Definition

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats

SWOT analysis is an important tool for auditing the overall strategic position of a business and its
environment.

Once key strategic issues have been identified, they feed into business objectives, particularly
marketing objectives. SWOT analysis can be used in conjunction with other tools for audit and analysis,
such as PEST analysis and Porter's Five-Forces analysis. It is also a very popular tool with business and
marketing students because it is quick and easy to learn.

The Key Distinction - Internal and External Issues

Strengths and weaknesses are Internal factors. For example, a strength could be your specialist
marketing expertise. A weakness could be the lack of a new product.

Opportunities and threats are external factors. For example, an opportunity could be a developing
distribution channel such as the Internet, or changing consumer lifestyles that potentially increase
demand for a company's products. A threat could be a new competitor in an important existing market
or a technological change that makes existing products potentially obsolete.

it is worth pointing out that SWOT analysis can be very subjective - two people rarely come-up with the
same version of a SWOT analysis even when given the same information about the same business and
its environment. Accordingly, SWOT analysis is best used as a guide and not a prescription. Adding and
weighting criteria to each factor increases the validity of the analysis.

Areas to Consider

Some of the key areas to consider when identifying and evaluating Strengths, Weaknesses,
Opportunities and Threats are listed in the example SWOT analysis below:
This SWOT analysis example is based on an imaginary situation. The
scenario is based on a business-to-business manufacturing
company, who historically rely on distributors to take their products
to the end user market. The opportunity, and therefore the subject
for the SWOT analysis, is for the manufacturer to create a new
company of its own to distribute its products direct to certain end-
user sectors, which are not being covered or developed by its
normal distributors.

Subject of SWOT analysis example: the creation of own

distributor company to access new end-user sectors not
currently being developed.
strengths weaknesses
 • End-user sales control and direction.
• Right products, quality and reliability.
• Superior product performance vs • Customer lists not tested.
competitors. • Some gaps in range for certain sectors.
• Better product life and durability. • We would be a small player.
• Spare manufacturing capacity. • No direct marketing experience.
• Some staff have experience of end-user • We cannot supply end-users abroad.
sector.
• Need more sales people.
• Have customer lists.
• Limited budget.
• Direct delivery capability.
• No pilot or trial done yet.
• Product innovations ongoing.
• Don't have a detailed plan yet.
• Can serve from existing sites.
• Delivery-staff need training.
• Products have required accreditations.
• Customer service staff need training.
• Processes and IT should cope.
• Processes and systems, etc
• Management is committed and
• Management cover insufficient.
confident.

opportunities
• Could develop new products.
• Local competitors have poor products.
• Profit margins will be good.
• End-users respond to new ideas.
• Could extend to overseas.
• New specialist applications.
• Can surprise competitors.
• Support core business economies.
• Could seek better supplier deals.
threats
• Legislation could impact.
• Environmental effects would favour
larger competitors.
• Existing core business distribution risk.
• Market demand very seasonal.
• Retention of key staff critical.
• Could distract from core business.
• Possible negative publicity.
• Vulnerable to reactive attack by major
competitors.

In SWOT, strengths and weaknesses are internal factors.

For example:
A strength could be:
• Your specialist marketing expertise.

• A new, innovative product or service.

• Location of your business.

• Quality processes and procedures.

• Any other aspect of your business that adds value to your product or service.

A weakness could be:

• Lack of marketing expertise.

• Undifferentiated products or services (i.e. in relation to your competitors).

• Location of your business.

• Poor quality goods or services.

• Damaged reputation.

An opportunity could be:

• A developing market such as the Internet.

• Mergers, joint ventures or strategic alliances.

• Moving into new market segments that offer improved profits.

• A new international market.

• A market vacated by an ineffective competitor.

A threat could be:

• A new competitor in your home market.
• Price wars with competitors.

• A competitor has a new, innovative product or service.

• Competitors have superior access to channels of distribution.

• Taxation is introduced on your product or service.

next step of analysis, usually associated with the externally-focused TOWS Matrix, helps you think about the options
that you could pursue. To do this you match external opportunities and threats with your internal strengths and
weaknesses, as illustrated in the matrix below:
 TOWS Strategic Alternatives Matrix
External External Threats
Opportunities (T)
(O) 1.
1. 2.
2. 3.
3. 4.
4.
Internal SO ST
Strengths "Maxi-Maxi" "Maxi-Mini"
(S) Strategy Strategy
1. Strategies that use Strategies that use
2. strengths to maxi strengths to mini
3. mize mize threats.
4. opportunities.
Internal WO WT
Weaknesses "Mini-Maxi" "Mini-Mini"
(W) Strategy Strategy
1. Strategies Strategies
2. that minimize thatminimize
3. weaknesses by ta weaknessesand a
4. king advantage of void threats.
opportunities.

This helps you identify strategic alternatives that address the following additional questions:
• Strengths and Opportunities (SO) – How can you use your strengths to take advantage of
the opportunities?
• Strengths and Threats (ST) – How can you take advantage of your strengths to avoid real
and potential threats?
• Weaknesses and Opportunities (WO) – How can you use your opportunities to overcome the
weaknesses you are experiencing?
• Weaknesses and Threats (WT) – How can you minimize your weaknesses and avoid threats?

Example:

A start-up small consultancy business might carry out the following SWOT analysis:

Strengths:

• We are able to respond very quickly as we have no red tape, no need for higher

management approval, etc.

• 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 strong reputation within the market

• We can change direction quickly if we find that our marketing is not working

• We have little overhead, so can offer good value to customers

Weaknesses:

• Our company has no 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, leaving, etc.

• Our cash flow will be unreliable in the early stages

Opportunities:

• Our business sector is expanding, with many future opportunities for success

• Our local council wants to encourage local businesses with work where possible

• Our competitors may be slow to adopt new technologies

Threats:

• Will developments in technology change this market beyond our ability to adapt?

• A small change in focus of a large competitor might wipe out any market position
we

achieve

The consultancy might therefore decide to specialize in rapid response, good value
services to

local businesses. Marketing would be in selected local publications, to get the

greatest

possible market presence for a set advertising budget. The consultancy should keep
up-todate with changes in technology where possible.
Strengths
• End-user sales control and direction.
• Specialist marketing Experience.
• Right products, quality and reliability.
• Better product life and durability.
• Direct delivery capability.
• Product innovations ongoing.
• Can serve from existing sites.
• Processes and IT should cope.
• Management is committed and
confident.
• Advertising through free Social sites
Facebook, Twitter, and Myspace.
opportunities
• Could develop new products.
• Profit margins will be good.
• End-users respond to new ideas
• New specialist applications.
• Could seek better supplier deals.
weaknesses
• Customer lists not tested.
• We would be a small player.
• No direct marketing experience.
• We cannot supply end-users abroad.
• Need more sales people.
• Limited budget.
• Delivery-staff need training.
•Availability of raw & inconsistent raw
material prices.
threats
• Existing core business distribution risk.
• Market demand very seasonal.
• Retention of key staff critical.
• Could distract from core business.
• Possible negative publicity.
• Vulnerable to reactive attack by major
competitors.
• Competitors have superior access to
channels of distribution
•
 Strengths Weaknesses

• High Cycle time.

• Right products, quality and
reliability. • Need more sales people.

• Better product life and durability.

• Delays.

• Cost advantage • Lack of marketing expertise.

• Differentiation • High inventory Costs.

• Processes and IT should cope • Wastage of raw materials.

• Direct delivery capability.

• Management is committed and

confident.

• Adds value to product.

• Product innovations ongoing.