SWOT (originally was SOFT) ANALYSIS

It is a situation analysis in which internal strengths and weaknesses of an

organization, and external opportunities and threats faced by it are
closely examined to chart a strategy. SWOT stands for strengths,
weaknesses, opportunities, and threats.
It is a unique management model that does not provide any
insight of the correction or gap to take appropriate correction. So much
flexible it is to use at a suitable time (as per your thought).
In the 1960’s and 70’s, Albert Humphrey (STANFORD UNIVERSITY) is said
to have developed this strategic planning tool using data from the top
companies in America at the time. (He categorized the factors as WHAT IS
GOOD IN THE PRESENT-SATISFIES, WHAT IS GOOD IN THE FUTURE-
OPPORTUNITIES, WHAT IS BAD IN THE PRESENT-FAULT, WHAT IS BAD IN
THE FUTURE-THREAT). The background to SWOT stemmed from the need
to find out why corporate planning failed. The research was funded by the
fortune 500 companies to protect stop these failures. The Research Team
consisted with Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert
Stewart, Birger Lie.
A SWOT Analysis looks at the strengths, weaknesses, opportunities and
threats that are relevant to an organization in a new venture (situation). It
allows users to look at the direction an organization wishes to move
towards in the future.
Purpose of using SWOT: It provides an action plan when a firm has to
defend or attack and it remains strong and vulnerable. It enables the
professionals to look at the daily life problems and business strategy with
a new perspective.
Here are some examples for which a SWOT analysis is used:
• a company (its position in the • a opportunity to make an
market, commercial viability, etc) acquisition
• a method of sales distribution • a potential partnership
• a product or brand • changing a supplier
• a business idea • outsourcing a service, activity or
• a strategic option, such as resource
entering a new market or • an investment opportunity
launching a new product
Strengths:
Internal attributes that is helpful to the organization to achieving its
objective (to leverage)
• Identify skills and capabilities that • Advantages of proposition?
you have. • Capabilities?
• What can you do particularly well, • Competitive advantages?
relative to rivals? • USP's (unique selling points)?
• What do analysts consider your • Resources, Assets, Machines?
strengths? • People, Experience, knowledge,
• What resources do you have? data?
• Is your brand or reputation strong? • Financial reserves, likely returns?
• Marketing - reach, distribution,
awareness?
• Innovative aspects?
• Location and geographical?
• Price, value, quality?
• Accreditations, qualifications,
certification-ns?
• Processes, systems, IT,
communications?
• Cultural, attitudinal, behavioural?
• Management cover, succession?
Weaknesses:
Internal attributes that is harmful to the organization to achieving its
objective (to remedy)
• What do rivals do better than you • Disadvantages of proposition?
do? • Gaps in capabilities?
• What do you do poorly? • Lack of competitive strength?
• What generates the most • Reputation, presence and reach?
customer dissatisfaction and • Financials?
complaints? • Own known vulnerabilities?
• What generates the most • Timescales, deadlines and
employee dissatisfaction and
complaints? pressures?
• What processes and activities • Cash flow, start-up cash-drain?
can you improve? • Continuity, supply chain
robustness?
• Effects on core activities,
distraction?
• Reliability of data, plan
predictability?
• Morale, commitment, leadership?
• Accreditations, etc?
• Processes and systems, etc?
• Management cover, succession?
In short, SWot provides a set of internal factors like, PRIMO-F
P: people, R: Resources, I: Innovation, M: Marketing, O: Operation, F:
financial resources
Opportunities:
External factors that help the organization achieve its objective
(prioritized, optimized)
• Where can you apply your • Market developments?
strengths? • Competitors' vulnerabilities?
• How are your customers and their • Industry or lifestyle trends?
needs changing? • Technology development and
• How is technology changing your innovation?
business? • Global influences?
• Are there new markets for your • New markets, vertical, horizontal?
strengths? (e.g. foreign) • Niche target markets?
• Are there new ways of producing • Geographical, export, import?
your products? • New USP's?
• Are your rivals’ customers • Tactics - surprise, major contracts,
dissatisfied? etc?
• Business and product development?
• Information and research?
• Partnerships, agencies, distribution?
• Volumes, production, economies?
 • Seasonal, weather, fashion
influences?
Threats: External factors that is harmful to the organization to achieving
its objective (minimized and managed)
• Are customers able to meet their • Political effects?
needs with alternative products? • Legislative effects?
• Are customers needed changing • Environmental effects?
away from your product? • IT developments?
• What are your competitors • Competitor intentions - various?
developing? • Market demand?
• Are your rivals improving their • New technologies, services, ideas?
product offerings or prices? • Vital contracts and partners?
• Is new technology making your • Sustaining internal capabilities?
product obsolete? • Obstacles faced?
• Is your cash flow and debt position • Insurmountable weaknesses?
healthy? • Loss of key staff?
• Are your employees satisfied? Is • Sustainable financial backing?
turnover high? • Economy - home, abroad?
• Is new competition coming? • Seasonality, weather effects?
• Are sales growing slower than the
industry average?
In short, External factors can be expressed as PESTLE: (P: POLITICAL, E:
ECONOMICAL, S: SOCIETAL, T: TECHNOLOGICAL, L: LEGAL, E:
ENVIRONMENTAL)
SWOT MATRIX TOWS MATRIX
The advantages are as follows:

 Low cost, Simplicity, Flexibility, Quicker, Collaborative

 Since its qualitative, it can be used as a discussion tool

 A good first step before a more in-depth analysis or a good

summary of detailed findings

 Takes into consideration of external business environment as well

as internal capabilities
Many disadvantages found in this regard are as follows-

 It may tend to persuade companies to compile lists rather than think

about what is actually important in achieving objectives

 No suggestions for solving disagreements

 It Can become too focused on the short term

 No obligation to verify statements or aspects based on the data or

the analysis

 It also presents the resulting lists uncritically and without clear

prioritization
Example in Hypothetical firm:

Strength Weakness
1. Marketing 1. Financial aspects
2. R&D 2. Global presence
3. Quality
Opportunity
1. Economic boom ADVANCE OVERCOME
 1. S1S2O2O4: Develop new

2. New product product 1. W1O3: Merger with foreign

3. Market in European 2. S1S2O3: Develop product as companies
Countries per the research on the

4. Excess residual income European market

Threat
1. Global Competitors AVOID AVOID & OVERCOME
2. Saturated market in the 1. S1T1: Increase brand loyalty 1. W1T2: Liquidate the
present industry 2. S1T2: JUDICIOUS MARKETING products which are losses
& ADVERTISING 2. W1T2: MERGER TO GAIN
MORE MARKET SHARE

BIG QUESTIONS:

 WHERE ARE YOU NOW? ASSESSMENT OF CURRENT POSITION BASED

ON THE STRENGTH & WEAKNESS
 WHAT IS HAPPENING NOW (INDUSTRY ANALYSIS, COMPETITOR
ANALYSIS, SOCEITAL ANALYSIS, SWOT)
 WHAT SHOULD THE BUSINESS BE DOING (EVALUATION OF
STRATEGY)