SECTION 2
EVIDENCE REVIEW
2.0 Introduction
This section contains a review of the analytic frameworks adopted while analysis the current business environment of Sports Direct and offering workable solutions to its problems. The SWOT Analysis and Fielder’s Contingency Model were both discussed to highlight their advantages and pitfalls and weighed to ascertain their relevance in the study. Also, an assessment of the Leader-Member Exchange (LMX) Model aimed at gaining insight in its importance, procedure, and applicability to the litany of problems at Sports Direct.
1.1 SWOT Analysis
2.1.1 Introduction to SWOT Analysis
No organization survives market competition without solid internal and external structures which must undergo regular reviews for proper adjustments considering the volatile nature of business environments. This implies a careful examination of all factors classified as strengths, weaknesses, threats, and opportunities to formulate a dynamic plan relevant to industry demands and with capabilities of providing an edge over market contenders. Now, the SWOT Analysis proves an important tool.
SWOT is an acronym for STRENGTH, WEAKNESS, OPPORTUNITIES and THREATS. It is a management term often used in the administrative process of an organization. The term also refers to a strategic tool for planning (Ivancevich et al., 2007).
SWOT Analysis aids in assessing an organization’s current business environment to identify its weak points, internal strength, external opportunities and existing or anticipated threats incorporated in decision-making to provide lasting solutions to organizational problems. SWOT analysis helps to synchronize factors from both internal and external environments of the organization (Kouzes & Posner., 1987).
Among other purposes, SWOT Analysis helps in identifying new problem-solving approaches with an organization. It plays a crucial role when decisive actions in new opportunities or threats become unavoidable. In addition, the model provides justification for solutions offered as well as guides management in deciding when or what changes are necessary within an organization, especially when existing solutions have failed. The processes of SWOT Analysis allow mid-way reviews and adjustments for favourable results (Lamb & McKee., 2004).
Figure 5: SWOT Analysis Model
2.1.2 Internal Analysis
One of the best applications of SWOT Analysis is in presenting all internal factors deemed crucial in an organization’s survival. The factors include all activities performed under supervision by the management in delivering products and services which determine a company’s success or failure. These elements are categorised as strengths or weaknesses and are important in achieving competitive advantage.
While weaknesses refer to the internal factors which are responsible for failure, it is worth noting that certain circumstances can either represent strength or weakness depending on their end results.
The following are a list of the internal factors found within any organization:
- Operating Capital
- Number and Quality of Employees
- Efficiency of the Organizational Structure
- Customers’ Loyalty
- Equipment/Technology
- Suppliers/Channels of Distribution
- Patent Rights
- Copywrite Materials
2.1.3 External Analysis
The external analysis is complementary to the internal evaluation discussed above. Since no company exists in a vacuum, the external analysis seeks to identify all opportunities and threats within an organization’s external business environment, which comprises of the eco-system, markets and third parties as presented in Figure 4. Organizations have no control over high or low-impact external environments; therefore, managers need a thorough assessment of the factors to correctly classify them as either opportunities or threats (Gharajedaghi J., 2006).
Valentin E. K. (2001) described market as a place where companies find their purpose of existence and a meeting point where customers or consumers of goods and services assemble. End-users of goods and services determine the producer’s profitability and as such their satisfaction present an important challenge in business.
Within the eco-system, we find existing factors and other expected ones with impacts on the organization, but these are independent of the market. An example of elements in the eco-system is new technologies which can transform business operations when utilized or create rooms for closure where managers fail to adopt same (Jago., 1982).
Third parties, as shown in Figure 6, include business partners, competitors, governments, and regulatory institutions, including the media or other entities which have impact on the organization but are neither customers nor part of the eco-system.
Every organization operates within a political, economic, social, and legal environment which, in turn, has different opportunities and threats. These factors are unavoidable but can create huge benefits when managers exploit them with effective business models. A good knowledge of the factors enables organizations to make adequate preparations against their weaknesses thus reducing impact of the threats (Newstrom & Davis., 1993).
As shown in Figure 7 below, opportunities for growth abound when managers implement changes within any of the following variables: lifestyle, social patterns, technology, population growth and government policy. SWOT Analysis therefore provides organizations with clear pictures of strategic factors that provide opportunities for diversification or expansion.
Figure 7: External Opportunities
Barnett Quaicoo, 2018
On the other hand, Figure 8 shows that changes in variables such as price reduction by competitors, high cost of supplies, change in lifestyle, new government policy, introduction of new technology, changes in consumer behaviour and economic recession will lead to low earnings or outright closure. This proves the importance of managers having knowledge of SWOT Analysis and applying same to gain competitive advantage (Valentin., 2001).
Figure 8: External Threats
academicscores.com 