanding the context, typically statements of the business
environment, then proceeds to analyse a specific situation or idea. This
usually leads to parallel SWOTs, each analysing some specific aspect, and
contributing different elements to the resulting strategy.

By contrast, generalized SWOTs have limited value. The data capture may be
interesting, but without a context and purpose, the result is often somewhat
vague statements masquerading as a strategy. A good SWOT analysis
requires the overall context to be understood. Context helps to eliminate
interesting but irrelevant actions.

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2.6 Summary
In this section we’ve introduced the basic components of SWOT. It is a
straightforward framework, but with its apparent simplicity it is tempting to
bypass the underlying principles and consequently end up without a
worthwhile result.

To summarize what we have so far …

 Axis
The axes are important to SWOT. The axes: In Control gives us the
Internal/External factors; Impact gives us the Helpful or Harmful
factors. Whether that factor is in the correct place depends on the
context.

 Context
A specific context is essential for a good quality SWOT; your
Strength in one Context could be a Weakness in another.

 Specific
A good SWOT analyses a specific situation within a specific context.
Writing a purpose statement helps to keep the analysis relevant
rather than generalised.

And that is almost it, a simple a four-box model where each box holds
specific information.

However, at this point, SWOT is not yet useful. A SWOT chart of four boxes
filled with bullet points is just a yawning ‘so what’ moment. We need two
additional features …

Creating strategic responses

SWOT is good at capturing input factors — it needs to be extended and
redrawn so that we can create strategic outputs. And to make it work we
need …

Surrounding method
To make SWOT useful, a surrounding method — almost a project plan — is
needed to take us through the whole process from input, analysis, choices
and strategic actions.

2.7 Exercises
Context is so important to a well-constructed SWOT analysis, it is worth
spending some intellectual energy to reinforce the principle.

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As an exercise, try to identify a real situation where a factor changes place

depending on the context.

Try this exercise for three instances …

1 A business or an organisation from your perspective as an observer.

Your position as an observer may be close in, for example as a
customer, or more distant, for example by reading newspaper reports.

2 Look within your own organisation where a factor currently in one of

the SWOT boxes needs to be moved to a different SWOT box depending
on the circumstance.

 For example, a Threat in one department might be an Opportunity

for your own department.

 A specific example might be where creativity is a Strength in a new

product development team, but is a threat in an operational
delivery team where strict processes must be followed.

3 Examine your own circumstances. For example a Strength at work or

the sports club becomes a Weakness at home. Or a Threat in one
circumstance becomes an Opportunity elsewhere.

Remember that a factor can do a double switch where an internal/helpful

Strength becomes an external/harmful Threat, or conversely, an
internal/harmful Weakness becomes an external/helpful Opportunity.

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3 Creating strategic responses

3.1 Beyond the four boxes
So far SWOT is a data and information gathering framework which records
input factors. In a typical analysis project, each of the four boxes would
contain a list of factors — typically as a bullet-point list (with supporting
rationale in an accompanying document). Although these four lists are
interesting as a classification of input factors, they don’t yet help us to
develop a strategy. To make SWOT useful, two additional features are
needed …

 Turn SWOT inside out to become TOWS and reveal generic

approaches for development into specific strategic actions.

 Consider what to do with the factors. This is done by the

application of two verbs: Match and Convert.

3.2 SWOT becomes TOWS

To advance our four lists of input factors into potential strategic outputs,
the SWOT framework needs to be adapted as shown in Figure 8.

Figure 8 — Transforming SWOT inputs into strategic responses – TOWS.

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In essence, SWOT has been turned inside out and the four input categories
are used to guide you towards output strategies or, if you prefer, strategic
responses. In this state the framework is usually known as TOWS (that is,
SWOT backwards).

3.3 Match and convert

With our four lists in the S, W, O, and T boxes, the next step is to link the
related factors. This is done through Matching and Converting.

Match
Matching is the process of linking the external factors — Opportunities and
Threats — to the internal Strengths and Weaknesses.

Figure 9 below shows the various matches that are possible in SWOT. We’ll
examine later the types of strategy that the matching links produce.

Figure 9 — Matching the external factors to the internal factors.

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Convert
The principle of Converting is to encourage you to think about actions that
change harmful factors into helpful factors. Figure 10 below shows the
possible conversions within SWOT:

 Threat factors may be turned into a strategic advantage by

converting the Threat into an Opportunity.

 Weakness factors may be converted into Strengths.

Figure 10 — Potential Conversions.

Redrawing SWOT into TOWS and applying Match and Convert leads to four
generic strategies.

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3.4 The four generic strategies

With the SWOT model redrawn as TOWS, each intersection between the
internal and external factors results in an indication of the specific type of
strategic response arising from SWOT inputs. The four approaches are
illustrated in Figure 11 below.

Figure 11 — Specific types of response to the SWOT inputs.

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These four generic strategies are …

 Growth strategies (Opportunity × Strengths)

The essence of a growth-based strategy is to Match the Opportunity to
your existing Strengths and do more of what you’re already good at. A
growth-based strategy usually involves investing in those factors that
increase your capacity to do more of the same thing. The investment
could include, for example, hiring extra people or procuring additional
production machinery. The result of a growth-based strategy is
continuation of your competitive advantage.

 Internal development strategies (Opportunity × Weaknesses)

The main consideration in this type of strategy is to Convert weaknesses
to strengths so they can be matched to an opportunity. An internal
development strategy is about repairing or developing internal factors.
The investment may include developing new skills, hiring new people
with different skills or training existing people with new skills, designing
new processes or developing new technology. The internal development
strategy leads to new capabilities that were not present before, and
these can be matched to an opportunity.

 External development strategies (Threats × Strengths)

This type of strategy is based on using your existing strengths to convert
a threat into an opportunity. An external development strategy may
include extending your marketing reach into new areas or new
customers through advertising; you may use skills in product
development (a Strength) to broaden your services in existing markets.

 Survival strategies (Threats × Weaknesses)

A threat and weaknesses combined — the worst possible scenario. Here
you are faced with stark choices; for example, fundamentally change
what your organisation is or does, or ultimately dissolve the business
and release the capital back to the shareholders. Both match and
convert are applicable here. Assuming that you choose to stay in
business, the strategies are the simultaneous deployment of both
External and Internal development actions.

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3.5 Summary
In this section we have moved beyond the four boxes of SWOT. In particular
we know that …

 SWOT gathers the factors, and is turned inside out to create the TOWS
framework;

 Factors can be matched or converted; and …

 TOWS gives us four generic strategic responses …

 Growth strategy;

 Internal development strategy;

 External development strategy; and

 Survival strategy.

3.6 Exercises
Take a break and look at a variety of published strategies, from your own
organisation or elsewhere.

 Recall the basic purpose of a strategy outlined in §1.4 a strategy

gives you/your organisation a point of advantage or a point of
distinction.
Then …

 Make an assessment of the strategy — does it provide an

advantage or distinction?

 Make a note of the Match and Convert actions and how these
moved harmful aspects or weaknesses into helpful aspects or
strengths.

 Ascertain what type of strategy is being pursued. (Growth, internal

development, external development, survival.)

Just a cautious note: commercial organisations don’t often publish their

strategy; for a strategy to be successful it is often necessary to hide it from
the competition. What you read might be watered down statements that
sound good but don’t stand much scrutiny.

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4 Strategy development
4.1 The surrounding method
The SWOT/TOWS boxes don’t exist in isolation; they are part of an overall
strategy development method.

The basic method follows a sequence …

 Be clear about the context (the situation) and purpose of the

analysis;

 Identify the Opportunities and Threats;

 Identify the Strengths and Weaknesses;

 Match the Opportunities and Threats to Strengths and

Weaknesses;

 Convert harmful factors into helpful factors;

 Develop responses;

 Make choices and decisions; and

 Define actions to deploy the strategy.

For this Useful Guide, a basic framework in Figure 12 illustrates the type of
method needed. You could treat this as a basic project plan, although you
will need to modify this to suit your own circumstances.

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Figure 12 — SWOT within a surrounding method.

Although the method is shown as linear, the reality is that many feedback
loops exist. For example, the analysis may show the need for an additional
data source, so you will need to go back to the inputs.

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4.2 Define the context

We’ve already highlighted the importance of context for SWOT analysis
(Section 2.5). The context enables you to assess and interpret the issues
and factors so they are correctly located in the SWOT grid and therefore
correctly considered in the TOWS formulation of strategic responses.

In SWOT, a context statement may include …

 What your business is, typically mentioning …

 What you do, what you sell and who your typical customers are.

 What it does and does not do. Referring to your vision and mission
statements often helps.

 An indication of scale — are you a sole trader, a small business or

a corporate?

 How you go about your business. For example, is your business

retail or business-to-business; walk-in shop, Internet or phone;
quick sales (fast moving goods) or bespoke. This element of the
context is important when considering the business-fit of the
strategies that emerge from the SWOT analysis.

In preparation for later parts of this Useful Guide, some examples should
help. The following example is a fast food business and we’ll see how the
context affects the decisions made following a SWOT analysis.

Note — the label [Context] is introduced here because this notation is

used to identify various components in the case studies in the
Appendixes.

Example context — The Basic Burger Bar

[Context] The Basic Burger Bar business is a hamburger fast food

restaurant. It is a town-centre retail business selling a small range of
burgers and chips. Customers enter the premises and join a queue
where they make their selection and are served immediately at the
counter. Within a few minutes they have ordered, paid and received
their food. The food is delivered either in a paper bag for takeaway (‘to
go’ orders) or on a tray for ‘eat-in’ orders.
For ‘eat-in’ orders, customers sit at a table and consume their food with
their fingers and, optionally, a disposable plastic fork. The time at the
table is short, typically 10 to 20 minutes. Customers expect to take
their tray to a table, and afterwards to clear the table by taking the
trash and tray to a nearby collection point.

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Customer travel time is quick, an ‘eat-in’ customer is unlikely to be

longer than 30 minutes; a ‘to-go’ customer can enter and leave the
restaurant within 5 minutes.

4.3 Purpose
You will have already detected from the preceding sections that the
importance of purpose should not be underestimated. Whatever activity is
being undertaken, knowing the purpose adds focus and helps one keep the
activity to a manageable size by eliminating irrelevant matters.

The range of what may be a purpose is huge. The purpose may be formed
around any of the business processes or functions. Classic business
processes include, for example, invoicing, marketing, recruitment and
product development. The purpose may also be to support one-off
activities, for example mergers and actualisations, new office premises or
the formation of new internal business functions.

A good purpose is valuable because it helps to identify what inputs you may
need for the SWOT analysis. In a real situation, many SWOTs exist side-by-
side, each focusing on a specific issue or factor.

4.4 Discovering Opportunities and Threats

In SWOT-based strategy development, this first step is usually known as an
environmental scan. Or in plain English, what is going on around you. In
strategy development, the purpose is often to define a response to a
changing world and this presents the Opportunities and Threats. These
external factors may be, for example, new legislation, a new competitor or
a gap in the market.

Note — In SWOT analysis, environment does not mean air quality, carbon
footprint or energy consumption; it means the business environment
within which you exist.

There are many sources and models to help with your environmental scan.
Figure 13 illustrates some of these. Each has a particular focus and benefit
and you may need to use several. Remember — don’t let these models
constrain you, mix and match as needed.

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A framework known as PESTEL (Political, Economic, Social, Technological,

Environmental and Legal) is popular because it provides a checklist of
issues and factors from an external perspective, and these can help with the
inputs to your SWOT analysis. Appendix 2 introduces PESTEL in more detail.

Figure 13 — Sources of environmental information for SWOT inputs

(* PESTEL is introduced in Appendix 2).

4.5 Identifying Strengths and Weaknesses

Strengths and Weaknesses are internal factors over which you have
substantial control. You should look for, and identify, Strengths and
Weaknesses within your internal processes, your operations and the way
you do things (including your business ethos and culture).

Appendix 3 illustrates three ways of identifying your Strengths and

Weaknesses, including a suggested list of core business processes you could
use as a checklist in your search for Strengths and Weaknesses that help or
hinder the external Opportunities or Threats.

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Remember that factors classified as Strengths or Weaknesses are valid only

within a given context or circumstance.

Example …
Suppose that your organisation has an extremely robust credit
verification process. Because of this, it can take several weeks to
approve a new customer account.

This could be a Strength in the context of reducing fraud, but it is a

Weakness in the context of quickly gaining new customers.

4.6 Match and Convert

Match and Convert were introduced in Section 3.3. To illustrate matching,
assume that you are the owner of the Basic Burger Bar mentioned in
section 4.2 and have commissioned some market research. This suggests
that there is an opportunity for extending the menu to include plated food
eaten with knives and forks. Figure 14 illustrates how the Opportunity
factors are matched to the Weakness factors.

Figure 14—Example of Matching an Opportunity to a Weakness for

the Basic Burger Bar.

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4.7 Use TOWS to select a strategic approach

Our Basic Burger Bar business now has to make some decisions. Redrawing
SWOT into TOWS, so that we can see the intersection of Opportunity and
Weaknesses, would suggest an internal development strategy.

Figure 15—TOWS suggests an Internal Development strategy.

An uncritical application of SWOT and TOWS would suggest investment in

cutlery, plates and a supportive menu. Both front-of-house and back-of-
house would require some investment. Front-of-house would require
crockery and cutlery, as well as waiting staff to clear and collect plates,
knives and forks; these staff would also need training. Back-of-house would
need a dishwasher (with staff training, cleaning materials, water softeners,
etc) and storage. Items may go missing; cutlery may get broken, so
consequently prices may need to increase. With sit-down meals, customers
are likely to stay longer, so the Basic Burger Bar would need to rethink the
seating capacity.

Context is important here. The Basic Burger Bar attracts low-spending

customers who stay for a relatively short time. The front-of-house and
back-of-house procedures are geared towards this. Against this context,
plated meals are an opportunity that the Basic Burger Bar should decide to

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avoid. If the managers of the Basic Burger Bar wanted to take advantage of
the plated food opportunity, they may consider opening a new restaurant
with a different operating ethos.

4.8 Reality — Testing the decisions

The example of the Basic Burger Bar provides a straightforward, if
simplistic, situation. In reality, decision-making is more difficult and
decisions often involve a high degree of subjectivity. (Recall that an
important benefit is the strategic conversations that happen.)

Having made a decision, the final step is to give it a reality check. There are
many ways of doing this. The following list provides an indication of the kind
of tests you may use — your list would reflect what your business is and the
context of the analysis.

Areas to examine might include …

 Is it appropriate for your business (sector/subsector)? In business

jargon this is often referred to as the Business Fit.

 Does it match your ethics and values?

 Is the strategy an incremental change to what you do, or is it a

fundamental shift?

 Effectiveness — does the decision lead to a real strategic

distinction?

 Efficiency — what resources are needed to implement the

strategy?

 Would the strategic action be reliable and sustainable?

 Is it possible to visualise what things would be like after the

strategic change has been implemented? Being able to do this
helps one to communicate the decision, and to encourage the
motivation for the change.

 Is the strategy and solution elegant?

 What would happen if you do nothing?

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4.9 Deployment
Your strategy must be converted from intent into action. Strategy
deployment is a full subject in its own right and beyond the scope of this
Useful Guide. Consequently, this section is very brief.

Three worthwhile thoughts to address when preparing for strategy

deployment are …

 Communication
How to communicate your strategy — the goals for communication
are well known: clarity, simplicity, consistency and self-adjusting
so people can internalise the message in their own way.

 Implementation
Implementing a strategy often involves a change programme of
some kind. Give some thought as to what kind of programme, and
how big, it should be.

 Measuring success
How would you know whether your strategy has been a success?
Give some thought to the kind of indicators or measures you would
need so that you can check that the advantage or distinction is
delivering real results.

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4.10 Summary
At this point in the Useful Guide, you have the essential information to
prepare a strategy using the SWOT/TOWS technique. From the previous
chapters we have introduced the core SWOT framework (§2) and
demonstrated that a context is vital. Then in §3 we rearranged SWOT to
become TOWS and hence create a strategic response to the situation.

In this chapter, we introduced an overall method, almost a project plan, to

help you develop a SWOT-based strategy. The sequence listed in §4.1 is
worth repeating by way of a chapter summary …

 Be clear about the context (the situation) and purpose of the

analysis;

 Identify the Opportunities and Threats;

 Identify the Strengths and Weaknesses;

 Match the Opportunities and Threats to Strengths and

Weaknesses;

 Convert harmful factors into helpful factors;

 Develop responses;

 Make choices and decisions; and

 Define actions to deploy the strategy.

A classic error in SWOT strategy and development is to lock people in a

room and ‘do SWOT.’ At the end of the session, the walls are covered in
flipchart paper giving the illusion of ‘doing SWOT’ and making progress; in
fact the team might be only ‘doing flipcharts!’

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4.11 Exercises
In the next chapter, four case studies are introduced that illustrate the
breadth of problems that SWOT can address. But before embarking on the
case studies, which encourage you to develop a strategy from a given
situation, it may be worth analysing existing strategies to discover how they
were made and whether the strategy is sound.

As an exercise …

Examine someone else’s strategy …

 Can you deduce, or is it stated, what situation and specific context

the strategy is responding to?

 Ascertain the connections from context and purpose, through the

various SWOT factors; identify the matches and conversions,
through to decisions.

 Are those decisions a good fit with the business?

 What type of strategic response is being proposed?

 Is there any indication that a deployment plan supports the

strategic intentions?

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5 Examples and case studies

Case studies are one way of illustrating how the theory can be applied to
real situations. The examples provided here cover four different areas of
business activity and one personal one to give you a feel for the variety of
topics that may go into a SWOT/TOWS developed strategy. As with all case
studies, they represent only a snapshot of a situation; remember that SWOT
is only one of many strategy development tools.

Each case study includes the context and purpose with a list of factors and
their location on a SWOT/TOWS diagram.

5.1 The coffee shop

Appendix 4 is the classic coffee shop case study. This is a favourite example
in further/higher education and it is included here because of that
popularity. Take care with examples like this because you can only account
for what you see as an external observer — that is, the things you
experience by visiting the coffee shop and their competitors (often only a
few steps away down the high street). You may use information such as
their report and accounts and these may provide you with some additional
inputs for the SWOT. However, you are limited in what you can know about
the economic model of the coffee shop industry and their internal
processes, so it’s difficult to judge what is a Strength or a Weakness; hence
you can only produce a generalised SWOT.

Our coffee shop case study makes the purpose clear — should the
coffee bean be changed?

5.2 Personalisation and Individual Budgets

Appendix 5 shows the impact of government policy on an organisation’s
strategy. The case study is based on the political objective to give people
more control over how benefits are administered on their behalf. This
organisation is in the care sector and provides support for people with
learning disabilities. Traditionally, services are commissioned through block
contracts with local government.

Central government policy changed the funding arrangement. If this

organisation had followed the ‘do-nothing’ option, they would have been out
of business within 12 to 18 months.

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5.3 Deciding to start a new business

Appendix 6 is the personal SWOT of an individual who is considering self-
employment. This case study illustrates that soft factors can have a
significant impact on the strategic actions. It can be adapted for someone
who is applying for employment.

5.4 Wi-Fi in a Fast-food Restaurant

Appendix 7 introduces a situation where there is ultimately a conflict
between a strategic action to catch up with the competition, and the
introduction of a service which impacts on the very nature of a fast-food
restaurant.

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6 Summary

6.1 SWOT checklist

SWOT can be applied to a wide variety of issues and problems. But, like all
tools it is dependent on the skill of the user.

So, let’s conclude this Useful Guide with a checklist to help you prepare a
SWOT based strategy …

 Be clear what the four boxes in SWOT actually mean. The two axes
in control (internal or external) and impact (helpful or harmful)
define what should be recorded in each box (§2.1 to §2.4).

 Be clear of the situation — the context, and what problem is being

addressed (§2.5, §4.2, and §4.3).
Note that dealing with the problem at once often requires several
SWOTs sitting side by side to address multiple issues.

 SWOT captures input factors. You may need several methods of

identifying the input factors (§4.4 and §4.5).

 Apply the Match and Convert principles to the issues to discover

what is possible in the resulting strategy (§3.3 and §4.6).

 The TOWS suggests the type of strategy appropriate to the mixture

of input factors (§3.2 and §4.6).

 Remember to examine the strategies in order to check that they fit

with the characteristics of your own business (§4.8).

6.2 Avoiding the waste of time

Sadly, SWOT is often misused. Remember the remark in §1.4 — SWOT is also
known as a Significant Waste Of Time. This occurs when SWOT is applied as
a general activity without a specific focus. At the time of writing an Internet
search for “SWOT + Apple” produced more than 49 million hits! The page
one results were generalized SWOTs with almost no substance and no
strategic suggestions.

A more interesting result came from the search “SWOT + apple + iphone +
android” — this still produced 1.6 million hits — many were quite specific
but only included what could be observed as an outsider. Many of the
so-called facts were nothing greater than guesses. Be careful about the
intrinsic quality of the factors you collect.

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7 Exercises
You might be keen to undertake a SWOT analysis and to create a strategy.
The range of situations is vast, so to help you start, some suggestions are …

 A SWOT analysis for yourself — context: applying for a new job.

 A SWOT analysis for yourself — context: applying for promotion.

 A SWOT analysis for yourself — context: facing redundancy.

 A SWOT analysis for your local corner shop — context: competition

from a shop on the opposite corner of the street.

 A SWOT analysis for your team at work — context: the team’s

annual review, with a view to securing ongoing funding.

 A SWOT analysis for a customer bid — context: a competitive

tender response.

 A SWOT analysis for an internal support function, for example

Information Technology, Billing and Receivables, or Training —
context: supporting the new customer requirements.

 A SWOT analysis for a charity you are associated with, for example
the local community centre/village hall, school or youth club —
context: a bid for lottery funding for a new roof.

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Appendices

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Appendix 1 — Alternative drawings of SWOT

Visual representations
Although SWOT is commonly drawn as 4-boxes, there are other
representations, the form shown in Figure 16 emphasises the
internal/external aspects of SWOT. A more stylized version of SWOT is shown
in Figure 17.
A diagram indicating SWOT where the strengths and weaknesses are enclosed within the opportunities and

Figure 16 — The original drawing of SWOT.

Figure 17 — A stylised drawing of SWOT.

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Alternative names for the four quadrants

The names of the four quadrants have alternatives. Some find the language
of SWOT too war-like or judgemental. And in a world littered with political
correctness, for some the choice of words carries more weight than the
meaning.

For example …

 Strengths — some interpret this in the context of a warrior and

strength of an army.
Alternatives include Advantages or Supporting Factors.

 Weakness — some people (and some professions) object to this

because it implies inadequate or shortcoming. Alternatives include
Liabilities, or Areas for Development.

 Opportunities — this term is frequently derided by two camps:

those who see the world in a deterministic way and hence dislike
opportunism, and those who see this as capitalist exploitation.
Alternatives include options, openings, or attractions; however, do
bear in mind that there are some opportunities you should not
take.

 Threats — to some this has overtones of violence or the headlines

used in the tabloid press. However, in SWOT the Threats are vitally
important in the recognition of, and response to, external hazards.
Downgrading the terminology with casual or softer vocabulary is
likely to lead to indecisive thinking and a poor strategy. However,
if you must change the terminology, alternatives include hazards,
impediments or risks.
Author’s note — Please, don’t go down the politically correct route of
negative opportunities. Thanks.

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Appendix 2 — Identifying Opportunities and Threats

using PESTEL
PESTEL is a useful tool for identifying inputs to SWOT. PESTEL is an acronym
where each letter indicates an aspect of factors that may influence both
your internal practices and your external products and services. Some
aspects, such as Health and Safety may fall under several headings; that is
to be expected.

 Political — Political factors are those coming from government. Political

factors include: Policy direction — the intention and opinion of
governments and their view of how a nation functions, and its role within
the community (local, national and global). Policies in this context are
about a government’s intentions;
Law-making — the type and style of laws that a government promotes
and introduces; Taxation — the principles of government revenue
collection; and Budgetary — how the government intends to spend the
tax revenue.

 Economic — Economic factors are those relating to the economy at

large. Economic factors include those led by a government, for example
interest rates, the amount of money in circulation, national debt, and so
on. Economic factors also include those that exist within industry or
commercial sectors. For example, the economic model for double-decker
busses is different from that of domestic saloon cars; the economic
model for the self-employed is different from that of a publically listed
company.

 Social — Social factors may include healthcare, culture and arts, law
and order, and population and demographics.

 Technological — Technological factors can be broad-ranging, including

everything from automation in factories and offices, information
technology in key operational processes, and research and development.

 Environmental — Environmental in PESTEL includes ecological factors

such as air quality, nature and waste disposal. For example, the Waste
Electrical and Electronic Equipment (WEEE) regulations caused
substantial product redesign or withdrawal.

 Legal — Legal factors include laws, regulations and statutory

requirements. These affect both what you do and how you do it.

You may encounter different variants and acronyms, for example, PEST,
SLEPT, PESTLE, STEER, and LONG-PESTLE. These all do similar jobs of
reminding you where to look when doing the environmental scan.

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Figure 18 illustrates PESTEL when it is used for an environmental scan. The

cells should hold a brief statement of how a factor is experienced at three
levels. The levels should provide a logical progression from the big picture
(macro) to the specific. These levels are …

 Macro — The factor as it applies everywhere;

 Sector — The factor as it applies to your market sector; and

 Specific — How the factor impacts on your specific organisation.

Figure 18 — PESTEL summary.

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Appendix 3 — Identifying Strengths and Weaknesses

Strengths and Weaknesses are internal factors. There are many ways to
identify these factors; this Useful Guide offers three suggestions that you
may employ.

1 Process-mapping
Start with a beneficiary, for example the customer, and follow what
happens at each stage of their experience. This approach is often expressed
as an informal diagram. The approach is sometimes known as the staple
yourself to … For example, a weakness may be the slow response to
purchase orders, then mentally staple yourself to a purchase order and
follow its journey through the organisation. Beware, the temptation with
this process-mapping approach can be to record the mechanics and
resources (for example, headcount); for SWOT, the purpose is to observe
where the issue (Threat or Opportunity) is supported (Strength) or hindered
(Weakness) by the presence, absence or performance of internal
capabilities. The key benefit of this approach is that you will have a diagram
of how things work currently.

Note — In consultant jargon, this current state is known as the as-is

situation. When things have to change, a similar diagram known as the
To-Be state is created and the differences between the as-is and to-be
are the foundations of a change plan.

2 What if …
The What if method deliberately injects a big idea (sometimes known as a
BHAG — Big Hairy Audacious Goal) into the analysis. For example, What if
we discontinue accepting payment by cash and only accept payments by
card; What if we remove our employee grade structure and call everyone an
‘associate’; What if we engage a public relations company; What if we made
our products exclusively for left-handed customers; What if our key supplier
becomes bankrupt, and so on. For SWOT, the Strengths and Weaknesses
become apparent as the big idea is worked through.

The advantage of the What If approach is that it encourages creativity and

freethinking. Where process-mapping is useful for analysing and responding
to previously identified issues, What If engages issues and topics that have
not yet appeared on the horizon.

Example — Within the context of mobile computing, an opportunity for a

small, inexpensive laptop computer was envisaged. Process-mapping led
to smaller and cheaper laptop computers know known as netbooks.
What if led to a new category of computing—the tablet.

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3 Checklist
Using checklists, or tick lists, is a method of ensuring that a wide variety of
factors have been taken into account and not forgotten. For SWOT, checklists
are a convenient way of reminding you where to look for strengths and
weaknesses. Typically, a checklist may be created using the major functions
of an organisation. These may include …

 Customer-facing activities
 Marketing/Advertising/Awareness
 Customer service/customer experience
 Sales, pricing, product attractiveness
 Delivery and fulfilment
 Payments, receipting

 Financial and investors

 Banking
 Reconciliation
 Tax management – returns and settlements
 Investor relations

 People – staff, volunteers, employees

 Selection and recruitment (Hire and fire)
 Morale, motivation, loyalty, remuneration
 Capabilities of leaders and managers (Staff development)

 Research and development

 New product development
 Ability to experiment, prototype, test, pilot

 Resource management
 Capability of Management Information Systems
 Knowledge management

 Operations
 Marketing, promotion, awareness
 Sales, order-taking
 Shipping and fulfilment, Goods inward
 Storage, logistics

 Resources
 Plant, machinery, tools
 Knowledge
 ICT

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Appendix 4 — Case study: the coffee shop

[Context] The coffee shop is a high-street café with hundreds of outlets
selling coffee beverages (and coffee variations) together with snack-sized
pastries. The high street coffee shop industry is very competitive with other
global and national operators who have local outlets often within a
moment’s walk away. At 2012 prices, a typical customer may spend £6 – £8
on an eat-in visit or slightly less on a ‘to-go’ visit. A repeat customer visiting
twice a day (breakfast and lunch) over one hundred days per year is worth
over £1,000 per year in revenue.

The business relies on high-volume and assumes a quick throughput of

customers. Shops are almost always positioned in prime retail sites on main
streets to attract plenty of passing trade.

The bean used in the coffee product is Robusta (coffea canephora), which is
rich in caffeine. However, market research has identified that discerning
coffee drinkers prefer other beans, in particular Arabica (coffea arabica),
which is reputed to be more refined and aromatic. Local competitors are
advertising 100% Arabica and successfully attracting these discerning
customers.

[Purpose] To review the use of the Robusta bean in the coffee beverages
and consider changing the recipe to include Arabica.

[Social] Customers are becoming more concerned with the ethics of coffee
production. It is a widely held view that the coffee growers receive poor
payment for the value of their crop. The rise of Ethical brands (eg Fair-
trade) causes some customers to go elsewhere. Some competitors
distinguish their establishment by promoting Fair-trade sources.

[Economics] Robusta is cheaper to grow and more abundant, consequently

the input costs are lower than Arabica.

[Technological] The espresso machines (grinding, packing, pressure) can

take either bean.

Recording the factors and developing the responses on a SWOT/TOWS

diagram would result in something like Figure 19.

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Figure 19 — SWOT/TOWS diagram for the review of coffee bean.

Exercises

1 — Next time you go to a coffee shop, observe what is going on and create
your own SWOT/TOWS analysis. Would you change the coffee bean?

2 — Imagine you wanted to start a new coffee shop business. What would
your SWOT/TOWS analysis contain?

Author’s note — Oh, you wanted an answer! Well, let’s just say that I’m
happy to walk past several national chain coffee shops to reach one that
serves good coffee. (And plays good jazz in the background!)

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Appendix 5 — Case study: a charity in the care sector

[Context] The charity is in the care sector with the charitable objective to
provide support and help for people with learning disabilities. The charity
has a turnover of £100 million (2012).

[Purpose] To examine how Individual Budgets (also known as

personalisation) will impact our care business, and decide how to react to
the government’s personalisation agenda.

[Political] The provision of care has traditionally been accessed and

administered through local authorities, who would then commission a
service provider to deliver the care service package using a block contract.

[Political] Government policy is to change the economic model so that a

person in need of care would receive the resources (as money) directly
instead of it being channelled through the local authority.

[Economic] The economic model of the care sector would change from
wholesale provision (for example, the block contract) to that where the
person in need of support would be a retail customer of the care provider.
The flow of resources and money would be entirely different; consequently
existing strengths in bids and tenders, largely a wholesale model of
provision, are no longer relevant.

[Threat] Most of the charity’s revenue comes via local authorities. In the
near future none of it will.

[Opportunity] People with an Individual Budget (the Individual Budget

Holder) are going to be our new paying customers. They are the same
people that receive the care services. These individuals often have what is
known as a ‘circle of support’ so our opportunity is to present ourselves as
the provider of choice to their circle of support and the individual budget
holder.

[Strength] The charity has a good track record of delivering care and has
considerable positive feedback from the people it supports.

[Weakness] The charity’s former strength of being able to respond to local

authority requirements in bids and tenders is no longer relevant.

[Weakness] Employees do not have retail sales skills.

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[Weakness] The charity has no retail-oriented process for a person and

their circle of support to make a purchase.

[Weakness] The charity has no supporting infrastructure, for example

computer systems to support sales enquiries, and thus no management
information to help operational decision-making.

[Weakness] Individual service components are often incorporated within a

larger package of services. The client may not need, nor want, the whole
package of services.

Using PESTEL and SWOT has highlighted many factors. Positioning these on a
SWOT/TOWS diagram may look something like Figure 20.

Figure 20 — Care Sector SWOT/TOWS.

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Whilst the foregoing may paint a desperate picture for the charity, it
demonstrates that in the old environment they were the market leader.
Suddenly, in the new environment, they may not even be in business. In
this case the SWOT has led to a Strategic Imperative.

[Strategic Imperative] Unless we change the way we do business, and

make ourselves attractive to the retail buyer of personal care services, we
will go out of business in under a year. The goal is to convert the Threat
into an Opportunity.

Strategy and actions

 [Survival]

 Re-invent our organisation as a retail provider of care services.

In order to do this …

 [Internal Development]

 Unbundle our services so each element can be individually priced

and sold.

 Develop a retail customer service journey from initial enquiry,

enquiry tracking, order taking (sales), and fulfilment (service
delivery).

 Train our staff in customer service skills.

 Develop the financial systems for retail sales.

 [External Development]

 Develop and promote the organisation – advertise directly to the

new Individual Budget Holders and their family and friends.

 Awareness – advertise and host seminars.

 [Growth]

 Develop related services for other groups with similar (but

different) conditions. For example, retail care services for those
with autism or dementia.

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Appendix 6 — Case study: self-employment

[Context] Kay is employed as the Senior Operations Manager of a Contract
Cleaning business. The company’s business includes large-scale cleaning
services, for example cleaning school premises during the vacations, or
builder’s cleans (cleaning a house immediately following the builder’s
completion of their work so it is ready for use or sale).

On the downside, the company is a family business whose directors are

reluctant to share their rewards. Employee satisfaction is consistently low
with many disciplinary cases (often for trivial ‘offences’) and there is poor
communication between the directors and the operational teams. Against
this background Kay is considering setting up a limited company to become
self-employed.

[Purpose] Define a strategy for Kay to start a new contract cleaning

company.

[Opportunity] Several clients have indicated that they would switch their
allegiance to Kay if she were to start her own contract cleaning business.

[Political/Legal] New regulations are about to come into force which require
cleaning staff to be adequately trained.

[Threat] If Kay were to leave, there is a small possibility that her existing
employer may require a non-compete agreement. The risk is small since
this is vague in her contract of employment.

[Threat] Whilst some existing clients may support Kay, others, typically the
larger corporations might not, because the effort of reworking their
procurement processes (due diligence, supplier qualification and supplier
management) could be expensive.

[Strengths] Kay’s expertise includes surface, wall and floor cleaning using
specialist industrial solvents, and project logistics to source cleaning
operators to the client’s site.

[Weakness] Kay has limited skills in running a business, as distinct from

operations management in the cleaning industry, and no skills in starting a
new business. Additionally, there is insufficient cash in her savings to
purchase the amount of equipment and supplies required to start the
business.

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Placing these factors on a SWOT/TOWS diagram would result in something

like Figure 21.

Figure 21 — SWOT/TOWS for Kay’s ambition.

Strategy and actions

The most obvious strategy is survival because the threats and weaknesses
intersect. She can either put up with the problematic employer, or leave.
Let’s assume that Kay wants to start her own business; the primary
strategy type is Internal Development because the opportunities are there,
but Kay has weaknesses that prevent the opportunity being taken.

A strategy based on Internal Development would be …

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 Raise working capital

The key requirements for cash are …

 To purchase tools (floor scrubbers, vacuum cleaners), materials

(cleaning chemistry, consumables) and other equipment.

 To establish the business as a business — company formation, web

site, telecoms and computing, and so on.

 Reserves to cover cash flow from the period of the first contract
through to being paid.

 Engage a business partner

The key requirements for a business partner are …

 Experience in establishing small businesses.

 Practical experience in complementary services for the cleaning

industry. For example, to seize the opportunity presented by
forthcoming legislation for staff to be trained. So, someone having
training skills would be desirable.

However, these are mechanistic strategic objectives. Because Kay is risk-

averse and is reluctant to take a leap into the unknown, the most important
strategic action is finding emotional support to help her through the first
steps of creating a new business and going self-employed.

 Prepare to go self-employed
This is the most important element in Kay’s strategy. Actions may
include …

 Mentoring to become self-employed.

 Taking the small preparatory steps in advance of resigning from

her employer.

 Seeking support and advice from local business links.

Note that the other quadrants in the TOWS framework have been ignored at
this stage. One cannot have a Growth Strategy unless there is a business to
grow; one cannot have External Development without a business (in any
case, this area has been covered to some extent by some customers
indicating their willingness to engage Kay).

The main point from this case study is that strategy is not mechanical and
must also incorporate the human and emotional aspects.

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Appendix 7 — Case study: Wi-Fi in the Basic Burger Bar

We introduced the Basic Burger Bar in §4.2 where the opportunity to serve
plated food was strategically declined. In this case study, we’ll add a new
aspect to the study — the provision of free Wi-Fi in the restaurant so that
customers can use their own computing devices (laptops, tablets, phones)
to check email, surf the web and so on.

The context needs extending to embrace more of the social culture of the
burger bar, and the purpose needs to be modified.

[Context] The Basic Burger Bar is a fast food restaurant. The duration that
a customer may be in the restaurant is short; from entry, ordering, paying,
eating, clearing and leaving is unlikely to be longer than 30 minutes.

The environment is designed to reflect these short duration visits: The

décor is garish, the noise level is high, and seats are designed for ease of
cleaning not for comfort.

[Purpose] Decide whether to offer a free Wi-Fi service in the Basic Burger
Bar.

[Threat] Loss of Customers: observation of customer attendance and exit

surveys indicate that some are frequenting nearby competitors who offer
free Wi-Fi for their customers to use whilst on the premises.

[Threat] Reputation: risk being seen as out of touch and unattractive to the
mobile computing generation.

[Opportunity] To retain our customers.

[Weakness] Encouraging long-stay customers is inconsistent with the ethos

of fast-food/quick entry-to-departure. There is insufficient table space to
hold the net increase in occupants.

[Weakness] Although central IT skills can undertake the provision, there are
no front-of-house technical support skills. Most staff are not technically
knowledgeable and the jobs have low skill requirements. Giving a customer
technical support would deflect their attention away from their fundamental
job function and be inconsistent with the notion of ‘fast.’

Placing these factors on a SWOT/TOWS diagram could result in something like

Figure 22.

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Figure 22 — SWOT/TOWS for Wi-Fi in Basic Burger Bar.

Strategy review
The main driver for change is to keep customers from drifting away to
competitors. The threat is exacerbated by important weaknesses. The
strategic action is …

 Convert the Threat into an Opportunity — attract the techno customers.

 Convert the Weakness into a Strength — Invest in Wi-Fi.

 And finally to invest in External Development by advertising to inform

their customers that Wi-Fi is available for free in the Basic Burger Bar.

Note that this type of strategy is a Catch-Up action. It is also known as a

‘me-too’ response so that your distinction of being the “laggard” is averted.
It doesn’t provide you with a new feature to distinguish yourself from your
competitors. A Wi-Fi service standard may also be needed, for example to
cover how long a customer may stay connected; and information for
customer self-help when using Wi-Fi in the restaurant would be essential.

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Appendix 8 — Weighting the factors

We’ve tacitly assumed that the factors in SWOT have a basic equality. In real
life this isn’t so; some factors have a stronger impact than others. There are
many methods of illustrating the relative importance of factors. Two popular
ways of representing impact are spider diagrams and bubble graphs. See
the example in Figure 23.

Figure 23 — Example diagrams to illustrate the impact of a factor.

Note — Constructing spreadsheets for this kind of visual display of data

is beyond the scope of this Useful Guide.

There are many methods of assigning relative importance scores, and to

some extent it depends on the purpose of the SWOT analysis. For example …

 Score = agreement × criticality

This approach may be useful in a workshop where gaining
consensus among the participants is a goal. The score is a scalar
value and lends itself to a spider diagram.

 Score = relevance to purpose × importance

This may be useful where multiple factors need to be taken into
account. The relevance and importance position the factor (x and y
axes) on a bubble diagram with the size of the bubble being the
score.

Printing each of the four SWOT quadrants on very large paper such as a
flipchart (ISO A1) is a useful method to gain stakeholder agreement
(buy-in) to the analysis.

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About the author

author of this useful guide. ALT TEXT

Alan Sarsby has enjoyed over forty years in

many different careers, initially in electronic
engineering and IT strategy then later in
customer service and business change.

He has developed and implemented novel

approaches to enterprise design and
change leadership. Since 2001, Alan has
specialised in training services.

He is a conference speaker and has had

articles published in the trade press.

Alan is also the author of A Useful Guide to

Managing Email.

Alan runs an independent training company that specialises in …

 The application of leadership and management-ship to practical

situations
 Training trainers
 Making sense of messy problems, Quest and Lost in the Fog projects
 Interpersonal communications and presentation skills
His clients include: commercial and industrial, charitable, voluntary,
and local government.

Alan may be able to help you with …

 Training, seminars, conference speaker.

 Customised versions of this Useful Guide.

Please contact Pansophix on [email protected]

or telephone 0845 260 2820.

When not working with clients or writing, Alan is an enthusiastic

photographer. He is an active member of a local Camera Club, a tutor for
leisure photography at Otley College in East Anglia, and a photographic
judge.

—∆—

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