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  • Outdated technology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