Summary of SWOT analysis. 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.

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).

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

Indentifying Strengths, Weaknesses, Opportunities and Threats

SWOT Analysis

Summary of SWOT. Abstract