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Indentifying Strengths, Weaknesses, Opportunities and Threats

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SWOT Analysis

Summary of SWOT. Abstract

 

A SWOT analysis is an instrumental framework in Value Based Management and Strategy Formulation to identify the Strengths, Weaknesses, Opportunities and Threats for a particular company. 


Strengths and Weaknesses are internal value creating (or destroying) factors such as assets, skills or resources a company has at its disposal relatively to its competitors. They can be measured using internal assessments or external benchmarking.


Opportunities and Threats are external value creating (or destroying) factors a company cannot control, but emerge from either the competitive dynamics of the industry/market or from demographic, economic, political, technical, social, legal or cultural factors.


Typical examples of factors in a SWOT Analysis are:


 

 

Strengths


- specialist marketing expertise

- exclusive access to natural resources

- patents
- new, innovative product or service
- location of your business

- cost advantage through proprietary know-how
- quality processes and procedures
- strong brand or reputation

 

Weaknesses


- lack of marketing expertise
- undifferentiated products and service (i.e. in relation to your competitors)
- location of your business

- competitors have superior access to distribution channels
- poor quality goods or services
- damaged reputation

 


 

Opportunities


- developing market (China, the Internet)
- mergers, joint ventures or strategic alliances
- moving into new attractive market segments
- a new international market

- loosening of regulations

- removal of international trade barriers
- a market led by a weak competitor

 

Threats


- a new competitor in your home market
- price war
- competitor has a new, innovative substitute product or service
- new regulations

- increased trade barriers
- taxation may be introduced on your product or service


Any organization must try to create a fit with its external environment. The SWOT diagram is a very good tool for analyzing the (internal) strengths and weaknesses of a corporation and the (external) opportunities and threats. However, this analysis is just the first step. Actually creating alignment is often a more hazardous job, because in reality the two sides of the SWOT analysis often point in opposite directions, leaving strategists with the paradox of creating alignment either from the outside-in (market-driven strategy) or from the inside-out (resource driven strategy).

 

Compare: Core Competence  |  Parenting Advantage  |  Porter's five forces model  |  Outsourcing  |  Industry Change  |  OODA Loop  |  BCG Matrix  |  GE Matrix

 

Tip: One can also apply a SWOT analysis to competitors. This may reveal some interesting insights...



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2016 Value Based Management.net - Last updated: Jan 6th, 2016 - All names by their owners

 

Summaries of 2,000 management methods