SWOT Analysis

The SWOT (Strength, Weakness, Opportunity and Threat) analysis is a useful tool for any business. SWOT is a two-dimensional analysis, in which the ‘Internal’ and ‘External’ dimensions of an organization are analysed. The objective of SWOT is to evaluate the internal strengths and weaknesses of an organization, along with its external threats and opportunities.

What is SWOT?

SWOT Analysis is a useful technique (more of an assessment tool) commonly used by businesses to understand the Strengths and Weaknesses, and for identifying the Opportunities as well as the Threats they face.

SWOT stands for ‘Strengths, Weaknesses, Opportunities and Threats’.

SWOT Analysis is commonly used as a planning tool to strategically evaluate the strengths, weaknesses, opportunities and threats in a project or in a business venture.

SWOT uses business objectives and identifies both internal and external factors that are either favorable or unfavorable to achieving that objective.

SWOT analysis includes a series of checklists derived from the marketing audit and the PESTLE analysis, presented as the internal strengths and weaknesses, and the external opportunities or threats (Baines, 2016).

SWOT is also known as TOWS or SCOT (Strength, Contains, Opportunities, and Threats) or ETOP (Environment Threat and Opportunities Profile).

SWOT Explained

Strengths

Strengths are the internal capabilities that a firm can leverage to meet its objectives. Strengths are those things that enable a firm to do something well or enhances its competitiveness.

These are the positive competencies of a firm in all its functional areas.

• Valuable skills, competencies, or capabilities
• Valuable physical assets
• Valuable human assets
• Valuable organizational assets
• Valuable intangible assets
• Important competitive capabilities
• An attribute placing a company in a position of market advantage

Examples: Adequate financial resources, Superior technological skills, Robust distribution system, Loyal customer base. Better manufacturing capability.

Here are some questions that a firm needs to ask:

• What advantages does your organization have?
• What do you do better than anyone else?
• What unique or lowest-cost resources can you draw upon that others can’t?
• What do people in your market see as your strengths?

Weaknesses

Weaknesses are the internal limitations of a firm that hinders it’s ability to meet its objectives. These are the things that a firm lacks or does poorly, it can also refer to conditions that places the firm at a disadvantage.

These are the negative competencies of a firm in all its functional areas.

Resource weaknesses relate to:

• Inferior or unproven skills, expertise, or intellectual capital
• Lack of important physical, organisational, or intangible assets
• Missing capabilities in key areas

Examples: Lack of managerial talent, Poor image of the firm, Weak distribution network, Under utilization of capacity, Narrow product line.

Here are some questions that a firm needs to ask:

• What could it improve?
• What should it avoid?
• What are people in your market likely to see as weaknesses?
• What factors lose you sales?

Opportunities

Opportunity is a favourable situation, which enables an organization to strengthen its present position. These are the ‘External factors’ that the company may be able to exploit to its advantage.

Examples: Changing customer preferences, Technological advances, New markets, Online distribution channels, Population life style changes (like the Vegan market).

• What good opportunities can you spot?
• What interesting trends are you aware of?

Threats

Threat is an unfavourable situation which results in risk and damage to an organization. These are the ‘Current and emerging external factors’ that may challenge the company’s performance.

Examples: Slower market growth, Rising sales of substitute products, Technological advances, Changes in customer tastes and needs.

• What obstacles do you face?
• What are your competitors doing?
• Are quality standards or specifications for your job, products or services changing?
• Is changing technology threatening your position?

Benefits & Limitations of SWOT Analysis

Benefits

• Identifies the core competencies of the firm.
• Helps in setting objectives or strategic plan
• Simple to use
• Flexible and can be adapted to varying situations
• Development of goal – oriented alternatives
• Useful as a starting point for strategic analysis
• Source of information for strategic planning
• Builds an organization strengths
• Reverses organizational weakness
• Prepares organization to be proactive and face threats
• Helps to know the past, present and future

Limitations

• Time consuming and expensive
• Insufficient research and development facilities
• Faulty products due to poor quality control
• It does not provide solutions or offer alternative decisions
• It can generate too many ideas but does not helping in choosing which one is best
• It can produce a lot of information, but not all of it is useful
• Poor industrial relations
• Lack of skilled and efficient labour etc.

Issues with SWOT Analysis:

• Long lists with no attempt at prioritization
• Over-generalisation – SWOT used as a substitute for analysis
• Risks when SWOT is used to guide strategy

How I Started The UK’s Fastest Growing Company: My Gymshark Story | Ben Francis (Conduct a SWOT analysis for Gymshark)

Phases of SWOT Analysis

1. Internal analysis
   The main objective is to evaluate the organization’s, technical financial, and management capabilities, with the objective of identifying the internal strengths and weaknesses, which are essential to understanding the competitive position of the company within its environment.

2. External analysis
   
   • General environment: general market trends.
     
   • Activity sector: trends in our area or context.
   • Nearby environment: Possible events that can affect us directly in short, medium or long term.

3. SWOT Matrix
   Create the SWOT matrix.

4. Prioritization of Actions
   Once the SWOT matrix is prepared, create a Feasibility-Impact matrix where you list the feasibility and impact of the various actions.

An internal survey is required for strength and weakness and an external survey is required for opportunity and threats.

In a interdependent world, opportunities can come up anywhere, anytime, just as threats can come from any part or segment of global industry.

SWOT Analysis: Things to Consider

SWOT Analysis: Things to Consider

• Be focused but generate a range of opinions
• Use an analysis of the macro marketing environment as input to the opportunities and threats
• Rank the points listed in order of importance
• Have supporting evidence
• Be honest (the good and the bad)

(Dibb et al, 2012)

Examples of SWOT Analysis

SWOT Analysis of a Studio

Present:

• Strengths: Skill of photographers/videographers and other creative people, Company reputation, Attractive premises, Many repeat customers, Price competitive
• Weaknesses: Weak online sales, No sales growth, Modest profit margins

Future:

• Opportunities: New technology may enable cheaper production costs, Develop website & online presence.
• Threats: New technology means customers may do photoshoots and basic photo/video edits themselves. Customers may preferred “themed” shoots to traditional.

SWOT Analysis of Apple

• Strengths: Brand Identity, Innovative Products, Loyal customer base, Brand value reputation, Marketing advertising, Distribution chain, Customer focus.
• Weaknesses: Premium Pricing, Lack of Competition, Incompatibility, Dependency on other suppliers for critical parts
• Opportunities: Smart wearable technology, Expand distribution networks, Use of Artificial Intelligence
• Threats: Counterfeit products, Lawsuits

References:

Dyson, R. G. (2004). Strategic development and SWOT analysis at the University of Warwick. European journal of operational research, 152(3), 631 640

Nixon, J., & Helms, M. M. (2010). Exploring SWOT analysis – where are we now? A review of academic research from the last decade. Journal of Strategy and Management, 3(3), 215-251.

More Useful Read

The TOWS Matrix: Putting a SWOT Analysis into Action

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