What is SWOT analysis?
- A method for analysing a business, its resources and its environment
- Often used as part of strategic planning
- Looks at
- Internal Strengths
- Internal Weaknesses
- External Opportunities
- External Threats
Personal SWOT Analysis
- Strengths
- Technical ability
- Motivation
- Enthusiastic
- Weaknesses
- Over reaching
- Repetitive tasks such as revision are difficult
- Opportunities
- Could get involved in open-source and build up a CV
- Could get a part-time job
- Could set up a small online store
- Threats
- Hard to stand out
- Burnout
SWOT Analysis aims to discover
- What the business does better than the competition
- What competitors do better
- Whether it is making the most of the opportunities available
- How a business should respond to changes in its external environment
The SWOT Matrix
- Positive factors
- Strengths
- Opportunities
- Negative factors
- Weaknesses
- Threats
Internal vs External
- Strengths and weaknesses
- Internal to the business
- Relate to the current situation
- Opportunities and threats
- External to the business
- Related to changes in the environment which will impact the business
What are strengths?
- Market share
- Economies of scale
- High quality
- Leadership skills
- Financial resources
- R&D capabilities
- Technological representation
- Brand reputation
- Protected IP
- Distribution network
- Employee skill
- High productivity
- Flexibility of production
- etc etc
What are weaknesses?
-
A source of competitive disadvantage
-
Low market share
-
Inefficient plant
-
Outdated technology
-
Poor quality
-
Lack of innovation
-
A weak brand name
-
High costs
-
Cash flow problems
-
Undifferentiated product
-
Inadequate distribution
-
Quality problems
-
Low productivity
-
Skills gap
-
Unmotivated staff
-
etc etc
What are opportunities?
- An opportunity is any feature of the external environment which creates positive potential for the business to achieve its objectives.
- Technological innovation
- New demand
- Market growth
- Demographic change
- Social or lifestyle change
- Government spending programmes
- Higher economic growth
- Trade liberalism
- Diversification opportunity
- Deregulation of the market
- etc etc
Emerging Markets
- Developing countries (Pakistan, India etc)
- Large amounts of change
The “Grey Pound”
- Pensioners are better off if they retired longer ago
- Pensions used to be more generous than they currently are
- Some OAPs have lots of disposable income
COVID-19 Pandemic
- Despite many being furloughed
- Many opportunities for growth have been enjoyed by some
What are threats?
- Any external development that may hinder or prevent the business from achieving its objectives
- New market entrants
- Change in customer tastes or needs
- Demographic change
- Consolidation among buyers
- New regulations
- Economic downturn
- Rise of low cost production abroad
- Higher input prices
- New substitute products
- Competitive pressure
- etc etc
SWOT is more than a list
- It is an analytical technique to support strategic decisions
- Strategy should be devised around strengths and opportunities
- The keywords are: match and convert
Match and Convert
- Match strengths with opportunities
- Convert weaknesses into strengths
Convert weaknesses into strengths
- Outdated technology
- Acquire a competitor with leading technology
- Skills gap
- Invest in training and more effective recruitment
- Overdependence on a single product
- Diversify the product portfolio by entering new markets
- Poor quality
- Invest in quality assurance
For every perceived threat, the same change presents an opportunity for a business.
IKEA Case Study
SWOT Analysis
- Strengths
- Growing customer base
- 433 stores across 25 countries
- Recognised brand
- Low-cost of storage and transport of products due to flatpak
- Franchise system reduces administrative burden
- Committed to being climate positive by 2030
- Prices are low
- Weaknesses
- Franchisee system decentralises the business
- Requires work to setup their products
- Many people are increasingly “lazy” and do not want to build their own furniture
- IKEA may need to develop a solution to allow them to remain competitive
- Operating across countries and franchisees means that IKEA will need a lot of work to keep a consistent experience
- Different countries will have different demographics, looking for different items
- Opportunities
- E-commerce is growing rapidly, so moving more to the internet could help IKEA’s performance
- Diversification of products
- Provide sustainable solutions
- Chinese market growth
- Enter other growing markets
- Advertising/marketing could accelerate growth
- Viral advertising could be highly effective
- A simpler store layout could lead to more customers coming in
- Threats
- Partnership with Alibaba could disrupt relations with western countries
- Amazon and similar companies may outcompete them on price
- Legislation changes could force them to ditch their current Chinese-backed e-commerce platform in countries like the USA
- Competitors could rapidly arise in developing countries and other regions where IKEA does not currently operate
- Lower quality products could discourage potential customers