Strength, Weakness, Opportunities, and Threats Analysis for a Company, Competitor, Supplier, or Customer. Used to assess an organization's characteristics and climate to determine appropriate strategies and likely actions by players in the market place.
What it is
The SWOT analysis characterizes a player in the market place around the concepts of what it does best (advantaged compared to competitors), what it does not do well (disadvantaged), the opportunities indicated by the disruptions and changing trends in the marketplace and the corresponding threats indicated by disruptions and changing trends for the marketplace/economy. Strengths and weaknesses are generally internal to a company while opportunities and threats are external to a company and are influenced by the forces at play in the market place.
What does it do
The SWOT Analysis provides a high-level analysis of the marketplace or industry and the position the company holds within that environment. It can indicate potentially successful strategies that the company can employ and highlights the strength to leverage and weaknesses to overcome for the success of the strategy. It can also indicate threats to the current or proposed strategies of the organization. Because of the high-level nature of the analysis, the SWOT may identify specific topics for further research to better define the strengths, weaknesses, opportunities, and threats and what the company needs to leverage or change to be successful.
Uses:
How it is used A SWOT Analysis can be used to support Strategic Planning's development of business strategy, opportunity analysis of disruptions and shifting trends in the marketplace, competitive analysis, business & product development opportunities, and the development of marketing strategies and plans.
Because of the high-level nature of the SWOT analysis it can be a great tool to help you elevate your thinking and observations. By looking across the industry and marketplace in light of your strengths and weaknesses you can potentially uncover opportunities that you may be uniquely qualified to exploit. And identify threats that can particularly put your company or product at risk, and indicate needed changes to avoid the associated risks.
Where
The SWOT Analysis can be used for many purposes including:
Developing business strategies by gaining a view of the environment the business operates in and how the business stacks up against its competitors. Indicates the potential success of alternatives strategies being considered.
Developing product strategies by comparing the strengths and weaknesses of your product and what opportunities it has for growth, new applications, and the threat of new or competitive products to displace it in the market. The SWOT Analysis is a quick check of the potential the new product has for success, and whether you should proceed forward. If the decision is to move forward, the analysis can help define the best markets, customers, approaches, and other factors affecting the product launch.
Narrowing and choosing between strategic and tactical options. As you consider each option you can see the impact of your strengths and weaknesses on the likelihood of success of the option. You can also consider how each option leverages your opportunities for success and minimizes the potential impact of threats.
Help bring a new or existing team to a common understanding of the environment in which they operate and to reach a common view of the strength and weaknesses of their organization.
It can be used to analyze every player in the supply chain. You can perform a SWOT Analysis of your own company, business unit, department, product, as well as your suppliers of raw materials and services, partners, competitors, distributors, customers, etc. You can determine the strengths, weaknesses, opportunities, and threats associated with each of these players and how you might align yourself with or against each player.
Why
Business and Marketing analysis by its very nature is specific and detailed. It is easy to get lost in the forest and not see the pattern in the trees and landscape. Our horizon becomes too short range and our strategies and tactics too inwardly focused. We may see the great opportunity our tactics may create, but underestimate the ability of other competitors to not only block but exceed our offering because of their unique strengths and opportunities.
The SWOT analysis lets us see broader opportunities and strategies than the short term tactics would indicate, and avoid or eliminate risks that are not apparent on the near term horizon, or indicated by our internal analysis.
Limitations:
Where it shouldn't be used The SWOT Analysis is a high-level activity and is not normally used for detailed tactical analysis and implementation. While the analysis will indicate issues to pursue and actions needing resolution, there should be further research and data development to confirm the factors identified and actions indicated by the SWOT Analysis.
Any restrictions None
Warnings SWOT Analysis can be used broadly for high-level analysis in many types of situations, but never forget that in most ways the SWOT Analysis is subjective and open to errors in judgement. So you should not make critical decisions based on the analysis unless the factors driving that decisions are confirmed to be accurate.
The factors created in the SWOT Analysis are normally identified by brainstorming using the existing knowledge of the team. The knowledge of the team may be limited, biased, incomplete, or just plain wrong. Therefore the analysis and interpretations can lead to strategies that are doomed to fail. Be sure to identify which factors are key to any strategy, option, or planned tactic indicated by the SWOT Analysis, and confirm that those factors (the strength, weakness, opportunity, or threat) really exist and will have the impact indicated by the analysis.
We have learned by experience that most organizational opinions when compared to the actual market information will be directionally correct but exaggerated. An example might be that we think our competitors' cost to produce the product is much lower than ours. The answer will likely be that their cost is lower than our but there will be much less difference than we thought. A second example might be that our customers think our product is much better than our competitor, where in actuality the customers think our product is only marginally better. Misreading the size of the differences can be almost as bad as misreading where we are stronger and weaker. If you believe it is true strength, then you better check it in the market place before you act on the assumption.
Demonstrations:
(Use graphics, video, animations, documents, etc. to illustrate the tool):
Identify the strategy, product, problem, opportunity, etc. you are considering and write it above the grid you will be using to capture the SWOT analysis factors.
Bring together a knowledgeable group of people (or existing team) and ask them to prepare by considering the strengths, weaknesses, opportunities, or threats that are related to the problem/opportunity being considered.
Where possible distribute research, reports, or other information that will help in the analysis or ask them to bring their own to the meeting.
Create a 2 by 2 matrix or grid on a whiteboard or flip chart for all of the group to see. Above the grid write the strategy, problem, opportunity, etc. that is being considered during this meeting.
List one of the factors (strength, weakness, opportunity, and threat) as a heading in each of the four quadrants of the grid. A common practice is to have the internal factors (strengths and weaknesses) in the top row, and the positive factors (strengths and opportunities) in the first or left column.
As you prepare to fill in the grid, encourage participants to provide as much quantifiable data as possible to confirm the information they contribute.
Start by identifying organizational strengths (stated as titles or short bullets) that are intrinsic to your organization such as:
Why do customers choose your organization or your products?
Why do employees choose to work or remain at your organization?
What is unique about your offering that is an advantage over alternatives?
What services do you provide that no one else does or can supply?
What do you do best? (what are your competitors trying to match)
What supply chain factors & logistics are you uniquely positioned to provide?
Do you have a unique market position or customer goodwill?
What unique capability or position do you hold compared to competitors?
Identify weaknesses specific to your organizations, such as:
What do your customers complain about customer service and sales?
Why do customers choose not to buy or discontinue their service or product purchases?
What is it hard for your organization to do?
Why do your employees leave, or why do recruits turn down offers?
Where do you lose in the market place with your customers and employees?
What strengths or advantages do competitors have that you cannot match?
List specific opportunities that are appearing in your market due to changing trends and disruptive technologies beyond your control such as:
What areas are we poised to take advantage of?
Where do we have unique capabilities that can be used to capture opportunities?
What trends, policies, laws, public opinion, etc. are changing where we are in a better position to take advantage of the opportunity than any other organization?
Is new growth emerging where we already have an advantageous position?
How are changing demographics creating new opportunities in your market?
What disruptive technologies are creating new opportunities?
Note specific threats beyond your control to your current business, customers, products, and to new strategies & opportunities you are pursuing. (e. g.)
Where are we particularly vulnerable to outside forces threatening our position?
What new technologies will erode our competitive advantage?
What new trends or technologies will make our product of less or no value?
Are we in a position to deal with changing laws, policies, and trends in the market?
Will foreign competition erode our market share and technological advantage?
Will competitors diminish our competitive advantage by matching our position?
What new competitors and technologies are likely to enter the market?
Analysis of data
Discuss what you have brainstormed, and prioritize the factors in each quadrant as to the most important factors impacting the strategy or problem being considered. Look for strengths that align with opportunities and weaknesses that align with threats. Consider weaknesses that could undermine your success for an opportunity and the strengths that could be used to reduce or eliminate the impact of threats. Some examples of this type of discussion are given below:
Do some of your strengths put you into a position to exploit an opportunity?
Are there weaknesses that could be addressed that would reduce the potential impact of threats?
Are their opportunities so valuable that it would be worth adding strength through organic development or acquisition to improve our capability of capturing the opportunity?
What changes in strategy could help you exploit opportunities or minimize threats?
What weaknesses need to be addressed to survive or grow?
Interpretation of results
The analysis should leave you with a list of strategies and options that you can consider to meet the originally stated problem or strategy question. You may want to consider developing criteria for how you will decide which strategies and options you will select. You could create a prioritization table where you rate each strategy across all of the criteria. Then look for the highest total scores across the strategies and options to narrow the lists of which you will recommend or implement.
Presentation of results
Show the two by two grid that captures all of the SWOT factors in their quadrants and prioritized by most important factors at the top of the list.
There are a number of ways to present the recommendations from the SWOT Analysis. Two examples include:
Show the prioritization table with the proposed solutions in the rows and the criteria in the columns, with scores in each of the boxes of the table. The far left side should have a total score for each solution or recommendation. The solutions or recommendations should be listed from the highest total score to lowest.
A prioritized list of the recommended solutions and the factors from the SWOT Analysis that support each solution or recommendation. It is also valuable if you can list projected impact from the recommendations such as:
Projected new revenues.
Projected new profits and NPV of the recommendation.
The time frame for implementing the recommendation and the expected outcomes.
Sources of unique competitive advantage and why they will be sustainable.
Examples:
Walmart SWOT Analysis of Strategy
Strength
Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience, and a wide range of products all in one store.
Wal-Mart has grown substantially over recent years and has experienced global expansion (for example its purchase of the United Kingdom-based retailer ASDA).
Weakness
Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
Since Wal-Mart sells products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.
The company is global but has had a presence in relatively few countries Worldwide.
Opportunities
To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.
The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.
New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large supercenters to local and mall-based sites.
Opportunities exist for Wal-Mart to continue with its current strategy of large, supercenters.
Being a global retailer means that you are exposed to political problems in the countries that you operate in.
The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing costs have fallen due to outsourcing to low-cost regions of the World. This has to lead to priceLinks to an external site. competition, resulting in price deflation in some ranges. Intense price competition is a threat.
*Marketing Teacher.com
A small start-up consultancy might draw up the following SWOT Analysis
Strengths
We are able to respond very quickly as we have no red tape and no need for higher management approval.
We are able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers.
Our lead consultant has a strong reputation in the market.
We can change direction quickly if we find that our marketing is not working.
We have low overheads, so we can offer good value to customers.
Weaknesses
Our company has little market presence or reputation.
We have a small staff, with a shallow skills base in many areas.
We are vulnerable to vital staff being sick or leaving.
Our cash flow will be unreliable in the early stages.
Opportunities
Our business sector is expanding, with many future opportunities for success.
Local government wants to encourage local businesses.
Our competitors may be slow to adopt new technologies.
Threats
Developments in technology may change this market beyond our ability to adapt.
A small change in the focus of a large competitor might wipe out any market position we achieve.
*Mindtools.com
Recommendations for Small Startup Consultancy:
As a result of their analysis, the consultancy may decide to specialize in rapid response, good value services to local businesses, and local government.
Marketing would be in selected local publications to get the greatest possible market presence for a set advertising budget, and the consultancy should keep up-to-date with changes in technology where possible.
