The SWOT analysis must be one of the most widely known management frameworks. SWOT stands for Strengths, Weaknesses, Opportunities and Strengths. Whenever you want to think about strategy, a SWOT analysis is an easy starting point.
When is it useful?
It is a simple approach that is a good introduction to strategic thinking that could be used as an easy starting point for an analysis, or with a team that has no exposure to more sophisticated tools. It is a particularly useful tool for quickly thinking though what the strategic situation looks like from another company’s point of view – either competitors, suppliers, partners or customers.
A powerful way to use SWOT analysis is in competitive analysis. Think through the SWOT for each competitor in turn. In combination with other data, develop a view of each competitors likely future strategy. What is the total industry pattern that results? What opportunities are likely to be fiercely contested, what others will be left as gaps to exploit? How can we avoid competitors strengths and attack their weaknesses?
Another way to use SWOT Analysis is across your customer base. What is the strategic situation facing your major customers? Who is in the strongest position – can you grow with them? How can you become invaluable to helping them exploit their opportunities?
It is hard to draw conclusions from just a SWOT analysis. The four questions will identify areas for further work.
How do you do the analysis?
Use the SWOT Analysis by thinking through each area in turn. From their perspective:
- What are their biggest Strengths they can exploit?
- What are their Weaknesses?
- What are their biggest Opportunities?
- What are the major Threats to their business to worry about?
You reduce overlaps if you look from different perspectives:
- Opportunities/Threats: External perspective of industry, customers, competitors
- Strengths/Weaknesses: Internal perspective about our company. To use SWOT in competitive analysis you need to define a baseline to compare strengths and weaknesses to. Otherwise you will find yourself double-counting – the strength of one competitor will always be the weakness of another. The natural baseline is your own company, so when a competitor is stronger than you mark it as their strength and where you are better than them they have a weakness.
The weakness of this tool becomes clear when you try to decide which category to put your ideas.
- Is e-commerce a threat or an opportunity to retailers?
- Is a Foreign Brand a strength or a weakness?
- Don’t all weaknesses create threats?
The answer to both of these is not clear-cut; it depends on how you want to frame the situation to the organisation
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How can you adapt this concept?