Corporate Strategy III
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps strategist to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.
Strengths and weaknesses are internal factors. For example:
A strength could be:
Your specialist marketing expertise.
A new, innovative product or service
Location of your business
Quality processes and procedures
Any other aspect of your business that adds value to your product or service.
A weakness could be:
Lack of marketing or other expertise
Undifferentiated products or services (i.e. in relation to your competitors)
Location of your business
Poor quality goods or services
Damaged or tarnished reputation
Opportunities and threats are external factors. For example:
An opportunity could be:
A developing market such as the Internet.
Mergers, joint ventures or strategic alliances
Moving into new market segments that offer improved profits
A new international market
A market vacated by an ineffective competitor
A threat could be:
A new competitor in your home market
Price wars with competitors
A competitor has a new, innovative product or service
Competitors have superior access to channels of distribution
Taxation is introduced on your product or service
A word of caution, SWOT analysis can be very subjective. Do not rely on it too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors. So use it as guide and not a prescription.
Simple rules for successful SWOT analysis
Be realistic about the strengths and weaknesses of your organization
Analysis should distinguish between where your organization is today, and where it could be in the future
Be specific. Avoid gray areas.
Always analyze in relation to your competition i.e. better than or worse than your competition
Keep your SWOT short and simple. Avoid complexity and over analysis
SWOT is subjective.
Once key issues have been identified, they feed into marketing objectives. It can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. It is a very popular tool with Corporate Strategy students because it is quick and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple.
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