SWOT Analytical Tool

Very often, we can encounter this SWOT Analytical tool being used in our work place. In fact, this is indeed a very common analytical tool frequently used to generate strategic alternatives from a situation analysis.

It is particularly useful when we need to concentrate on issues that potentially have the most impact but we have very limited amount of time available to address a complex strategic situation.

SWOT analysis has commonly being found in the corporate level, business unit level and frequently in marketing plans

SWOT analysis classifies …

• the internal aspects of the company as strengths or weaknesses and
• the external situational factors as opportunities or threats.

By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.
The completed SWOT profile can be arranged as follows:

When the analysis(both internal and external) has been completed, a SWOT profile can be generated and used as the basis of goal setting, strategy formulation, and implementation. By understanding the company’s strength(S),weaknesses(W),opportunities(O) and threats(T), it helps top management further into building up their vision and mission.

Some internal factors (for understanding strength and weaknesses) that can be considered are:

• Company culture, company image, organizational structure, key staff, access to natural resources, position on the experience curve, operational efficiency, operational capacity, brand awareness, market share, financial resources, exclusive contracts, patents and trade secrets

Some external factors(opportunities and threats) that can be considered are:

• Customers,competitors, market trends, suppliers, partners
• Social changes,new technology,economic environment,political and regulatory environment.(macro-environmental variables and addressed in a PEST analysis)

Some salient points/rules to note when preparing the SWOT analysis:

• Important to try to interact the quadrants in the SWOT profile. For example, the strengths can be leveraged to pursue opportunities and to avoid threats, and managers can be alerted to weaknesses that might need to be overcome in order to successfully pursue opportunities.
• Be realistic about the strengths and weaknesses of your organization
• SWOT analysis should distinguish between where your organization is today and where it could be in the future
• SWOT analysis can be very subjective hence avoid grey areas if possible. Always be specific
• Try to keep the SWOT short and simple and avoid complexity and over analysis.

• To ensure the quality of the analysis, we should try to hold interviews not only with the CEO but with the company’s spectrum of stakeholders such as employees, suppliers, customers, strategic partners, etc. Information also should not be hastily obtained.

• The need to understand the limitations of the SWOT analysis like

the SWOT framework has a tendency to oversimplify the situation by classifying the firm’s environmental factors into categories in which they may not always fit. This is because sometimes the classification of some factors as strengths or weaknesses, or as opportunities or threats is somewhat arbitrary. For example, a particular company culture can be either a strength or a weakness. A technological change can be a either a threat or an opportunity. Instead of superficially classifying these factors, the firm’ should be aware of them and try to develop a strategic plan to use them to its advantage.

Some examples of Strength (S):

• Powerful retail brand
• Reputation for value for money
• Convenience for shopping
• Wide range of products and services
• Location of the business
• A very profitable business
• A very competitive business and culture
• Quality processes and procedures
• Long years in business
• Strong brand
• A new, innovative product or service
• Any other aspect of your business that adds value to your product or service.

Some examples of Weaknesses(W):

• Location of the business
• Poor quality of goods and services
• Lack of marketing expertise
• Damaged reputation
• Undifferentiated products or services ( ie in relation to your competitors)

Some examples of Opportunities(O):

• A new international market
• Mergers, joint ventures or strategic alliances
• A developing market like Internet
• Moving into new market segments that offer improved profits
• Market vacated by a competitor
• New products or service development

Some examples of Threat(T):

• New competitor(s)
• A new competitor with reliable cheaper product or service
• Competitors have superior distribution channel
• New taxation or other government legislation introduced that affects the company’s product or service
• Being number one re being target of competition, locally and globally
• Exposed to rises in cost of raw materials,etc

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