SWOT analysis

What is SWOT analysis?

A SWOT analysis is a structured planning method used to evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a business venture.

When is SWOT analysis used?

SWOT is meant to be used during the proposal stage of strategic planning. It acts as a precursor to any sort of company action, which makes it appropriate for the following moments:

• exploring avenues for new initiatives

• making decisions about execution strategies for a new policy

• identifying possible areas for change in a program

• refining and redirecting efforts mid-plan.

Strengths and weaknesses usually consider what factors?

Internal factors.

Opportunities and threats usually consider what factors?

External factors.

What are some internal factors to consider when carrying out SWOT analysis?

• Financial resources, such as funding, sources of income and investment opportunities.

• Physical resources, such as your company’s location, facilities, and equipment.

• Human resources, such as employees, volunteers, and target audiences.

• Current processes, such as employee programs, department hierarchies and software systems.

What are some external factors to consider when carrying out SWOT analysis?

• Market trends, such as new products and technology or shifts in audience needs.

• Economic trends, such as local, national, and international financial trends.

• Funding, such as donations, legislature, and other foundations.

• Demographics, such as a target audience’s age, race, gender, and culture.

What is a strength?

A strength is only a strength when a business is GOOD at something and takes advantage of this strength.

Examples of this could include:

• specialist marketing expertise

• new, innovative product or service

• patents

• strong brand identity or reputation

• being seen as a price leader

• location of your business

• effective distribution networks

• exclusive access to natural resources

• high levels of productivity

• quality processes and procedures

• high staff motivation

• good industrial relations.

When examining strengths, what questions will a business ask itself?

• What are our advantages over our competition?

• What do we do well compared to other businesses in the industry?

What is a weakness?

A weakness occurs when a business performs POORLY in an important area of operations or when it fails to take advantage of an existing strength.

This could include:

• lack of marketing expertise

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

• limited product range

• poor quality goods or services

• damaged reputation

• high levels of staff turnover

• location of your business

• competitors have superior access to distribution channels

• poor investment record in technology

• failing to achieve industry benchmarks

• bad debt or cash-flow problems.

When examining weaknesses, what questions will a business ask itself?

• What could be improved?

• What is done badly?

• What should be avoided?

What is an opportunity?

This considers what the business could do WELL in the future.

Give examples of opportunities that a business could take.

• gaining market share through developing innovative products to meet new market needs

• taking advantage of tax breaks and other incentives such as grants in development areas

• diversifying into developing markets (China, the Internet)

• mergers, joint ventures, or strategic alliances with other businesses

• moving into new attractive market segments

• a new international market

• removal of international trade barriers

• changes in technology and competitive structure of markets

• changes in government policy related to the business’s field such as a loosening of regulations

• changes in social patterns, population profiles, lifestyle changes, fashion tastes.

What is a threat?

This considers the possible PROBLEMS the business may face in the future.

Give examples of potential threats that businesses may face.

• a new competitor in their home market

• price wars

• a competitor has a new, innovative product or service

• new technologies being used by competitors

• economic slowdown/recession

• new legal constraints and regulations – e.g. changes to environmental legislation

• increased trade barriers

• taxation may be introduced on your product or service

• demographic changes – changing consumer incomes or tastes which result in less demand for the product/service

• technological change which means that there is less demand for the product.

An effective SWOT analysis will allows businesses to…?

• build on strengths

• resolve weaknesses

• exploit opportunities

• avoid threats.