SWOT Analysis

The SWOT business tool, is an essential element for planning and strategising in any business. FashionCapital.co.uk provide an extensive overview of the generic model for maximum impact.

Threats



Threats have the potential to damage an organizations performance in the market place or external environment.

Threats often arise from competitors or factors that are outside the control of the organization.

• Competitors cutting prices or launching a new range of technologically advanced products pose a threat to all organizations trading in that industry.
• Legislation relating to that industry also poses a threat e.g. VAT on a product will affect retailers sales, manufactures and consumers.
• Threats can also jeopardize opportunities of which the organization expects to take advantages.

Opportunities



Opportunities are chances in the external environment or marketplace that an organization may refuse to obtain benefits. The identification of a new geographic market is an opportunity.



·         Such opportunities can be exploited by manufacturing the product in close proximity, or if abroad manufacturing in the firms country and exporting or farming a strategic alliance , and having benefits of a greater understanding of local and national external environment offered by that partner in strategic alliance.



·         This type of alliance will also need to confer benefits on the partner, otherwise it is unlikely to be successful in the long term.



·         Manufacturing in close proximity is probably the time and resource consuming due to setting up from scratch in another country/region.



Key success factors- What an organization must do well and better than it competitors if it is to succeed and can arise from numerous sources.

• Key success factors can be established by the industry in which the organization operates e.g. entailers providing speedy deliveries is a key success factor to all trades within the industry.
• Key success factors may also be determined by the organization itself e.g. accurate service, customer service, minimize paperwork, 24 hour availability via internet and telephone
• Key success factors may also be signified by customers indicating that they require products with particular features or services e.g. offer broader range of high quality products and services.

 

Weaknesses



Weaknesses are lacking in competence, resource or attribute that an organisation needs to perform better than its competitors. E.g. furniture companies rely on styling and designs to make products appealing to its customers. If it relies on designs that have always been used or the staff coming up with new patterns it is likely to lack competence in design – a Key Success Factor.



The lack of a key success resource, such as a new piece of technologically advanced equipment, is also a weakness, particularly if competitors do have access to that equipment.



Strengths



A strength is a competence, valuable resource or attribute that an organisation uses to exploit opportunities in the external environment, e.g. a well motivated and skilled workforce with a low turnover; or an attribute such as a strongly established brand image or reputation.



Stakeholders and Key Success Factors

Customers are stakeholders in an organisation and fulfilling Key Success Factors (KSF’s) involves the organisation in meeting the needs and expectations of its customers and other stakeholders. A key success factor can be a solid relationship with a reliable or one of few suppliers. Meeting key success factors also require meeting the needs of suppliers expectations e.g. regular orders of a certain minimum size, with little room for negotiation on price if the supplier is powerful.



In seeking to satisfy stakeholders, especially customers, whilst outperforming competitors, organisations should seek to:

• Fulfill the KSF’s for the industry or market
• Develop competencies providing competitive advantage e.g. additional products/services and pricing
• Utilize competencies to meet the requirements of specific customers and aim to charge a premium price

 

Competitive Advantage and Premium Prices



Competitive advantage arises from the unique features or “extras” a product or service possesses and for which customers can pay a higher or premium price. E.g. Dry cleaners standard and gold service. A small group of customers can pay the premium price for “extras” in the gold service and being able to offer the service provides the Dry Cleaner with a competitive advantage over the nearby cleaners unable to offer the service.



 Different Types of SWOT Analysis



Basic SWOT analysis examines how threats and opportunities can be dealt with whilst allowing the organisation to utilize its strengths and weaknesses to meet its KSF’s. Bear in mind:

• Long lists of SWOT elements indicate lack of though and seriousness in regards to the organisation
• Lists should be brief and specific indicating key and important issues
• SWOT elements should be judges and assessed in relative terms i.e. each elements worth should be expressed in relation to how competitors fare with the same strength or opportunity
• Organisations aim to beat competitors when it comes to possessing strengths and exploiting opportunities
• The same goes for weaknesses and threats – need to seek the minimum effect of these to a greater extent than their competitors
• Should discuss, illustrate and debate the threats, opportunities, weaknesses and strengths identified and how to build on strengths, exploit opportunities and minimize weaknesses and threats to a greater extent than competitors.
• Will also include assessment of where the company is at the current time and where it wishes to be at some point in the future
• The organisation needs to decide how far away the future is, it will vary from a few months to years depending on the organisations nature of its business and its current situation.

 

Guidelines for Carrying out SWOT Analysis



1)       Identify Key threats, opportunities, weaknesses and strengths. DO NOT produce a long list



2)       Clear discussion and debate considering questions about each element outlined below:



Threats



Do threats need managing more urgently than opportunities pursuing? Which threats need dealing with immediately and in short term? Which issues need considering when undertaking long term planning? How can critical threats be offset or turned into new opportunities?



Opportunities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Identify new markets and market segments that might be suitable given the existing strengths and competencies. Identify changes occurring to existing customers within existing markets. Consider using strategies of market penetration and market development to take advantage of any opportunities from existing and changing markets. Identify changes needed to products and services. Consider strategies of product development and diversification to take advantage of any opportunities arising from changes to existing products (see Ansoff)





Weaknesses





Decide if remedying weaknesses is more urgent than building on strengths to exploit opportunities. Does ignoring key weaknesses make you vulnerable to threats resulting in going out of business or being taken over? How can critical weaknesses be offset or converted into strengths?





Strengths





Do you have appropriate strengths on which to build and exploit opportunities? How can you exploit strengths in relation to opportunities? Which strengths should you develop in the future?