Introduction to

SWOT Analysis

February 3, 2009

What is SWOT?

•

An analysis tool important for understanding

an organization’s

S

trengths,

W

eaknesses,

O

pportunities and

T

hreats

•

Can be done at the level of the entire

organization, business unit, product line, or

specific product

•

Helps the firm identify strategy-related factors

•

Important to focus on the most critical factors

SWOT - Definitions

•

A

Strength

is a resource or capacity the organization can

use to effectively achieve its objectives

•

A

Weakness

is a limitation, fault, or defect in the

organization that will keep it from achieving its objectives

•

An

Opportunity

is any favourable situation in the

organization's environment

–

usually a trend or an overlooked need that increases

demand for a product or service and permits the firm

to enhance its position by supplying it

•

A

Threat

is any unfavourable situation in the

organization's environment that is potentially damaging

to its strategy

–

may be a barrier, a constraint, or anything external

that might cause problems, damage or injury

SWOT Matrix

Why is SWOT Important?

•

For decision making

•

Developing strategies for the future -

improve company’s overall performance

•

Can help uncover opportunities that a

company is well positioned to exploit

•

By understanding the weaknesses of a

business, it can manage and eliminate

threats

What do we use SWOT for?

•

Identification of SWOT’s is essential
because subsequent steps in the planning
process may be derived from the SWOT’s

•

How can we use and capitalize on each
strength?

•

How can we improve each weakness?

Strengths

•

Determine a company's strong points

•

Consider these from an internal perspective, and

externally from the point of view of its customers and

people in the market

•

These are a company’s resources and capabilities that

can be used as a basis for developing a competitive

advantage

•

What advantages does this company have?

•

What does this company do better than anyone else?

•

What unique or lowest-cost resources does it have

access to?

•

What do people in this market see as it’s strengths?

Strength VS Opportunity

• Strength

- within the company’s means to

control

–

High profit margins

–

Industry leader in innovation

• Opportunity

– external to the company,

affects the industry as a whole

–

Changes in government policies/regulations

–

Rise in consumer spending

Strengths - Examples

•

A new, innovative product or service

•

Location of a business

•

Quality processes and procedures

•

Skills and expertise that a business has that
its competitors do not possess

•

Valuable physical assets or resources

•

Strong relationships with suppliers or partners

•

Any other aspect of a business that adds
value to its products or services

Strengths – Examples

Continued

• Marketing

- company reputation, relationship with

customers, service quality, sales effectiveness,

distribution effectiveness

• Finance

- ability to access capital, healthy cash

flow, financial stability

• Manufacturing

- facilities, economies of scale,

capacity, ability to produce on time, flexibility,

technical skill

• Human Resources

- strong leadership, dedicated

employees, entrepreneurial orientation, responsive

to changes in business conditions, training and

development

Weaknesses

•

In many cases a weakness may be the

opposite of a strength, or a weakness may be

viewed as a lack of certain strengths

•

These must consider the company

perspective, as well as a competitor

perspective

•

What could the company improve?

•

What should the company avoid?

•

What are people in the market likely to see as

weaknesses?

Weakness VS Threat

• Weakness

- within the company’s means

to control

–

Slow inventory turnover

–

Low brand recognition

• Threat

– external to the company, affects

the industry as a whole

–

Rising labour/production costs

–

Decline in GDP

Weaknesses - Examples

•

Lack of marketing expertise

•

Undifferentiated products or services

•

Location of the business

•

Poor quality goods or services

•

Damaged reputation

•

Lack of patent protection

•

Weak brand name

•

Lack of access to key distribution channels

SO WHAT DOES THIS

MEAN TO THE

COMPANY?

So What?

•

Likely outcomes to the company if the

trend continues

–

In terms of profitability, morale, perception,

reputation, shareholder value, etc.

•

Must link point back to company

•

Examples:

–

Will lead to higher profits for the company

–

Will lead to higher profits for the company,

helping it to achieve its goal of acquiring

competitor XYZ for $2.3 billion CAD

So What? - Example

Point:

Astral Media is an industry leader in delivering

innovative technology to its customers.

Proof:

Astral will be the first Canadian broadcaster to

introduce VOD, a new pay TV product customers can

receive by subscribing to existing Astral channels.

Aggressively pursuing the discovery of new

technologies allows Astral to maintain a competitive

advantage over other firms in the industry.

Explanation:

The company is able to add value to

existing products, making Astral an attractive choice

for consumers seeking unique, high quality products.

Through innovation, Astral Media is able to

differentiate itself from competitors, encouraging

customers to associate the Astral Media brand of

products with superior quality, increasing brand loyalty.

So What? - Example

Point:

Astral Media’s television broadcasting stations are

not capturing the full potential of advertising revenues.

Proof:

“Astral’s exposure to the advertising market is

approximately 30%, which is below industry standards.”

Over the past year, the advertising market has

experienced a slow-down, which has created an

increasingly competitive advertising environment for

broadcasters.

Explanation:

Astral has not responded to this downturn in

advertising spending; the company needs to actively

market its available advertising space in order to

maximize revenues. Without the potential revenue from

advertising during some of Canada’s most highly-rated

shows, Astral can not re-invest these profits into other

aspects of the company. Astral is limiting its growth

potential due to a decreasing profit margin.

Sources

•

Datamonitor

•

Company websites

•

Competitor websites

•

Annual Reports

•

Newspaper articles

•

Mergent Online

•

Industry Reports