SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or with a competitor.
- Cross-functional groups - ideally a cross-functional team or a task force that represents a broad range of perspectives should carry out the SWOT analysis. For example, a SWOT team may include an accountant, a salesperson, an executive manager, an engineer, and an ombudsman.
- Both Strength & Weakness - what may represent strengths with respect to one objective may be weaknesses for another objective.
Use of Objective
If SWOT analysis does not start with defining a desired end state or objective, it runs the risk of being useless. The decision makers have to determine whether the objective is attainable, given the SWOTs. If the objective is NOT attainable a different objective must be selected and the process repeated. In this case, SWOTs are:
- Strengths: attributes of the organization that are helpful to achieving the objective.
- Weaknesses: attributes of the organization that are harmful to achieving the objective.
- Opportunities: external conditions that are helpful to achieving the objective.
- Threats: external conditions that are harmful to achieving the objective
The SWOTs can be used as a starting point for creating strategies by asking and answering each of the following four questions, many times:
- How can we Use each Strength?
- How can we Stop each Weakness?
- How can we Exploit each Opportunity?
- How can we Defend against each Threat?
Internal and External Factors
The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective:
- Internal factors – The strengths and weaknesses internal to the organization. The factors may include all of the 4P's; as well as personnel, finance, manufacturing capabilities, and so on.
- External factors – The opportunities and threats presented by the external environment.
The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position.
- Objectives - SWOTs should not exist in the abstract. They can exist only with reference to an objective. If the desired end state is not openly defined and agreed upon, the participants may have different end states in mind and the results will be ineffective.
- External vs internal- opportunities external to the company are often confused with strengths internal to the company. They should be kept separate.
- Strategy vs conditions - SWOTs are sometimes confused with possible strategies. SWOTs are descriptions of conditions, while possible strategies define actions. This error is made especially with reference to opportunity analysis. To avoid this error, it may be useful to think of opportunities as "auspicious conditions".
- Incorrection weight - because there is no value placed on each point, weak opportunities may appear to balance strong threats.
In competitor analysis, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses:
- sources of profits
- resources and competencies
- competitive positioning and product differentiation
- degree of vertical integration
- historical responses to industry developments
- and other factors.
Marketing management often finds it necessary to invest in research to collect the data required to perform accurate marketing analysis. Marketers employ a variety of techniques to conduct market research, but some of the more common include:
- Qualitative marketing research such as focus groups
- Quantitative marketing research such as statistical surveys
- Experimental techniques such as test markets
- Observational techniques such as ethnographic (on-site) observation
- Environmental scanning to help identify trends and competitive intelligence
- Product quality
- Advertisements and awareness
- Distribution channel
- Unique selling points
- Optimum debt/equity ratio
- Number of share holders
- Inventory size
- Optimum use of the financial resources
- Low cost of borrowings
- Proper investment of the financial products
- Low cost
- Higher productivity
- Excellent quality
- Modernized technology
- Cheap quality resources
- Experienced & skilled employees
- Gaps in capabilities
- Bad Reputation
- Weak market presence and reach
- Low financial resources
- Cash-drain projects or departments
- Cashflow problems
- Tight deadlines
- Poor supply chains
- Poor leadership
- Market developments
- Market or global trends
- Competitors' vulnerabilities
- New technology or innovation
- New vertical market
- New horizontal market
- Niche target markets
- Unique selling point
- Major partnerships
- Seasonal conditions and weather
- Political environment
- Legislative developments
- Environmental issues
- IT developments
- Competitor intentions
- Market demand
- New technologies
- New services, products, or ideas
- Vital contracts and partners
- Sustaining internal skill set - loss of key staff