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Planning Your Strategy


2/1/2005
By Gary Naples

A thorough business gameplan warrants some critical assessment to think beyond the numbers. One of the best tools is an honest SWOT analysis.
 

Strategic planning on any level is all about knowing where your parts business is going and how it will get there. It's easy to lose sight of the ultimate goal when you are preoccupied with immediate issues. This is the reason why a strategic plan is so critical. It won't guarantee success, but it will decrease the odds of failure.

In my second book, Beyond The Numbers: Managing the Assets of an Automobile Business, I stress that planning a strategy relies on the store owner /manager knowing the strengths, weaknesses, opportunities and threats of the organization. In fact, I devote a whole chapter to strategy development. One of the time-worn but still effective steps in strategy thinking, which I recommend and cover in-detail in my book, is the SWOT analysis-an acronym for Strengths, Weaknesses, Opportunities, and Threats. The process of utilizing the SWOT approach requires an internal survey of the strengths and weaknesses of a company and its external opportunities and threats. It is a valuable strategy-planning tool because it focuses on the key elements of a businesses position within the market.

Strengths and weaknesses are essentially internal elements of the business or organization, and they apply to matters concerning resources, operational programs and company organization relative to performance in key areas such as sales, marketing, distribution, management expertise, inventory control, inventory capacity, product quality and pricing. Strengths are things a business is doing right.

They can be anything from competencies, such as consistently supplying the right part the first time every time, to competitive advantages, such as having the largest inventory in the area. Weaknesses are things the business does poorly as compared to the competition, or some existing condition that puts it at a disadvantage. These could be anything from lack of product knowledge among counter staff to unorganized delivery to wholesale accounts. The objective of analyzing strengths and weaknesses is to reveal the business' outstanding good points and bad points, achievements and failures and other critical features.

Opportunities and threats are external elements. Exploring opportunities provides realistic avenues for future growth and areas in which the parts store can realize the most potential to develop a competitive advantage. For example, adding a product line, with emerging popularity, to your inventory that no one else in your market place yet offers or is considering. Clearlym this could be an opportunity for growth if its addition is timely and at the ground floor of customer appeal. On the other hand, threats are factors that can lead to a decline in the future performance of the parts store. A competitor setting up shop in your market place and offering a larger parts selection and better parts service would be a clear threat to the future of your stores performance.

Performing a SWOT analysis helps you identify the operational assets and operational liabilities of your operation. In essence, strengths can be thought of as core assets, and weaknesses can be thought of as competitive liabilities. In the case of opportunities, these are future assets to be cultivated, whereas threats are future liabilities to be avoided.

When SWOT analysis is completed, the strategy may readily present itself or, as is usually the case, emerge as some amalgam of tactics. Whatever the direction the analysis takes, strategic action will be as follows:

 


  • Build on strengths

  • Overcome weaknesses

  • Seek and seize opportunities

  • Prevent and avoid threats

     

The first step in a SWOT analysis is to construct a worksheet by creating four sectors: one each for strengths, weaknesses, opportunities and threats. After constructing the worksheet, the next step is to list specific items, related to the problem at hand, under the appropriate heading in the worksheet. To keep the worksheet manageable and to avoid overgeneralization, limit the list per heading to 10 or fewer items.

As the worksheet is constructed, SWOTs can be entered either by the store owner or manager or by the store personnel as a group. Group SWOT analysis is particularly effective in providing structure, objectivity, clarity and focus to discussions about strategy, which might otherwise tend to wander or be strongly influenced by company politics or individual personalities.

As SWOTs are entered on the worksheet, remember that they are "one handed." In other words, an item is either a strength or a weakness-not both. The same is true for opportunities and threats. Additionally, as SWOTs are entered on the worksheet, they should be ranked in order of importance.

The following example below illustrates the use of SWOT analysis as the foundation for planning strategy. In this example, a store owner is considering adding a complete line of tires as an additional product line. The owner and store employees met and conducted a SWOT analysis to help develop a strategy. The example shows SWOT worksheet construction and what might appear on the worksheet.

INTERNAL STRENGTHS

 


  1. Existing counter persons are well trained and possess a high technical degree of automotive systems-related knowledge.

     


  2. Store personnel are enthusiastic about adding additional product lines.

     


  3. Sufficient funds to invest in the inventory expansion.

     


  4. Successful experience in the past with the addition of new product lines; thus, expertise in expanding sales skills.

     

INTERNAL WEAKNESSES

 


  1. Current counter persons are not well versed in tire applications or tire technology.

     


  2. Warehouse is close to capacity; shortage of stock space could develop.

     


  3. Limited area for tire mounting; could handle only one vehicle at a time.

     


  4. Some department personnel prefer exploring other products such as speed and performance equipment rather than tires.

EXTERNAL OPPORTUNITIES

 


  1. Retail customer surveys suggest that tires could be a profitable addition to the inventory.

     


  2. Customer base will increase, leading to more sales of chassis-related parts.

     


  3. Wholesale customers have expressed strong interest in the store as a source of quality tires at a good price.

     


  4. There are no exclusive tire dealers in the immediate market selling tires.

EXTERNAL THREATS

 


  1. A competitor parts store not more than five miles away recently added tires to its product line.

     


  2. The competitor parts store can accommodate two vehicles at a time for tire installation.

     


  3. Due to the increase in inventory needed, any market changes causing a decline in tire sales will produce a costly increase in inventory holding costs.

     


  4. A discount department store that offers tires is planning to come to the area within a year.

Often, a business may add a new product or service; expand operations such as night and weekend service, without heeding its own strengths and weaknesses. When such internal evaluations are carried out, areas requiring some changes reveal themselves. In the above example, the first weakness to overcome in the parts store is training counter staff so they can effectively assist customers in making the correct tire-buying decisions. Making a list of internal weaknesses not only reveals areas that can be changed to improve departmental operations; it also reveals some things that are beyond control.

The external audit of opportunities and threats is complementary to the internal study in SWOT analysis. Information about customer tendencies and industry information is particularly valuable at this stage when evaluating opportunities.

Threats must be studied closely. They come in various forms. In the above example, an existing competitor and the imminent discount department store are present and future threats that must be addressed. If tires do not sell as well as anticipated, another possible threat could be impaired cash flow, excess inventory, and obsolescence as a result of the additional inventory investment.

A SWOT analysis can form the foundation on which various strategies can be constructed for any business or segment of the business. However, for SWOT analysis to be most effective, it must be flexible. Business conditions do not remain constant; therefore, the analysis should be updated to compensate for change.













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