SWOT Analysis

Overview

Another model popular in both the business and academic environments is SWOT. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. SWOT is a useful tool when you need to cover a large scope.

• Strengths are those elements of a company which provide them competitive advantage. These can range from product strengths to strategic strengths.
• Weaknesses are the opposite of strengths. They are the elements of a company which put them at a competitive disadvantage. Often this can include incomplete product features as well as marketing and distribution problems. Both strengths and weaknesses reflect internal company factors.
• External factors are covered under opportunities and threats. These could come from a wide range of sources including government actions, alliances and customers, for example. They can also be found in the present or potentially in the near future.

There are two approaches to detailing with opportunities and threats.

1. One approach takes the view of the competitor you are evaluating, where you document the opportunities and threats the competitor’s management might identify.
2. The other approach is to document your firm’s opportunities and threats against this competitor. Either approach will work, if applied consistently. The only key difference is that in the first approach you must consider your firm separately, while in the second you might be tempted to evaluate your firm only through the competitors.

SWOT Questions[1]

To carry out a SWOT Analysis, answer the following questions. Where appropriate, use similar questions:

Strengths:

• What are your advantages?
• What do you do well?
• What do other people see as your strengths?

Consider this from your own point of view and from the point of view of the people you deal with. Don’t be modest – be realistic. If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths!

Weaknesses:

• What could you improve?
• What do you do badly?
• What should you avoid?

Again, consider this from an internal and external basis – do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities:

• Where are the good opportunities facing you?
• What are the interesting trends you are aware of?

Useful opportunities can come from such things as:

• Changes in technology and markets on both a broad and narrow scale
• Changes in government policy related to your field
• Changes in social patterns, population profiles, lifestyle changes, etc.
• Local Events
• Demographic shifts

Threats:

• What obstacles do you face?
• What is your competition doing?
• Are the required specifications for your job, products or services changing?
• Is changing technology threatening your position?
• Do you have bad debt or cash-flow problems?

A SWOT Analysis Must Be More Than a Set of Four Lists[2]

• Some strategy related strengths are more important than others and may count for more in the market place and in building a successful strategy.
• Some strategy related weaknesses can be fatal, while others might not matter as much or can be easily remedied.
• Some opportunities may make more sense to pursue than others.
• An organization may be much more vulnerable to some threats than to others.

A Criticism of SWOT[3]

Hill and Westbrook argue that SWOT analysis is an overview approach which is unsuited to today’s diverse and unstable markets. They also suggest that it can be ineffective as a means of analysis because of:

• the generation of long lists
• the use of description, rather than analysis
• a failure to prioritize
• a failure to use it in the later stages of the planning and implementation process.

A Sample Checklist[4]

Strengths/Weaknesses (Internal Environment)

• Competitive advantages
• Marketing
  • brand name(s)
  • market analysis/knowledge
  • market position
  • customer perception
  • marketing campaigns
  • marketing mix (e.g. prices for products/rates for services, product lines – breadth/depth/complements)
  • value added to products/services (e.g. special warranties, extra customer care, etc.)
• Human Resources
  • diversity
  • employee education and experience levels
  • employee knowledge (of company, products/services)
  • employee programs
  • hiring practices
  • job design
  • performance of employees
  • performance review systems
  • preparation/support for expatriates and repatriates
  • quality of work life
  • strikes/slowdown prevention policies
  • teamwork
  • training and development
  • turnover/retaining
  • wages/benefits
• Finance
  • adequate financial resources
  • ability to raise capital
  • analysis of financial ratios
  • efficient use of capital
  • stockholder value
• Corporate Culture
  • doing vs. saying
  • creativity
  • flexibility
  • integrity
  • leadership
  • management
  • openness to learning
  • policies
  • productivity
  • quality
  • social responsibility
  • vision
• Corporate Structure
  • communication
  • corporate objectives
  • corporate strategies
  • decision-making
  • management of change
  • structure available to handle rare occurrences (e.g. natural disasters, political obstacles, etc.)
• Operations
  • customer focus
  • customer service
  • distribution
  • downtime
  • inventory control
  • labor costs
  • learning curves
  • manufacturing systems (quality, capabilities, productivity)
  • service
  • value chain
• Information Technology
  • effective use of
  • (e.g. automation, database management, ecommerce, etc.)
• Innovation
  • ability to keep products/services in demand
  • research and development
  • technology investments and results
• Strategies
  • economies of scale/scope
  • in terms of growth (e.g. mergers and acquisitions, strategic alliances)
  • in terms of refocusing (e.g. divesting, restructuring)
  • within each function (e.g. marketing, human resources, etc.)
  • in terms of direction (e.g. mission statement)
  • business model
  • business tools used (e.g. just-in-time)
  • benchmarking against competitors and other companies within similar industries (and even different industries)
  • management depth/talent
  • international capabilities
• Location

Opportunities/Threats (External Environment)

• Alliances
• Bargaining power of customers
• Bargaining power of suppliers
• Buyer relationships
• Competition – Rivalry amongst closest competitors, competitors in related industries, potential competitors
• Competitors’ learning curves
• Costs (of material resources, labor, etc.)
• Customer loyalty
• Distribution channels
• Ecommerce
• Economic climate/forces
• Education of the workforce
• Environmental situations/requirements/interest groups
• Expansion opportunities (e.g. diversified/complimentary products & services, M&A, etc.)
• Interest group demands/support
• Market demographics
• Material resources (e.g. land)
• Labor unions (relationships with)
• Local/National/International communities
• New entrants
• New markets / existing market growth or contraction
• Political/Legal/Regulatory climate/forces
• Product lifecycles
• Related, unrelated, and supporting industries
• Source(s) of employees
• Stockholder support/demand
• Substitute products/services
• Supplier relationships
• Takeover threats
• Technology development/obsolescence
• Trade association affiliations
• University affiliations (e.g. joint research programs)
• Currency movements

 

---

[1] SWOT Analysis – Understanding Your Strengths, Weaknesses, Opportunities and Threats | MindTools (http://www.mindtools.com/swot.html)

[2] The Use and Abuse of SWOT Analysis | Mack Management Consulting

[3] Performing a SWOT Analysis | Academy of Human Resources Development (https://web.archive.org/web/20020111175658/http://www.academyofhrd.org/clswot.htm)

[4] SWOT “Checklist” (https://web.archive.org/web/20000229151731/http://businessmajors.about.com/education/businessmajors/library/weekly/aa112999a.htm?)