Why use SWOT analysis

SWOT is used to develop strategies and plans to achieve some objective and it helps to see the whole situation and possible scenarios of further activity. SWOT analysis can be used not only by commercial organizations. It is used when someone needs to make some decision that is thought over and has strong basis. It can be both big non-profit organizations and individuals.

What is SWOT
Any segmentation starts from comprehensive research of a market situation in which the company works and estimation of opportunities and threats that it can face. SWOT-analysis that is one of the most widespread types of analysis in marketing is used as a benchmark for such a review. In other words, SWOT-analysis allows revealing and structuring Strengths and Weaknesses of a company and also potential Opportunities and Threats. Managers compare internal strengths and weaknesses of the company to opportunities given by the market. Considering quality of conformity the decision in what direction the organization should develop its activity is made and finally distribution of resources for segments is determined

SWOT Analysis
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths ( S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan: SWOT Analysis Framework Environmental Scan / \ Internal Analysis External Analysis /\ /\ Strengths Weaknesses Opportunities Threats | SWOT Matrix

Strengths A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks

Weaknesses The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment. Opportunities The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:

an unfulfilled customer need arrival of new technologies loosening of regulations removal of international trade barriers

Threats Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

shifts in consumer tastes away from the firm's products emergence of substitute products new regulations increased trade barriers

The SWOT Matrix A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity. To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix Strengths Opportunities Threats Weaknesses

S-O strategies W-O strategies S-T strategies W-T strategies

S-O strategies pursue opportunities that are a good fit to the company's strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.

Elements of the internal environment: strengths and weaknesses

Strengths and weaknesses cover variety of aspects of the company activity. Below are the categories that are often included in the analysis. Every SWOT is unique and can include one or two of them,

and even all at once. Each element depending on buyers perception can be both strength and weakness.

Marketing o Product o Pricing o Promotion o Marketing information/investigation o Service/personnel o Distributions/distributors o Trademarks and positioning Engineering and development of new products. The communication of marketing and technical department becomes closer and the given elements will be more important. For example, the strong interaction between the development team and the marketing department allows the use of buyers feedback in design of a new product. Operational activity o Manufacturing/engineering o Sale and marketing o Processing of orders/transactions Personnel Researches and developments Distributors Marketing Sale Post-sale service/maintenance Customer service/ maintenance Management Company Resources. Resources define availability of personnel and finance and in this way affect ability of the company to benefit from definite opportunities.

Elements external environment: opportunities and threats

Opportunities and threats are out of the organization control. Thus, they can be considered as external, concerning elements of the market environment. Basic elements to be considered include:

Legislation/regulatory/political forces; Public forces (culture). Directly influence the company when dissatisfied buyers press upon the organizations which activity is considered as unacceptable; Technological forces. The technological abilities helping the company to reach the purposes influence products that are offered to the buyers and on their feedback; Economic situationThe general state of the economy influences consumer demand and manner to spend money; Competition. The nature and scale of competitive threat. The special attention is paid to the following moments: o Intensity of a competition o Threat of occurrence of new competitors o Buyers demands o The market power of buyers, distributors, suppliers o Competitiveness o Pressure from the goods-substitutes