2.4 SWOT Analysis

Strengths, Weaknesses, Opportunities, and Threats

SWOT analysis is the practice of asking the following four simple questions and using the answers to better understand the subject and create a plan of action.

  1. What are the company’s internal strengths?

  2. What are our internal weaknesses?

  3. What external opportunities do we have?

  4. What external threats stand in our way?

Elements of a SWOT Analysis

Strengths

A strength is a resource or capability that provides the organization with an advantage relative to its competitors in meeting or exceeding customers' expectations. Strengths may include competencies in developing new technologies, providing exceptional customer service, operating with superior efficiency, or predicting customer needs. Organizations may have a unique strength in marketing, operations, design, or other specialties that leads to a competitive advantage.

Weaknesses

A weakness is a shortcoming or vulnerability in an organization's capability to meet customers' needs compared to competitors. Weaknesses generally stem from a lack of resources or competencies. For example, an organization may lack the financial resources to fully implement a desired strategy. A firm may not have the needed technical or design talent required to effectively compete. Sometimes the weakness is an inability to rapidly adapt to a changing environment in a timely manner that allows for continued growth and prosperity.

Opportunities

An opportunity is a condition in the external environment that represents a prospect to improve the organization's competitive position in the market. Changes in technology, a growing middle class in international markets, or new sociocultural trends may provide fresh opportunities for businesses in the general environment. Stakeholders may also present opportunities such as improving relationships with key suppliers, finding a new segment of customers that had not previously been targeted, or partnering with a community to build goodwill.

Threats

A threat is a condition in the external environment that is unfavorable to the competitive potential of the firm. Examples of threats from the general environment might include a poor economy, changing sociocultural trends, or new laws and policies implemented by governments. Threats may also come from stakeholders in the external environment such as new competitors entering the market, poor relations with strategic partners, or special interest groups criticizing the organization.

Examples - SWOT Analyses at Different Levels

Personal SWOT Analysis

Let’s personalize this idea by performing a SWOT analysis on you. What are your strengths? As a student, you’re most likely young, bright, educated (or becoming educated). Maybe you have specific talents that make you especially likable or brilliant in a certain subject. Now, what are your weaknesses? Are you sometimes lazy, prone to lose your temper, or spend too much time on social media? What opportunities do you currently have? You have the opportunity to go educate yourself, prepare yourself for future employment, and choose what you want to make of your life. In fact, you have countless opportunities. Finally, what are your current threats? What could knock you off your feet if not addressed correctly? Is there a threat of not doing as well in this class as you’d like? Are you afraid you may not be accepted into your preferred grad school or maybe struggle to find a job? Performing a SWOT analysis allows for full understanding of what is most important to an individual, project, business, or even industry. It provides a way to understand a situation, analyze it, and then take the necessary steps towards improvement.

Industry SWOT Analysis

Mentioned earlier was the idea that SWOT analysis can be implemented at the company as well as industry levels. Consider for example, the online industry of traded goods and services. Strengths of such an industry may be emphasized in the accessibility, the convenience, and popularity. Weaknesses may be present due to the markets high competition, laws that make it difficult, and present security issues. Opportunity has developed in the online goods and service industry as the world has turned towards the internet as a replacement to old business practices. Threats to the industry involve heavy competition, compromised security, and lost or stolen devices and ideas.

Company SWOT Analysis

Now consider ramengobblers.com, a small upcoming online business that specializes in university student goods and services. Some of Ramen Gobblers strengths are manifest in the cheap startup cost, easy maintenance, and market niche. On the contrary are Ramen Gobblers weaknesses. Being so new to the online business world the company is not well known and has very limited capital. Ramen Gobblers sees opportunity in catering its cite specifically to college students and their situation. Foreseeable threats to the business include other competing sites, student’s possible lack of interest, and malicious hacking.

As Ramen Gobblers CEO, how would you address our concerns and utilize our strengths and opportunities? We could minimize our threats by getting the site up and running quicker than other rising competition. We could instigate a marketing plan to promote the cite and assure that proper security measures are taken. To take advantage of our strengths and opportunities Ramen Gobblers should stress our niche in the college market and try to saturate the market quickly.

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