Theoretical Business Tools
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What is a: SWOT; SLEPT AND PEST ANALYSIS?
There are three main theoretical business tools that most business guru’s, academics and experts advocate. These are:
These acronyms will come up though the whole course, as they impact upon all businesses that are successful and are aspiring to be. We will briefly consider these valuable business tools. To illustrate each of these business analysis tools, the following diagrams explain how they are applied and used:-
Strengths and weaknesses are internal and external to an organisation. A good example of external opportunities and constraints is that of the building industry in the UK today. The government is encouraging developers to build on 'brown field' sites as opposed to 'green field' sites. The constraint therefore is not being able to develop on green field sites while the opportunity is that of developing on brown field land. But, just as important as these three are, the greatest problem for business is threats – competition; regulation, compliance, etc.
The best way of thinking about constraints and opportunities is to realise that good businesses will seek to turn constraint into opportunities, while at the same time building on existing opportunities.
Organisations should use their strengths such as having a good reputation, and experience in a particular field or segment of the market coupled with good marketing and resources, to build competitive advantage.
Before creating business plans or when evaluating existing ones it is important to 'scan' the external environment’, for forces, that impact on the business. This can be done takes by using the very useful SLEPT analysis, which is an investigation of the Social, Legal, Economic, Political, and Technological influences on a business. In addition it is also important to be aware of the actions of your competitors. These important forces are continually in a state of flux and any business large or small, should at regular intervals carry out a SLEPT Analysis.
All businesses are influenced by SLEPT factors. For example, some of the SLEPT factors affecting the airline industry in recent years include:
- Social: increased popularity of foreign travel leading to a boom in demand for air travel. However, this has been adversely affected by international terrorism.
- Legal: there are increasingly tight rules about the materials that need to go into aircraft construction in order to make them safer and more resistant to fire hazards. This has had the impact of raising costs.
- Economic: lower interest rates have meant that people have more disposable income to spend on luxuries like long distance air travel.
- Political: the development of freedom of movement and trade in the European Union has led to greater levels of competition on European routes coupled with increased movement of people and recently – Brexit!
- Technological: modern aircraft are safer and more economic to run than in the past making possible cheap air travel.
Before creating business plans or making decisions, it is important to 'scan' the external environment; this tool, is similar to the SLEPT analysis, be has a much greater depth and focus; that is more useful to larger businesses. This can also be achieved through a PEST analysis, i.e. an investigation of the Political, Economic, Social and Technological influences on a business. In addition it is also important to be aware of the actions of your competitors. These forces are continually in a state of change in any business.
The PEST Square
PEST Stands For...
- Political changes: relate to changes in government influence and can have huge significance for companies. Changes in the priorities for public spending or the UK 's relationships with other countries can open or close major markets. European Union (EU) regulations can have similar effects while the accession of new members (eg Poland) can bring business opportunities.
- Economic changes: are closely related to social ones. The economy goes through a series of fluctuations associated with general booms and slumps in economic activity. Businesses will be more encouraged to expand and take risks when economic conditions are right, e.g. low interest rates and rising demand.
- Social factors: relate to pattern of behaviour, tastes, and lifestyles. A major component of this is a change in consumer behaviour resulting from changes in fashions and styles.
- Technological changes: have also become particularly significant in the post-millennium world. This is particularly true in terms of modern communication technologies. All businesses need to be aware of the latest relevant technologies for their business and to surf the wave of change.
There are many other tools for analysis that are currently being presented in academic learning and theory, but the three given here have stood the test of time, and are universally used across business and academic settings the World over.
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Sample Essay on SWOT Analysis of GAP Inc.
SWOT Analysis of GAP Inc.
SWOT analysis of GAP is an effective method that the company applies in determining its ability to survive in the market, while also growing revenue base. GAP Inc. is a leading world-wide retailer that deals in clothing, accessories and personal care products for the whole family. It operates six globally recognized brands including, Old Navy, Banana Republic, Gap, Intermix, Athleta and Piperlime. GAP has several more than 3,200 stores across the world and also operates an e-commerce website from where customers can get products information and do their shopping.
What is SWOT Analysis of GAP Inc?
A SWOT analysis of GAP Inc. basically explores the strengths, weaknesses, opportunities and threats of the clothing giant, with regards to the global market which targets. By determining the company’s strengths and opportunities, the management will be able to come up with measures on where emphasis is required for continued success.
The weaknesses and threats of a business are indicators of failure and by knowing them, the company can easily make decisions and plans for eliminating mistakes and avoiding losses in the future. The following is a comprehensive SWOT analysis of GAP Inc.
With the six brands that it operates globally, GAP has been able to attain a strong product portfolio and brand recognition. Coupled with its wide range of products that target the whole family, GAP Inc. enjoys global customer recognition and loyalty.
Its’ presence over a wider geographical area is also another strength that has made several people across the globe to identify with the company’s products.
Because of the global reach of GAP Inc. the business is able to record a high inventory turnover ratio. In fact, this is one of the main reasons the company commands a strong financial position in the market.
GAP Inc’s dedicated section for baby products is also another feature that has kept the business afloat since such products are always in demand even when the market is not doing well.
Despite the global customer base that GAP Inc. has, the company heavily relies on vendors from outside to sell its
products. This is an area of weakness since such vendors are susceptible to various kinds of mistakes that may hinder the successful operations of the company.
The high competition in the apparel and accessories industry is also another point of weakness since it implies many customers are learning of new brands that could shift their buying trends. Besides, it also limits the market share of the company.
GAP has not fully focused onto penetrating the emerging economy markets and this has limited its ability for expansion and revenue growth.
One of the opportunities that GAP Inc. can exploit is the emerging markets in Asia and Europe. These markets present an ideal platform for expansion and profitability.
The growing use of technology in business is also another opportunity. Through effective online campaigns and shopping, the company can easily attract new customers for its products and brands across the globe.
Considering the good performance of GAP Inc. in operating six major brands is proof that it can still form franchise units and joint ventures with other companies in the industry for greater development.
The readily available market for kids’ apparel and products is also another opportunity that the company can fully explore for maximum profits.
The clothing and accessories market is experiencing a very stiff completion between various brands, offering more fashionable products at better prices than GAP Inc.
The rapid change in fashion trends is also another threat that the company has to plan on how to handle.
Counterfeits is yet another issue that is threatening the existence and success of businesses today.
Another threat is the increased production and operational costs, which could water down profits.
Conclusion on SWOT Analysis of GAP Inc.
According to this SWOT analysis of GAP Inc., the company is strong enough to withstand market forces considering its wide selection of products and brand portfolio, which have ensured global recognition, loyalty and financial power. However, it still needs to focus on international expansion into the emerging economies and intensifying its online presence. Besides, GAP Inc. also needs to consider the shifting fashion trends in order to meet customer needs.
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