SWOT Analysis

(Strengths, Weaknesses, Opportunities & Threats)

By : N.S.Anuk Perera. HNDA 1ST year 2012. CA Assignment No 1.

What is a SWOT Analysis?

It is a scanning for the internal and external environment of the business. Environmental factors internal to the firm (within your control) usually can be classified as strengths (S) or weaknesses (W), and Those external to the firm (you cant control) can be classified as opportunities (O) or threats (T).

Purpose
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 a basic tool its mastery is a fundamental requirement for the marketer, entrepreneur or business person. It is a very important and useful tool to use in marketing Management, strategy formulation and selection. Also in other business applications.

SWOT Analysis
Helpful
(to achieve the objectives)

Harmful
(to achieve the objectives)

Strengths

Weaknesses

W
T

Internal Origin
(Attributes of the firm)

Opportunities

Threats

External Origin
(Attributes of the environment)

Strengths
What do we do well? Ones strength is anothers weakness. A firm's strengths are its resources and capabilities that can be used for developing a competitive advantage. Examples of such strengths include:
1. 2. 3. 4. 5. 6. 7. Patents Strong brand names Good reputation among customers Cost advantages from proprietary know-how Exclusive access to natural resources Good access to distribution networks skills, education or connections do you have that others don't have

Weaknesses
What is wrong now? What should you avoid? Ones strength is anothers weakness. Be truthful so that weaknesses may be overcome as quickly as possible. The absence of certain strengths are a weakness. For example, 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 best natural resources Lack of access to key distribution channels

Weaknesses - Continued
In some cases, a weakness may be the flip side of a strength. For example, 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:
1. 2. 3. 4. An unfulfilled customer need Arrival of new technologies Loosening of regulations Removal of international trade barriers

Threats
Changes in the external environment also may present threats to the firm. Some examples of such threats include:
1. shifts in consumer tastes away from the firm's products 2. emergence of substitute products 3. new regulations 4. increased trade barriers 5. other ongoing research or commercialization efforts 6. a large existing competitor 7. market volatility (because we are new market entrants) 8. market access (for supplies or customers) 9. a competitor has a new, innovative product or service 10. competitors have superior access to channels of distribution

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities (overextending). 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.

SWOT / TOWS Matrix

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix, can be changed into what is known as the TOWS Matrix that is shown on the next slide:

SWOT / TOWS Matrix

TOWS Analysis

Strengths

Weaknesses

Opportunities

S-O Strategies

W-O Strategies

Threats

S-T Strategies

W-T Strategies

SWOT / TOWS Matrix

S-O strategies pursue opportunities that fit well 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 make a defensive plan to prevent the firm's weaknesses from making it susceptible to external threats.

SWOT Interactions

Important Tips
Be realistic about the strengths and weaknesses of your organization or group. Distinguish between where your organization is today, and where it could be in the future. Be specific: Avoid gray areas. Always analyze in relation to your core mission. Keep your SWOT short and simple. Avoid complexity and over analysis.

Empower SWOT with a logical conceptual framework.

Common Mistakes
Failure to lay the analysis out as a grid. Not identifiable sources for external aspects (like a STEEP or Five Forces analysis). Confusing internal aspects with external aspects i.e, confusing strengths with opportunities and weaknesses with threats. Not using bullet points Too many bullet points Failure to make links (between strengths and opportunities and, weaknesses and threats)

Caution!
SWOT analysis can be very subjective.. Two people rarely come-up with the same final version of SWOT. Do not rely on it too much. Use it as guide and not a prescription.

SWOT analysis can be very subjective.

Be realistic; no need to inflate strengths or be in denial about shortcomings. Be specific. Avoid grey areas. Always analyze in the context of your competitive environment.

Thank You !