SWOT analysis

What is SWOT analysis?

A framework that investigates a company’s strengths and weaknesses to foresee future opportunities and threats.

What is the purpose of SWOT analysis?

To help managers understand the business’s current position and plan strategies based on evidence.

Example of SWOT in practice at Tesco (2014–15)?

New CEO Dave Lewis conducted a root-and-branch review of Tesco’s operations before setting a new strategy.

Why was SWOT essential for Dave Lewis at Tesco?

He was an outsider with no retail experience and needed insight and credibility quickly.

How can SWOT analysis guide strategy?

By identifying internal strengths/weaknesses and matching them to external opportunities/threats.

What are the two main ways to conduct a SWOT analysis?

1. Top-down (boss or consultants); 2. Consultative (involving managers and staff).

Advantage of a top-down SWOT analysis?

Dispassionate and objective, unaffected by tradition or internal bias.

Disadvantage of a top-down SWOT analysis?

Staff may hide weaknesses to protect jobs, reducing honesty and insight.

Advantage of a consultative SWOT analysis?

Encourages openness, especially under new leadership; staff share ideas for improvement.

What can a new outsider leader gain from a SWOT analysis?

Authentic insights, as staff feel free to criticise previous management.

Example of SWOT-style insight-gathering from media?

Channel 4’s “Undercover Boss”, where leaders experience operations firsthand.

How is SWOT divided?

Strengths and Weaknesses are internal; Opportunities and Threats are external.

Why is benchmarking useful in SWOT analysis?

It compares performance to the best in the industry to identify real strengths and weaknesses.

Example of benchmarking insight?

Nissan UK reduced labour turnover to 10%, but JLR’s 2% shows further improvement is possible.

Give an example of an economic factor creating opportunities and threats.

Falling oil prices (2015) hurt renewable energy firms but benefited acrylic clothing producers.

Give an example of a technological factor creating opportunities and threats.

The development of graphene offers opportunities in aerospace but threatens firms slow to adapt.

According to Marcus Buckingham, what defines a true strength?

“Strengths are not activities you’re good at, they’re activities that strengthen you.”

What are Key Performance Indicators (KPIs)?

Numerical measures a business uses to assess strengths or weaknesses that truly matter.

Example of KPIs used by firms.

Sales per employee, absenteeism, market share, customer satisfaction.

Why are too many KPIs a problem?

Having too many dilutes focus; businesses need a few that align with overall goals.

What KPI did Tesco focus on under Dave Lewis?

Improving customer empathy and reputation, measured through regular research.

What does “like-for-like sales” mean?

Sales comparison with last year, excluding new store openings.

Example of a like-for-like sales comparison.

House of Fraser’s 8% rise vs. John Lewis’s 4.8% in Christmas 2014.

What does market share measure?

The firm’s proportion of total market sales compared to competitors — a key indicator of strength or weakness.

What is capacity utilisation?

The percentage of a firm’s productive potential that is being used.

Example of falling capacity utilisation.

Ryanair 2012–13: bought too many planes, leading to unused capacity and lower load factors.

How did Ryanair turn a weakness into a strength?

Improved customer service and raised load factors from 81% to 88% within 18 months.

What are Opportunities and Threats?

External factors largely outside management’s control that can affect performance.

What is demography, and why does it matter?

Population changes affecting market size, workforce and consumer needs (e.g., ageing UK population).

Example of a demographic opportunity.

Rising elderly population creates markets for health, travel, and financial services.

How can new laws create opportunities?

Child car seat laws (2006) boosted sales for Britax and Halfords.

Example of technological threats.

ITV faces competition from Netflix, Sky, and social media, reducing advertising revenue.

Example of technological opportunities.

New platforms like Twitter and Instagram emerged due to technological change.

Why are commodity prices important to SWOT analysis?

Fluctuations (e.g., oil) affect costs for transport, production, and materials.

Example of how oil prices affect non-oil firms.

Rising oil prices increase costs for Apple’s plastic casings and logistics.

Why are economic factors important?

Firms can’t control growth, inflation, or unemployment but must respond to them.

How can firms influence external opportunities and threats?

Through lobbying — trying to shape government policy and regulation.

What is lobbying?

Attempting to influence MPs or ministers to create favourable legislation for businesses.

What ethical issue surrounds lobbying?

Wealthy firms may have more access to power than ordinary citizens or vulnerable groups.

Quote linking SWOT to knowledge and insight.

“Know others and know yourself, and you will not be imperilled in a hundred battles.” — Sun Tzu.

Quote linking strength to struggle.

“Strength does not come from winning. Your struggles develop your strengths.” — Arnold Schwarzenegger.