Strenghts, Weakenesses, Opportunities and Threats
SWOT is an important tool in auditing the external and internal environment of the organization.
Strengths and Weaknesses are internal environmental factors, while external environmental factors are expressed through Opportunities and Threats.
Basically the SWOT analysis should be helpful in assessing the resources, capabilities and vulnerable points which need improvement in order to develop competitiveness. It can also provide a framework to review the strategy or direction of a company.
Strengths represent those specific characteristics of the business that offer an advantage over its competitors. These features are helpful when it comes to achieving objectives, so the organization may seek to discover new means of using these strengths.
Weaknesses are characteristics that limit performance and could represent an obstacle in achieving objectives. Therefore, new solutions should be found to eliminate or improve them.
Opportunities include external conditions that could help improve performance or that can be capitalized upon or exploited.
Threats indicate external conditions and situations that could hinder performance, so ways of defending against them can be explored.
Using SWOT, the company can estimate whether its objectives are attainable or not, given the internal and external circumstances.
Using a SWOT
A SWOT Analysis should be more than a basic listing of strengths, weaknesses, opportunities and threats.
Most organizations have the same, common-sense type of threats, such as competitors, technological changes, regulation and deregulation, or weaknesses such as high price, but these are all very general, hard to control elements meaning the utility can be quite limited. As Cranfield’s Professor Malcolm McDonald puts it, real SWOTs should be more concise and specific.
First of all, they should be applied to a specific segment of the market and analyze which factors people take into consideration when they decide to buy a specific product (the ‘Critical Success factors’), together with the level of importance accorded to each individual item. This gives a final score which is the result of a strengths/weaknesses analysis from a customer perspective and shows the status of a company and other competitors. Once strengths and weaknesses are established, the impact of threats is easier to assess and new opportunities can be explored.
SWOT and Other Tools
To understand this improved type of SWOT analysis, further tools are provided such as McDonald’s version of the directional policy matrix applied to the Cranfield organization. This instrument can help marketers understand products, brands and services in terms of market attractiveness and business strengths, which are the main axis of the matrix. We can see examples of how some educational segments of the Cranfield organization have developed and moved across the matrix over a 25 year period.
The conclusion is that companies should apply a different policy for each type of market and several guidelines are suggested for different positioning of markets on the directional policy matrix. Changing a market position should not be assessed in terms of profitability alone, but also considered in terms of improved competitiveness.