SWOT Analysis
SWOT has a long history as a tool of strategic and marketing analysis. No one knows who first
invented SWOT analysis. It has features in strategy textbooks since at least 1972 and can now be
found in textbooks on marketing and any other business disciplines. It advocates say that it can be
used to gauge the degree of fit between the organisations strategies and its environment, and to
suggest ways in which the organisation can profit from strengths and opportunities and shield itself
against weaknesses and threats (Adams, 2005). However, SWOT has come under criticism recently.
Because it is so simple, both students and managers have a tendency to use it without a great deal of
thought, so that the results are often useless. Another problem is that SWOT, having been conceived
in simpler times, does not cope very well with some of the subtler aspects of modern strategic theory,
such as trade-offs (De Witt and Meyer, 1998).
Strengths
Determine an organisations strong points. This should be from both internal and external customers.
A strength is a resource advantage relative to competitors and the needs of the markets a firm serves
or expects to serve. It is a distinctive competence when it gives the firm a comparative advantage in
the marketplace. Strengths arise from the resources and competencies available to the firm.
Weaknesses
Determine an organisations weaknesses, not only from its point of view, but also more importantly,
from customers. Although it may be difficult for an organisation to acknowledge its weaknesses it is
best to handle the bitter reality without procrastination. A weakness is a limitation or deficiency in one
or more resources or competencies relative to competitors that impedes a firms effective
performance.
Opportunities
Another major factor is to determine how organisations can continue to grow within the marketplace.
After all, opportunities are everywhere, such as the changes in technology, government policy, social
patterns, and so on. An opportunity is a major situation in a firms environment. Key trends are one
source of opportunities. Identification of a previously overlooked market segment, changes in
competitive or regulatory circumstances, technological changes, and improved buyer or supplier
relationships could represent opportunities fro the firm.
Threats
No one likes to think about threats, but we still have to face them, despite the fact that they are
external factors that are out of our control, for example, the recent economic slump in Asia. It is vital to
be prepared and face threats even during turbulent times. A threat is a major unfavourable situation in
a firms environment. Threats are key impediments to the firms current or desired position. The
entrance of new competitors, slow market growth, increased bargaining power of key buyers or
suppliers, technological changes, and new or revised regulations could represent threats to a firms
success.
Because SWOT is such as familiar and comforting tool, many students use it at the start of their
analysis. This is a mistake. In order to arrive at a proper SWOT appraisal, other analyses need to be
carrier out first.
Since opportunities and threats mostly arise from the environment, SWOT analysis needs to take
account of the results of a full environmental analysis.
It is impossible to gauge what an organisations real strengths are until you have assessed its
strategic resources in fact, strategic resources and strength are the same thing. There is a tendency
for students to put down anything vaguely favourable that they can think of about a company as a
strength. This temptation needs to be resisted - a strength is not a strength unless it makes a genuine
difference to an organisations competitiveness. The same is true of weaknesses.
For example, look at Southwest Airlines and [Link]. Both companies have important groups of
potential customers to whom they offer poor service. Southwest ignores business passengers, and
will not accept transfers from other airlines. Amazon makes people wait days to receive books that
they can obtain instantly from their neighbourhood bookstores, and pay a delivery charge for the
privilege. Surely, these are major threats. Southwest and Amazon have chosen not to give those
customers priority. Serving them would divert resources from the firms core markets, and dilute
service to their main customers. Not serving them is certainly not a weakness; in a paradoxical way, it
may be a strength.
The wizardry of SWOT is the matching of specific internal and external factors, which creates a
strategic matrix and which makes sense. It is essential to note that the internal factors are within the
control of organisation, such as operations, finance, marketing, and other areas. On the contrary, the
external factors are out of the organisations control, such as political and economic factors,
technology, competition, and other areas. The four combinations are called the maxi-maxi
(strengths/opportunities), maxi-mini (strengths/threats), mini-maxi (weaknesses/opportunities), and
mini-mini (weaknesses/threats). Weihrich (1982) describes the four combinations as follows:
1. Maxi-maxi (S/O). This combination shows the organisations strengths and opportunities. In
essence, an organisation should strive to maximise its strengths to capitalise on new opportunities.
2. Maxi-mini (S/T). This combination shows the organisations strengths in consideration of threats,
e.g. from competitors. In essence, an organisation should strive to use its strengths to parry or
minimise threats.
3. Mini-maxi (W/O). This combination shows the organisations weaknesses in tandem with
opportunities. It is an exertion to conquer the organisations weaknesses by making the most of any
new opportunities.
4. Mini-mini (W/T). This combination shows the organisations weaknesses by comparison with the
current external threats. This is most definitely defensive strategy, to minimise an organisations
internal weaknesses and avoid external threats.