Strength and weakness appraisal of a business unit


In order to discuss Strength-weakness Analysis we have taken Modi-Xerox as a case. Given below is a chart showing strength-Weakness appraisal of Modi-Xerox.

§ Strong brand name
§ Value engineering skills.
§ A solid base of 40,000saisfied customers.
§ Excellent market coverage.
§ A well-motivated sales force.
§ Access to the Xerox product range.

§ Higher price compared to competition
§ Narrow product range
§ Lower productivity compared to international standards.
§ Inadequate Investments on information software, systems and databases.
§ High personnel attrition rates.

Internal appraisal:

The next task is internal appraisal. The basic purpose of internal appraisal has already been dealt with while discussing strategic planning process at the corporate level. We are not repeating it here.

The main tasks in internal appraisal:

1. Assessing the strengths and weakness of the business unit.

2. Assessing the health and status of the different product lines, products and brands.

3. Assessing the competitive advantages available to the unit.

Assessing Strengths and Weaknesses of the Business Unit

As an illustration, let us take Modi Xerox and see what they have identified as their strengths and weakness. The details are provided in above chart.

With this understanding of how a strength-weakness appraisal would basically look like, let us go into the details of how the task of strength–weakness analysis is actually carried out.

Aspects to be covered in S-W analysis

The strengths and weakness of the unit have to be assessed in each of the functions / areas such as:

* Marketing.
* Finance.
* Manufacturing / operations.
* R&D
* Human resources.
* General factors: Image of the unit, its relative priority, etc.

Actually, the strength–weakness is appraised in several aspects in each of the functions/areas listed above. Both qualitative and quantitative evaluations form parts of this appraisal. The intention is to make a very detailed as well as reliable estimate of the capabilities of the business unit.

Strength-Weakness in Marketing

To assess the strength-weakness in the marketing area, a large number of issues have to be covered. These include:

(i) Overall market growth.
(ii) Firm’s market share.
(iii) Competitors’ shares
(iv) Firm’s production capacity in relation to market potential.
(v) The lifecycle stage of the various products
(vi) Brand equity
(vii) Product quality/sophistication/technology
(viii) Synergy in the product-mix
(ix) Customer perception/customer satisfaction level.
(x) Profitability, prices and margins vis-à-vis competition.
(xi) Marketing capability overall.

In this appraisal each product line, product and brand of the firm gets evaluated individually.

The typical questions that are raised include the following

Market growth

How does the market behave? What are the recent growth trends? Is the overall growth rate satisfactory? Is there any indication of some stagnation setting in? Or, is it poised for a buoyant growth? If so, what are the underlying causes?

Market share

What share of the market (s) has the firm been holding for the last four to five years and how consistent is the position? Is this share spread out or concentrated with regard to the number of customers? Does the firm find a place in the fist three positions? How does the market share compare with that of the competition? Is the relative market share satisfactory?

Production capacity

Is the production capacity of the unit sufficient in relation to the overall market growth, the firm’s potential and its market share position? Considering the extent of contribution expected of the unit towards total corporate growth, should it plan for an expansion of capacity?

PLC stage of the products

In what phase of their lifecycles are the products placed? What is the position with respect to each of them? Composite plotting of the life cycle positions of products can indicate emerging gaps. A business unit, which is currently very profitable but has not provided for new products for the future, will show virtually all of its products at or near the period of peak profitability. Though from the standpoint of current cash flow, it is a strength, there is an inherent weakness in the situation as the slide would begin son. The question to be considered is: If there are indications of decline for some of the products, are there enough new products ready t substitute them?

Brand equity and product quality

These issues are dealt with more elaborately in the next section on assessment of the health of each product line and brands.

Customer perception and customer satisfaction level

How do current customers and potential customers rate the products of the firm? How are marketing practices received by the major parties involved, i.e. the consumers and the trade?

The aforesaid analysis may involve in house as well as external specialists to have a clear picture of the intended purpose for which it is undertaken. It may initially look cumbersome but its worth all the trouble to have better results for use of the Company.