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The Power of the SWOT Analysis

June 25, 2018

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Here is a SWOT image by Wikipedia which explains SWOT via a single image:

 

 Among the above, strengths and weaknesses is something that the organization needs to decide for itself.

 

These are considered as internal environment analysis and should be done with a neutral view point. A wrong analysis means that the company might think it has great strengths or very few weaknesses. Hence, the internal analysis must be done correctly possibly with a consultant with a neutral point of view should be used if needed.

 

The external environment factors are the Opportunities and Threats. All opportunities to any organization are a factor of External environment. Example – If the government policies are favorable, if the market is booming or any such positive or negative factors belong to the external environment. Such external factors give new opportunities to the firm but also bring new threats to the company. This is why Opportunities and Threats are considered as External environment factors.

 

If a firm wants to grow, it needs to use all the four quadrants of the matrix to come to decisions regarding growth of the firm.

 

Example – If I have an opportunity to expand to a new market, then I have to look at my strengths – Do I have the financial stability to expand? I also have to look at my weaknesses. My sales staff is already overloaded, so how will it handle a new territory? Finally – I have to look at my threats. The new territory I am planning already runs on a VERY low price. I cannot match that price. So there is no use expanding into that particular territory.

 

Elements of SWOT analysis

 

Strengths

As the name suggests, an organization first needs to look at the strengths it has. This is because whenever you are taking any decision, you need to know what you are capable of. If your strengths don’t match your plans, then it is better to delay the plans or think of other ways forward which match your strengths and capabilities.

 

Example of Strengths in SWOT Analysis
  • What is the marketing mix of the company?

  • What is the Unique Selling Proposition (USP) of the company?

  • What is the market share of the company?

  • How is the management of the company?

  • Is the industry demand increasing or decreasing?

  • How is the marketing effort of the company?

  • What is the brand value and brand equity of the company?
     

Weaknesses

More important than Strengths, analyzing the weaknesses helps the company in deciding which opportunities to say NO to. Example – If yours is an engineering company, and it does not have skilled manpower or training is not done of executives after recruitment, then this is a major weakness of the company – something which competition can exploit. All your weaknesses can become opportunities for your growth. If a firm knows that its brand equity is low, then improving branding can also be an opportunity for the firm.

 

Example of Weaknesses in SWOT Analysis
  • Is the company utilizing resources optimally?

  • How are the financials of the company?

  • Is the company losing out to competition?

  • How is the channel strength of the company?