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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 diagram:
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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
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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
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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
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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
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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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Summaries of 2,000 management methods