SWOT ANALYSIS

WHAT IS A SWOT ANALYSIS? DESCRIPTION

A SWOT analysis is a tool used in management and strategy formulation. It can help to identify the Strengths, Weaknesses, Opportunities and Threats of a particular company.

Strengths and Weakness are internal factors that create value or destroy value. These can include skills, assets, or resources that a company has at its disposal, compare to its competitors and this can be measured through internal assessment or external benchmarking.

Opportunities and threats are external factors that create value or destroy value. These emerge from either the competitive dynamics of the industry or from demographic, economic, political, technical, social, legal or cultural factors (PEST) and cannot be control by company.

Typical example of factors in a SWOT Analysis diagram:

Strength ·         Exclusive access to natural resources. ·         Specialist marketing expertise. ·         New, innovative product or services. ·         Patents ·         Strong brand or reputation. ·         Cost advantages through proprietary know-how	Weakness ·         Lack of marketing expertise. ·         Location of your company. ·         Damaged reputation. ·         Poor quality of goods and services. ·         Competitors have superior access to distribution channels.
Opportunities   ·         Developing market (China, the internet) ·         A new international market. ·         Loosening of regulations. ·         Removal of international trade barriers. ·         Moving into new attractive market segments. ·         Mergers, joint ventures or strategic alliance.	Threats     ·         Price war. ·         New regulations ·         Increased trade barriers. ·         A new competitor in your own home market. ·         A potential new taxation on your product or services.

 

Any organisation must try to create a fit with its external environment. The SWOT diagram is a very good tool for analyzing the internal strengths and weaknesses of an organisation and external opportunity and threats. However, this analysis is just the first step, to really create the fit with the external environment is often the most difficult work.

 

 

 

CONFRONTATION MATRIX

Confrontation Matrix is a tool used to combine the internal factors with the external factors.

	Opportunities	Threats
Strengths	Offensive                                                                            make the most of these	Defensive Restore strengths
Weaknesses	Strengths Watch competition closely	Survive   Turn around.

 

Often in reality the two columns of the SWOT diagram are pointing in opposite directions. Strategies must still deal with the paradox of creating alignment and this can be done through inside-out formulation (resources – driven) or Outside-in strategy formulation (market – driven strategy).

Note: You can also apply a SWOT analysis to competitors, often providing interesting new perspectives.