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SWOT Analysis
A SWOT analysis is a strategic planning tool used to evaluate Strengths, Weaknesses, Opportunities and Threats of an organization or business venture. It 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 and enables proactive thinking, rather than relying on habitual or instinctive reactions.
Consultants can use a SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. For example, in marketing, a SWOT analysis can help to carve a sustainable niche in the market. It can be used to gain an understanding of competitors, which can give you the insights you need to craft a coherent and successful competitive position. Make sure to apply it at the right level, for example, at the product or product-line level.
Completing a SWOT analysis is very simple, and is a good subject for workshop sessions and brainstorming meetings. Representatives from a variety of stakeholders groups should be involved. The key points to remember about SWOT analyses are that strengths and weaknesses are internal to the business and relate to the present situation, while opportunities and threats are external to the business and relate to changes in the environment, which may impact the business. The result of the analysis is often presented in a matrix format of positive and negative factors for management to address. The four areas of a SWOT analysis are explained below:
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, 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: lack of patent protection, poor reputation among customers, high cost structure, lack of access to the best natural resources.
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 include, shifts in consumer tastes away from the firm's products, emergence of substitute products, new regulations, increased trade barriers.
Once a consultant has completed a SWOT analysis it must be actioned. The strategy should be devised around matching the strengths with opportunities, and managing or eliminating threats. A key challenge for any business is also to convert weaknesses into strengths. For example, if a weakness is outdated technology, a possible response is to acquire a competitor with leading technology. A SWOT analysis does have limitations, in that it provides a simplistic approach to business problems, so should be used in conjunction with other strategy frameworks and tools. More complex issues may require more in-depth research and analysis to make decisions.
