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Wednesday, February 23, 2011
Tuesday, September 28, 2010
Using a SWOT Analysis to Develop Business Growth Strategy
Developing a strategy starts with a complete evaluation of a company's situation--both internal and external. This evaluation is called a SWOT Analysis. The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The S and W refer to the company's internal environment; its own strengths and weaknesses. The O and T refer to the external environment. The company's external environment is composed of both the macro and the micro environment.
It is important for the company to analyze the entire external environment to find attractive opportunities and identify threats. The goal is to align the company's strengths to seize the opportunities and eliminating or minimizing weaknesses to overcome threats. The SWOT Analysis then serves as an input for strategy development.
Examples of a SWOT Analysis
# A SWOT analysis is a method used in business planning. It is a summary of the company's current situation. The strengths and weaknesses of a company are identified, along with the opportunities and threats in its environment. The SWOT analysis allows the current state and future potential of the company to be evaluated. If the strengths and opportunities outweigh the weaknesses and threats, the company is in a good position. SWOT analyses can also be used to build strategies for the future by considering how weaknesses can be turned into strengths, and how threats can be turned into opportunities.
Example 1
# Richard Clarke of Chartwell Financial Services Ltd. described to Business Link UK how the performance of a SWOT analysis helped his business. The company, which provides independent financial consultancy services, came under new management in 2002. Since then, the business has been systematically planning its future, with SWOT analyses playing a key role.
The new management conducted a SWOT analysis after they purchased the company. They wanted to know precisely what they were entering into. They analyzed all aspects of the business including the finances, clients, competitors, and market. Clarke indicated that the analysis helped them create their strategy for the company's future. They found ways of creating strengths and opportunities out of weaknesses and threats. They realized, for example, that the overhaul of legislature concerning pensions, which at first it appeared to be a threat, was in fact an opportunity because clients would need more advice to see them through the changes.
Clarke points out that a SWOT analysis is a snapshot of the company's current position. The analysis needs to be repeated as things change. Three SWOT analyses were conducted at Chartwell in the first year alone. They used each analysis to set their next goals, each with a specified timescale.
Example 2
# The Time 100 reports that a SWOT analysis of the car manufacturer, Skoda, found that they had an excellent and well-liked product, but they only had a small percentage of the UK market.
The analysis included surveys of Skoda customers and an assessment of its place in the market. Skoda owners were found to be satisfied with their cars, but the company had only a 1.7 percent market share. The brand was found to be perceived as outdated, although Skoda was no longer seen as producing poor copies of competitor's cars. The SWOT analysis showed that Skoda needed to build its brand in order to grow its market share. They capitalized on this opportunity by creating a new advertising campaign, focusing on the positive feedback that they had received from customers, and then launched a marketing campaign based on the happy customer experience. This campaign allowed Skoda to compete against its rivals by making itself stand out.
Example 3
# A SWOT analysis of the home furnishings chain IKEA was also described by the Times 100. The analysis highlighted IKEA's commitment to sustainability and waste reduction as a major strength. The IKEA brand and their key concept of offering good quality products at affordable prices are also key strengths. The need to keep production costs down could also be viewed as a weakness; however, the growing market for green and sustainable products was identified as an opportunity that they should capitalize on. The current state of the economy is seen as a threat to IKEA's success, but their low prices were expected to help them turn this threat into an opportunity.
Example 1
# Richard Clarke of Chartwell Financial Services Ltd. described to Business Link UK how the performance of a SWOT analysis helped his business. The company, which provides independent financial consultancy services, came under new management in 2002. Since then, the business has been systematically planning its future, with SWOT analyses playing a key role.
The new management conducted a SWOT analysis after they purchased the company. They wanted to know precisely what they were entering into. They analyzed all aspects of the business including the finances, clients, competitors, and market. Clarke indicated that the analysis helped them create their strategy for the company's future. They found ways of creating strengths and opportunities out of weaknesses and threats. They realized, for example, that the overhaul of legislature concerning pensions, which at first it appeared to be a threat, was in fact an opportunity because clients would need more advice to see them through the changes.
Clarke points out that a SWOT analysis is a snapshot of the company's current position. The analysis needs to be repeated as things change. Three SWOT analyses were conducted at Chartwell in the first year alone. They used each analysis to set their next goals, each with a specified timescale.
Example 2
# The Time 100 reports that a SWOT analysis of the car manufacturer, Skoda, found that they had an excellent and well-liked product, but they only had a small percentage of the UK market.
The analysis included surveys of Skoda customers and an assessment of its place in the market. Skoda owners were found to be satisfied with their cars, but the company had only a 1.7 percent market share. The brand was found to be perceived as outdated, although Skoda was no longer seen as producing poor copies of competitor's cars. The SWOT analysis showed that Skoda needed to build its brand in order to grow its market share. They capitalized on this opportunity by creating a new advertising campaign, focusing on the positive feedback that they had received from customers, and then launched a marketing campaign based on the happy customer experience. This campaign allowed Skoda to compete against its rivals by making itself stand out.
Example 3
# A SWOT analysis of the home furnishings chain IKEA was also described by the Times 100. The analysis highlighted IKEA's commitment to sustainability and waste reduction as a major strength. The IKEA brand and their key concept of offering good quality products at affordable prices are also key strengths. The need to keep production costs down could also be viewed as a weakness; however, the growing market for green and sustainable products was identified as an opportunity that they should capitalize on. The current state of the economy is seen as a threat to IKEA's success, but their low prices were expected to help them turn this threat into an opportunity.
Importance of SWOT Analysis
A SWOT analysis is a tool for companies to assess the industry and to develop strategies to remain competitive. This is a simple way to focus aspects of the company and business sector and to organize the findings to evaluate the current status of the business, future prospects and the economic climate. A SWOT analysis promotes critical and specific thinking to enhance strategic plans and objectives. The SWOT analysis has been used as a business concept since the 1960s and has shown its value when applied to organizations, management structure and marketing.
History
1. Albert Humphrey from Stanford University is credited as the developer of the Strengths, Weaknesses, Opportunities and Threats--or SWOT--analysis, which derived from the Team Action Model research project. TAM is a business concept that supports executives in effectively managing change. SWOT extends from the TAM concept. George Albert Smith Jr. and C. Roland Christiensen from Harvard Business School are credited with the acronym during the 1950s and 1960s to evaluate gaps and resources within companies as an organizational strategy. The SWOT concepts were refined over the years to become one of today's marketing tools.
Significance
2. The SWOT analysis is a key component in strategic planning. The analysis subjectively evaluates the impact of internal and external factors for a business objective. Internal processes and resources are considered strengths and weaknesses (S and W, respectively). External factors affecting the business and industry are considered opportunities and threats (O and T, respectively). An evaluation of these factors develops a strategic perspective that includes the competitive landscape and current market conditions.
Features
3. SWOT analysis can include:
Strengths: Experience and expertise; new and current products; quality and reputation; resources and access to distributors; location
Weaknesses: Deficiencies in access and experience; brand name recognition and reputation; perceived value; costs
Opportunities: Emerging markets and technologies; strategic partnerships and alliances; changes in regulations and policies; expansion into other geographic areas or industries; diminishing competition
Threats: Generic or updated products or technologies; increased scrutiny and tighter regulations; competitors entering the marketplace; increased costs for resources
Considerations
4. A SWOT analysis is subjective yet concise. Overanalysis and generalizations have limited value in preparing a strategic perspective. The factors in the SWOT analysis should reflect the actual internal status of the business and its future prospects, as well as external forces within the industry so that an action plan can be prepared. Other tools such as Porter's Five Force analysis can supplement information in a SWOT.
Misconceptions
5. Strategy should not be based solely on a SWOT analysis. The value of a SWOT analysis is to prepare a snapshot of the current competitive landscape and to identify areas that can be improved, internally. A SWOT analysis can provide companies with discrete insight regarding prioritizing strategies and tactics to gain an advantage. Preparing a SWOT analysis is not complicated; it should be revisited on a regular basis to evaluate the impact of strategies in an ever-changing economy.
History
1. Albert Humphrey from Stanford University is credited as the developer of the Strengths, Weaknesses, Opportunities and Threats--or SWOT--analysis, which derived from the Team Action Model research project. TAM is a business concept that supports executives in effectively managing change. SWOT extends from the TAM concept. George Albert Smith Jr. and C. Roland Christiensen from Harvard Business School are credited with the acronym during the 1950s and 1960s to evaluate gaps and resources within companies as an organizational strategy. The SWOT concepts were refined over the years to become one of today's marketing tools.
Significance
2. The SWOT analysis is a key component in strategic planning. The analysis subjectively evaluates the impact of internal and external factors for a business objective. Internal processes and resources are considered strengths and weaknesses (S and W, respectively). External factors affecting the business and industry are considered opportunities and threats (O and T, respectively). An evaluation of these factors develops a strategic perspective that includes the competitive landscape and current market conditions.
Features
3. SWOT analysis can include:
Strengths: Experience and expertise; new and current products; quality and reputation; resources and access to distributors; location
Weaknesses: Deficiencies in access and experience; brand name recognition and reputation; perceived value; costs
Opportunities: Emerging markets and technologies; strategic partnerships and alliances; changes in regulations and policies; expansion into other geographic areas or industries; diminishing competition
Threats: Generic or updated products or technologies; increased scrutiny and tighter regulations; competitors entering the marketplace; increased costs for resources
Considerations
4. A SWOT analysis is subjective yet concise. Overanalysis and generalizations have limited value in preparing a strategic perspective. The factors in the SWOT analysis should reflect the actual internal status of the business and its future prospects, as well as external forces within the industry so that an action plan can be prepared. Other tools such as Porter's Five Force analysis can supplement information in a SWOT.
Misconceptions
5. Strategy should not be based solely on a SWOT analysis. The value of a SWOT analysis is to prepare a snapshot of the current competitive landscape and to identify areas that can be improved, internally. A SWOT analysis can provide companies with discrete insight regarding prioritizing strategies and tactics to gain an advantage. Preparing a SWOT analysis is not complicated; it should be revisited on a regular basis to evaluate the impact of strategies in an ever-changing economy.
Library SWOT Analysis
Analyzing the strengths, weaknesses, opportunities and threats---the SWOT---facing your library is an important part of strategic planning, which is vital to the continued success of libraries of all types, including academic, public and special. As the Northeast Kansas Library System noted in an internal audit, conducting a library SWOT analysis "will help you to focus your library's services and programs on areas where you are strong and where the greatest opportunities lie."
Strengths
1. Assessing a library's strengths, areas in which it is already successful, includes looking at staff skills and competencies, programming, budget maintenance and community relations. Planning for the library's future based on its strengths should include ways to maintain and improve existing success.
Weaknesses
2. Analyzing a library's weaknesses also means evaluating internal operations. G. Edward Evans and Patricia Layzell Ward, authors of "Management Basics for Information Professionals," point out that weaknesses may lie in the same areas as strengths. Careful analysis of library weaknesses suggests which areas need improvement. Weaknesses also identify areas that need attention to reduce the negative impact of their weaknesses.
Opportunities
3. Factors outside the library itself should be evaluated to see what could be acted upon to benefit the library. Library opportunities may present themselves in "economic, political/legal, technological, or sociocultural environments," says Anthony C. Danca in his analysis of SWOT. For example, awareness of a high economic status of the library's main patron base provides a population likely to participate in fund-raising activities.
Threats
4. Analyzing library threats also means evaluating factors outside the library that hinder its success. Like opportunities, many threats stem from the economic and political environment, says Danca. For example, economic downturns threaten to reduce the budgets of publicly funded libraries. Maintaining current awareness of threats allows the library administration to plan and act. This area requires frequent attention because the external environment often changes quickly.
Other Considerations
5. Evans and Ward explain that although conducting a library SWOT analysis takes significant time, the benefits are worth it. They further explain that the analysis fosters thinking through the planning process based on the external library environment and the internal library capabilities. The analysis process provides information on the current state of internal and external factors, many of which directly impact the continued viability of the library organization.
Strengths
1. Assessing a library's strengths, areas in which it is already successful, includes looking at staff skills and competencies, programming, budget maintenance and community relations. Planning for the library's future based on its strengths should include ways to maintain and improve existing success.
Weaknesses
2. Analyzing a library's weaknesses also means evaluating internal operations. G. Edward Evans and Patricia Layzell Ward, authors of "Management Basics for Information Professionals," point out that weaknesses may lie in the same areas as strengths. Careful analysis of library weaknesses suggests which areas need improvement. Weaknesses also identify areas that need attention to reduce the negative impact of their weaknesses.
Opportunities
3. Factors outside the library itself should be evaluated to see what could be acted upon to benefit the library. Library opportunities may present themselves in "economic, political/legal, technological, or sociocultural environments," says Anthony C. Danca in his analysis of SWOT. For example, awareness of a high economic status of the library's main patron base provides a population likely to participate in fund-raising activities.
Threats
4. Analyzing library threats also means evaluating factors outside the library that hinder its success. Like opportunities, many threats stem from the economic and political environment, says Danca. For example, economic downturns threaten to reduce the budgets of publicly funded libraries. Maintaining current awareness of threats allows the library administration to plan and act. This area requires frequent attention because the external environment often changes quickly.
Other Considerations
5. Evans and Ward explain that although conducting a library SWOT analysis takes significant time, the benefits are worth it. They further explain that the analysis fosters thinking through the planning process based on the external library environment and the internal library capabilities. The analysis process provides information on the current state of internal and external factors, many of which directly impact the continued viability of the library organization.
SWOT Analysis of a College
A strengths, weaknesses, opportunities and threats analysis is a tool used in businesses and other organizations to assess the potential upsides and liabilities of marketing plans and strategies, new business ventures and even hiring new employees. SWOT analyses have many applications in addition to those stated, though.
Strengths
1. The strengths section of a SWOT analysis should look inward on an organization. This is the section where a college would identify the internal strengths it possesses. For example, some colleges cite in this section high enrollment, high student retention, low student to teacher ratios, high graduation rates, experienced and effective faculty and a competitive academic environment.
Weaknesses
2. The weaknesses section of a SWOT analysis should also look inward on an organization. This is the section where a college would identify the internal weaknesses it faces. For example, some colleges might cite in this section low post-graduation employment rates, high staff and faculty turnover, a lack of student parking, high tuition rates or low school pride.
Opportunities
3. The opportunities section of a SWOT analysis should look at the external environment of an organization. The opportunities should entail local to distant factors that could lead to growth or improvement. This is the section where a college would identify those opportunities for growth or improvement. For example, some colleges cite in this section a large alumni pool, unused office capacity, training seminars and conventions, or competitor universities dropping degree programs or reducing incoming class sizes.
Threats
4. The threats section of a SWOT analysis should also look at the external environment of an organization. The threats should entail local to distant factors that could cause atrophy, decline or harm at an organization. This is the section where a college would identify those threats that would harm the college's current growth or status quo. For example, some colleges cite in this section community college growth, academic building erosion and wear, high health care costs, dissatisfied alumni, a poor economy, increasing online courses or smaller high school graduation classes.
Constructing a SWOT Analysis
5. With the strengths, weaknesses, opportunities and threats all drafted, taking that information and placing it in a chart is the next step. The way to display a SWOT analysis is by constructing a chart with the strengths listed in the upper left portion, weaknesses listed in the upper right portion, opportunities listed in the lower left portion and threats listed in the lower right portion.
Strengths
1. The strengths section of a SWOT analysis should look inward on an organization. This is the section where a college would identify the internal strengths it possesses. For example, some colleges cite in this section high enrollment, high student retention, low student to teacher ratios, high graduation rates, experienced and effective faculty and a competitive academic environment.
Weaknesses
2. The weaknesses section of a SWOT analysis should also look inward on an organization. This is the section where a college would identify the internal weaknesses it faces. For example, some colleges might cite in this section low post-graduation employment rates, high staff and faculty turnover, a lack of student parking, high tuition rates or low school pride.
Opportunities
3. The opportunities section of a SWOT analysis should look at the external environment of an organization. The opportunities should entail local to distant factors that could lead to growth or improvement. This is the section where a college would identify those opportunities for growth or improvement. For example, some colleges cite in this section a large alumni pool, unused office capacity, training seminars and conventions, or competitor universities dropping degree programs or reducing incoming class sizes.
Threats
4. The threats section of a SWOT analysis should also look at the external environment of an organization. The threats should entail local to distant factors that could cause atrophy, decline or harm at an organization. This is the section where a college would identify those threats that would harm the college's current growth or status quo. For example, some colleges cite in this section community college growth, academic building erosion and wear, high health care costs, dissatisfied alumni, a poor economy, increasing online courses or smaller high school graduation classes.
Constructing a SWOT Analysis
5. With the strengths, weaknesses, opportunities and threats all drafted, taking that information and placing it in a chart is the next step. The way to display a SWOT analysis is by constructing a chart with the strengths listed in the upper left portion, weaknesses listed in the upper right portion, opportunities listed in the lower left portion and threats listed in the lower right portion.
How to Facilitate SWOT Analysis
A SWOT analysis is an approach commonly used in organizational settings to facilitate decision making. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. By mapping out these factors, organizations can assess internal and external factors that can either assist them in achieving objectives, or present obstacles that must be overcome. While SWOT analysis is conceptually simple, the process requires some effort to do it well.
Difficulty: Moderately Easy
Instructions
1.Explain the goal of SWOT analysis to the exercise participants. This will help them identify relevant factors that fit into the SWOT categories.
2.Split up the participants into groups. Each group should have no more than four participants.
3.Give each group of participants a sheet of paper on which you have previously drawn a blank SWOT matrix. This is a table with two rows and two columns, where the left column consists of internal factors (strengths and weakness on the top and bottom row, respectively), and the right column has the external factors (opportunities and threats on the top and bottom row, respectively).
4. Ask each group of participants to jot down factors that belong in the respective cells in the table. Give them a predetermined amount of time to work on it.
5. Draw a large version of the blank SWOT matrix on the flip chart. Ask a member of each group in turn to come up to the flip chart, and write their group's results in the respective cells, using a different colored marker for each cell. Also ask them to explain to everyone their rationale for the factors they identified.
6. Allow some time for free discussion, then consolidate the results into a set of strengths, weaknesses, opportunities, and threats in which all participants can agree.
Difficulty: Moderately Easy
Instructions
1.Explain the goal of SWOT analysis to the exercise participants. This will help them identify relevant factors that fit into the SWOT categories.
2.Split up the participants into groups. Each group should have no more than four participants.
3.Give each group of participants a sheet of paper on which you have previously drawn a blank SWOT matrix. This is a table with two rows and two columns, where the left column consists of internal factors (strengths and weakness on the top and bottom row, respectively), and the right column has the external factors (opportunities and threats on the top and bottom row, respectively).
4. Ask each group of participants to jot down factors that belong in the respective cells in the table. Give them a predetermined amount of time to work on it.
5. Draw a large version of the blank SWOT matrix on the flip chart. Ask a member of each group in turn to come up to the flip chart, and write their group's results in the respective cells, using a different colored marker for each cell. Also ask them to explain to everyone their rationale for the factors they identified.
6. Allow some time for free discussion, then consolidate the results into a set of strengths, weaknesses, opportunities, and threats in which all participants can agree.
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