SWOTanalysis
SWOT- a method of analysis in strategic planning, which consists in dividing factors and phenomena into four categories: s trengths( strengths), w eaknesses (weaknesses), o pportunities (opportunities) and t hreats (threats).
SWOT analysis can be presented in the form of a table:
SWOT was first introduced in 1963 at Harvard Business Policy Conference by Professor Kenneth Andrews. Kenneth Andrews). Initially, SWOT analysis was based on articulating and structuring knowledge about the current situation and trends. Since SWOT analysis is general view does not contain economic categories, it can be applied to any organizations, individuals and countries to build strategies in a wide variety of areas of activity.
Methodology conducting SWOT-analysis is very simple, and the analysis itself consists of two parts. Opportunities and threats represent analysis external environment, all factors that may affect the company, but do not depend on it. Strengths and weaknesses are an internal analysis of the company/product. According to Professor Philip Kotler good manager when compiling a SWOT analysis, must indicate at least 5 global external threats and opportunities that can both develop and destroy the business. There are always such opportunities, it is important to find them.
Typically, a SWOT analysis begins with identifying strengths and weaknesses. It is important to take into account that when determining them, you should be guided by the opinion of consumers, and not by company employees. It is your clients who know your strengths and weak sides the best. Here is a list of factors often found in the analysis of strengths and weaknesses:
1) Company reputation
2) Product quality
3) Quality of service
4) Market share
6) Logistics
7) Promotion efficiency
8) Quality of work of sales agents
9) Geographical coverage
10) Introduction of innovations
11) Costs
12) Fin. Sustainability
13) Workers
14) Technical equipment
15) Ability to meet deadlines
16) Flexibility, quick response to events
17) Assortment
19) Resources
20) Buyer knowledge
It is important that the data be real facts and not someone’s guesses. Moreover, it is very bad when the responsibility for creating a SWOT analysis lies with one person. It turns out to be a slightly one-sided vision.
Opportunities and threats. These are all elements of the external environment that have nothing to do with the company. When analyzing them, it is important to understand that the data must be clear and verified. Otherwise, the entire analysis may become meaningless. External opportunities and threats include:
1) Economic situation in the country and the world
2) Demographic situation
3) Political
4) Social movements
5) Technological progress
6) Competitor analysis
7) Legislation
8) Cultural factors
9) Social issues
Typically, a SWOT analysis is presented in the form of a table. After it is carried out, it is necessary to develop a plan to eliminate weaknesses, and the company’s actions in case of threats. You should also consider how opportunities and strengths can be used most effectively.
In practice, several different forms of SWOT analysis:
1) Express SWOT analysis- the most common (due to ease of implementation) type of qualitative analysis, which allows us to determine which strengths of our organization will help fight threats and take advantage of the opportunities of the external environment, and which of our weaknesses will prevent us from doing this. This type of analysis is liked to be shown in some business schools, since the scheme for conducting it has an undoubted advantage: it is very clear and simple. However, in practice, this technique has drawbacks: only the most obvious factors fall into the points of all cells of the table, and even then, some of these factors disappear in the cross matrix because they cannot be used.
2) Summary SWOT analysis, which should present the main indicators that characterize the company’s activities in this moment and outline prospects for future development. Therefore, it should be done not “BEFORE” and not “INSTEAD”, but only AFTER all other types of strategic analysis. The advantage of this form of analysis is that it allows, in some approximation, to give a quantitative assessment of those factors that have been identified (even in cases where the company does not have objective information about these factors). Another advantage is the possibility (based on all types of strategic analysis) immediately move on to developing a strategy and develop a set of measures necessary to achieve strategic goals. The obvious disadvantage is the more complex analysis procedure (during strategic sessions in which the company's top management participates, it can take 1-2 days, depending on the depth of elaboration of factors).
3. Mixed SWOT analysis is an attempt to combine the first and second forms of analysis. To do this, at least three main types of strategic analysis are first carried out (usually STEP analysis, analysis using Porter’s “5 forces” model, and analysis of the internal environment using one of the methods). Then all factors are combined into single tables, from which a cross matrix is formed (as in the express form). Factors are not usually quantified. The advantage of this form is the depth of analysis. The disadvantage should include the psychological factor: in practice, very often the matter ends with the construction of a beautiful matrix and complacency (“well, now we know what to expect and what to fear, so we don’t need anything else”), or forgetting all the factors included in a large SWOT table: only those factors that are included in the matrix remain before your eyes and in your memory.
Anti-SWOTanalysis
There is also the Anti-SWOT method, which is based on SWOT, but its essence is that an analysis of the consequences of failure to implement the intended statements indicated in strengths, weaknesses, opportunities and threats is carried out.
Quadrant “strengths - opportunities”:
-How not to realize your strengths when there are opportunities?
-How can high expectations about the realization of opportunities prevent the use of strengths?
Quadrant "strengths - threats":
-How and when (under what circumstances) will strengths prevent the threat from being neutralized?
-How will increasing threats reduce strength?
Quadrant “weaknesses - opportunities”:
-How and under what conditions will changing weaknesses prevent you from taking advantage of opportunities?
-How and under what conditions will opportunities not allow you to level out your weaknesses?
Quadrant “weaknesses - threats”:
-How and under what conditions will threats strengthen weaknesses?
It is assumed that conducting an anti-SWOT allows one to formulate a plan for crisis measures that may arise during the implementation of the strategy.
MatrixSPACE-analysis
The main method for such assessments is the Strategic Positioning and Action Evaluation (SPACE) matrix.
The SPACE method consists in assessing four groups of factors for an enterprise. Each factor is assessed by experts on a scale from 0 to 6.
Factors of environmental stability (ES)
Technological changes (few - many)
Inflation rates (low - high)
Variability of demand (small - large)
Price range of competing products (small - large)
Barriers to market access (few - many)
Competitive pressure (weak - strong)
Price elasticity of demand (inflexible - flexible)
Factors of industrial potential (IS)
Growth potential (small - large)
Profit potential (small - large)
Financial stability (low - high)
Level of technology (simple - complex)
Degree of resource use (ineffective - effective)
Capital intensity (high - low)
Ease of access to the market (easy - difficult)
Productivity, capacity utilization (low - high)
Drivers of Competitive Advantage (CA)
Market share (large - small)
Product quality (high - low)
Product life cycle (initial - final)
Product replacement cycle (fixed - replaceable)
Customer loyalty (strong - weak)
Capacity utilization by competitors (strong - weak)
Vertical integration (high - low)
Financial Strength Factors (FS)
Return on investment (low - high)
Financial dependence (unbalanced - balanced)
Liquidity (unbalanced - balanced)
Required/available capital (large - small)
Flow of funds (weak - strong)
Ease of leaving the market (small - large)
Enterprise risk (large - small)
Having assessed the value of each factor, it is necessary to calculate the average value of the factors within each group, and then plot the obtained values on the coordinate axes. The result will be a quadrangle of one of the types shown in Fig. below.
If the side furthest from the center of coordinates is the side in the FS-IS quadrant, then the company is in an aggressive strategic state. If the party in the IS-ES quadrant is the most distant, then the company is in a competitive strategic state. If the side in the CA-FS quadrant is the most distant, then the company is in a conservative strategic state. If the party in the CA-ES quadrant is at its maximum distance, then the company is in a defensive strategic state.
SWOTAndSPACE- analyzes using the example of enterprises.
First, let's look at a practical example of SWOT analysis for the company OOO "Donut"
The company sells Russian equipment and bakes rye bread (the owner's hobby). The owner founded the company 10 years ago and has established good working relationships with all major customers.
|
Strengths of the Company |
The Company's opportunities in the external environment |
-Famous brandQualified Service Center Dealer agreements with well-known factories Market structure of the sales department Six months ago, the HR manager found a Sales Director who increased sales by 60% in 6 months. Availability of own site and service center 3 months ago a Marketing Department was created, headed by a strong marketer, the Marketing Department is working Information system This month, the Prospective Development Department was organized, headed by an experienced leader. |
The head of the department participated in the creation of 7 new businesses. Improving service and reducing maintenance time Possibility of narrow specialization Development corporate clients and new consumer industries Integration with manufacturers Tight integration with factories and receiving big discounts Increased profitability, control over earnings Creating a new equipment rental business |
|
Implementation of CRM |
Weaknesses of the Company |
|
External threats to business Quality problems (below average quality) a lack of working capital for procurement, weak? financial director At the beginning of the month the owner fired General Director , deputy director temporarily appointed to this post - weak Last year there were dramatic changes: high staff turnover (20% over the last six months) |
Weekly conflicts (translation of arrows) between the Head of the Purchasing Department (old) and the Sales Director (new) Instability of the dollar exchange rate (purchase prices are tied to $ and sold in rubles) (dollar exchange rate forecast) |
There is a change in supplier policyApplicationSPASE
-analysis for choosing strategies at OJSC Yartelecom
Using SPASE analysis, we can conclude that the most suitable strategy is a strategy - a conservative position.
Factors that determine a firm's competitive advantage
Factors determining the financial position of firms
Average 2.44Factors
determining the stability of the environment
Average value – 2.43
Factors determining the attractiveness of the industry
Average 4.63
Conclusion The company takes a conservative position.
This position is typical for stable, slow-growing markets.
The critical factor is the competitiveness of the product.
Recommended strategies 1) reduction of assortment; 2) cost reduction; 3) concentration on managing the flow of payments; 4) additional protective competitive products; 5) development of new products; 6) an attempt to penetrate more attractive markets.
Firm behavior: This is the behavior of the analyst. The company's policy is based on a thorough analysis of the opportunities available in the market and their careful use. (translation from English swot analysis)- one of the most effective tools in strategic management. The essence of swot analysis is to analyze the company’s internal and external factors, assess the risks and competitiveness of the product in the industry.
Definition of SWOT Analysis
The SWOT analysis method is a universal technique strategic management. The object of SWOT analysis can be any product, company, store, factory, country, educational institution and even a person. Exist the following types SWOT analysis:
- SWOT analysis of the activities of a company or manufacturing enterprise
- SWOT analysis of the activities of a government or non-profit organization
- SWOT analysis of the activities of an educational institution
- Firm behavior: This is the behavior of the analyst. The company's policy is based on a thorough analysis of the opportunities available in the market and their careful use. certain territory: country, region, area or city
- SWOT analysis of an individual project or department
- SWOT analysis of a specific market or industry
- SWOT analysis of the competitiveness of a brand, product, product or service
- SWOT personality analysis
Companies often conduct a SWOT analysis not only of their products, but also of competitors’ products, since this tool very clearly systematizes all information about the internal and external environment of any organization.
The advantages of SWOT analysis are that it allows a fairly simple, correct look at the position of a company, product or service in the industry, and therefore is the most popular tool in risk management and management decision making.
The result of a SWOT analysis of an enterprise is an action plan indicating implementation deadlines, priority of implementation and necessary resources for implementation.
Frequency of SWOT analysis. It is recommended to conduct a SWOT analysis at least once a year as part of strategic planning and in the formation of budgets. SWOT analysis is very often the first business analysis step when creating a marketing plan.
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Part one: SWOT analysis, determining the strengths and weaknesses of a product
Elements of SWOT analysis
Explanation of SWOT analysis abbreviations: Strengths, Weaknesses, Opportunities, T=Threats.
S=Strengths
Strengths of a product or service. Such internal characteristics of the company that provide competitive advantage in the market or a more advantageous position in comparison with competitors, in other words, those areas in which the company’s product feels better and more stable than competitors.
The importance of strengths for a company in strategic planning: due to strengths, a company can increase sales, profits and market share; strengths ensure an advantageous position of a product or service in comparison with competitors. Strengths must be constantly strengthened, improved, and used in communication with market consumers.
W=Weaknesses
Weaknesses or shortcomings of a product or service. Such internal characteristics of the company that impede business growth, prevent the product from leading the market, and are uncompetitive in the market.
The importance of weaknesses for a company in strategic planning: a company’s weaknesses hinder the growth of sales and profits, pulling the company back. Due to weaknesses, a company may lose market share in the long term and lose competitiveness. It is necessary to monitor areas in which the company is not strong enough, improve them, and develop special programs to minimize the risks of the influence of weaknesses on the company’s efficiency.
O=Opportunities
A company's capabilities are favorable external environmental factors that can influence business growth in the future. Importance of market opportunity for a company in strategic planning: Market opportunity represents the sources of business growth. Opportunities need to be analyzed, assessed and an action plan developed to exploit them using the company's strengths.
T=Threats
Company threats are negative external environmental factors that may weaken the company's competitiveness in the market in the future and lead to decreased sales and loss of market share. The importance of market threats for a company in strategic planning: threats mean possible risks companies in the future. Each threat must be assessed in terms of its likelihood of occurrence. short term, from the point of view of possible losses for the company. For every threat, solutions must be proposed to minimize them.
Drawing up a SWOT analysis
It is advisable to adhere to the following sequence of actions when conducting a SWOT analysis:
This SWOT methodology analysis allows you to assess the risks and opportunities of the company as fully and in detail as possible, plan a working marketing strategy product:
- An analysis of the surrounding market environment of a product or service is carried out in the context of external and internal factors.
- Based on the analysis, business strengths, business weaknesses, threats and market opportunities for business are formed.
- The obtained parameters are entered into the SWOT matrix for ease of analysis
- Based on the SWOT matrix, conclusions are drawn about necessary actions indicating implementation priorities and deadlines.
In the process of conducting a SWOT analysis, involve people interested in making a decision, experts in various issues. An outside opinion will allow you to create a more objective analysis.
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Standard view of a SWOT analysis table
In the SWOT analysis table, it is advisable to indicate factors in order of priority.
A monumental theory in marketing and planning, SWOT analysis, remains quite obscure to those who study the subject, and for many people not associated with advertising, finance and analytics, this thing is generally unknown. And in vain.
Today on the Econ Dude blog I will continue to cover the basics economic terms, theories, objects and phenomena, let's talk about SWOT analysis. My article will, as always, be somewhat subjective; I write in my own words and give examples. In a more general and scientific form, you can read about SWOT analysis.
What is written there is all competent and correct, but boring. They’ll tell you something like this in marketing at a university, but you most likely won’t understand anything, just as many teachers themselves don’t understand what they teach. And I will try to help you understand this theory and give examples to make the learning process interesting.
If you don't need it for study, so much the better.
It will be useful in life in any case, for general development brains
SWOT analysis is a very monumental thing, it can be applied not only to the analysis of commercial, private or state companies, it can be applied to almost any organization and even entire industries.
It works in politics, economics and social life.
Another theory in economics?
Many people do not consider economics a full-fledged science, and I, with an economic education, partly agree. If the subject is not science, then they will pull things out of thin air, invent theories, pour water and look for supposed dependencies of one on the other. This is done, for example, in topics that are not science.But the education sector is also an industry, which means jobs are needed, and coaches and teachers need to teach something, which means you need to come up with all sorts of theories and concepts. SWOT is such a thing partly and is, like, for example, the theory about the life cycle of a product. But in general, these are beautiful theories that are useful to study to warm up your brain. Moreover, even if some thing is unscientific, but if, for example, this SWOT analysis is used by the directors of Google, Gazprom or, for example, Tinkoff Bank, then in fact the theory becomes practical; the practice of application makes it practical.
They study this thing in marketing, analytics and business planning.
It is from these four corners that an existing project, or a new and theoretical one, for example a new one, is considered.
Read my article at this link if you have time, where I tell you exactly how one small business company operates, and much of this is precisely the logic of SWOT analysis, I just don’t mention it directly there.
It’s quite easy to imagine everything visually and graphically:
What's unclear here? Picture (matrix) I've already told you everything.
Everything is beautifully divided into segments, while there is two global segments different colors, external factors (Wednesday Thursday) and internal.
I understand that it is useless to show beautiful or ugly pictures with graphs in an attempt to explain something; this is a big mistake of many teachers in schools and universities. You need to teach only with the help of cases and real examples.
They will be later in the article, but you need to understand that in the countries of the former CIS capitalism is young, so there are few cases in Russian, and in general SWOT analysis is partly a corporate secret, however, below I translate some things from English.
How is SWOT analysis done? Example
Example, analysis of a small restaurant ( from English articles ):- Great location with lots of traffic (force);
- Good reputation among local residents ( force);
- Higher price than competitors and big companies (weakness);
- Low marketing budget ( weakness);
- Opportunity introducing food delivery through the application;
- Threat supplier price increases.
- Location and rent?
- Staffing and salary costs?
- Pricing policy in relation to competitors?
- Marketing budget?
- Tax regulation?
- General economy of a region, city or country (changes)?
- Reputation, brand awareness and customer base?
- Staffing, salary costs and labor costs?
And further down the list. You answer questions like these and choose whether it is a strength, a weakness, an opportunity or a threat. Here you can really turn everything around in your head and present one thing as both strength and opportunity. Sometimes it happens that a feature can be described as a weakness or a strength, depending on what angle you look at. There is room for creativity and some imagination.
You will not be able to open a successful low-price restaurant selling burgers next to MacDonald's; the presence of McFuck across the street from you is an external factor, you have practically no influence on it.
Therefore, you need to incorporate other things into your strategy, for example, opening a premium segment restaurant nearby, or, say, offering something that is not offered there: tranquility, absence of crowds, hookah, etc. Or .
The ability to identify external and internal factors in your head is the most important skill in life; it greatly helps you change even your personal life for the better and, for example, not blame yourself for what you are not responsible for. Moreover, if this is an internal factor and already your essence, then you need to change yourself.
Like this, maybe you like this personal examples more understandable.
Another example, SWOT analysis Coca-Cola
Here is a simple example of analyzing a large company:
Any grandmotherevenin any African country knows.
What does this give? People always choose a more recognizable brand at the same price. That is, if in any market in the world there is Cola on the store shelf, it will be very difficult to enter this market with your new drink in the same price category.
How to get out? Put pressure on health, as an example.
What are Coca-Cola's weaknesses?
This is a difficult question, you won’t guess it right away, you need to think about it.
The weak point is margin. It's low and it's built into their business.
Beverages are part of the food market and even part Agriculture, since competitors are water, milk, and juices. In the niche there are low margins, well, relatively low, for example.
Although they can be understood due to the processing cycle and brand, about that here:
So, Kolya, to get more gross revenue, we need to sell literally millions of cans and bottles of this poison. This means we need a huge logistics network, which means the purchases of aluminum and plastic are huge. Dependence on purchasing prices for raw materials is always a potential weakness in almost any business.
Why is this analysis needed and how to apply it?
You see what SWOT analysis does, he just forces you think, analyze and put the company in pieces. Some conclusions naturally follow from this, many of which are very practical and applicable.
Another weakness of Cola?
Competitor - Pepsi. What to do about it? Nothing really. The situation of a practically oligopoly is almost the best, because the monopoly will be crushed by the state, and with free competition one cannot expect normal revenue.
The goal in terms of business is to increase profits, this is generally the goal of any commercial enterprise. There may also be smaller tactical targets.
Let’s take some other example, from a different area.
SWOT analysis in politics
Let’s say the “Donald Trump” project, this is also a project of its own kind, already political, to which this analysis can also be applied.
Strength? Independence in the eyes of many from the US political elite and institutions. But as you know, our strengths are a continuation of our weaknesses. From any strength comes weakness, and vice versa.
He has no support from the US elite, no support from the media, all the Colberts and other John Olivers from the Democrats are hounding him every day.
Therefore, having promised something, pushing through the project is a difficult matter. People supported, ok. But power is not with these people, but with institutions.
His position now is such that he is a hostage to his strengths and weaknesses. Does he communicate with people directly using Twitter? This is a plus, but there is also a minus, a weakness. The media who are against him will suck up any Tweet and dig to the bottom. And if you write everything yourself without a press secretary, then of course you will blurt out something like that...
What are the opportunities and threats in his position? The threats are obvious. Impeachment, loss of trust of his nuclear electorate.
A lot depends on the goals here, and long term goals Trump is not entirely clear; he plays more like Russia, depending on the situation.
But if we assume that his goal, for example, is a second term, then based on this we can already think about how to take advantage of opportunities and avoid threats.
Any screw-up by the Democrats is an opportunity to score points. Any puncture is a threat of attack from enemies. Each specific situation is analyzed very quickly and conclusions are drawn. At all, SWOT analysis is a method of thinking in general, many people do it automatically without even realizing it. It is logical, it’s just that not all people know how to distinguish between internal and external factors, and confusing them is a big mistake.
The acronym SWOT was first coined in 1963 at Harvard Business Policy Conference by Professor Kenneth Andrews.
In 1965, four Harvard University professors - Leraned, Christensen, Andrews and Guth - proposed a technology for using the SWOT model to develop a firm's behavioral strategy. The LCAG scheme has been proposed (according to the initial letters of the authors' last names), which is based on a sequence of steps leading to the choice of strategy.
As you can see, the term is no longer new, this concept is quite old, so during its existence and application it has already gained some practice.
Turn a feature into that? (Feature)
You can do this analysis for almost anything, even for example this blog of mine, Econ Dude. What is the feature of the blog? I write on many topics at once (topics in the header): economics, psychology, reviews, games, design, etc.
This is exactly peculiarity, not weakness or strength. Feature. Such blogs are called author's blogs. And from this feature, pros and cons already follow.
That is, if we found a feature (market diversification, for example), then you shouldn’t immediately and headlong try to write it down as a strength or weakness, you need to draw conclusions from this and now put the conclusions into a category. Example?
Let’s say if I write on different topics, if the market changes and, for example, if traffic on one topic is lost, I can calmly close it, continuing to write further on other topics. That is, we are writing this by virtue of formulated something like this:
"Reducing the risks of market fluctuations as a result of diversification"
A into weakness we write like this:
"Reduced project growth rate due to diversification"
This is how one thesis and one feature turns into both strength and weakness.
Gaining a deeper understanding of the project
Here you can ask, what’s the point? Ok, you've sorted it all out and classified it, what are the practical conclusions from this? Are you going to blog about one topic after this, or what are you going to do? Why disassemble everything using this analysis?
Friends, it’s just a matter of deep understanding of the essence of the project and that’s all.
If there is understanding, then you can avoid many mistakes.
These are the practical conclusions and this is just one small example.
Often in life we start some business and some project, and we just do it, maybe we have the desire and motivation, or maybe we don’t and we just want to earn money, everything is commendable. But you will be amazed at how many people waste their energy doing things that they would never do if they understood their weaknesses, their strengths, and saw the opportunities and threats in their situation.
Damn, such an analysis can even save a relationship if you are simply evaluating the project “and family with Masha”, at least in your head you note her strange quirks and write it down in your head as a threat.
If there is a threat, maybe you can ask Masha’s friend, Dasha, is Masha generally okay? And your friend will tell you that you are crazy if you decide to marry her. That's how it works, simple things that can have a big impact on the future.
These principles, that if there is something good, then there must be something bad, are almost philosophical principles, and they are also principles for assessing objectivity, for example in Wikipedia. These are also the principles of quality journalism and science.
SWOT analysis makes you look at the world more adequately and realistically.
There is always a threat, everything cannot be fine. There is always an opportunity, all is not lost. You have strengths, you underestimate yourself. You (or for a business, project) There are also weaknesses, don’t be naive and blind and don’t be arrogant.
Along with SWOT analysis, the works of Porter, For example five forces analysis. Several similar techniques together provide much more interesting results and you shouldn’t limit yourself to SWOT alone.
Porter's techniques are applied to the analysis of competition and external factors, as a result they provide a good understanding of the market and industry.
That's all, my other articles on economic topics can be found here.
SWOT is an acronym for the words Strengths, Weaknesses, Opportunities and Threats. The internal situation of the company is reflected mainly in S and W, and the external situation - in O and T. SWOT analysis is a development stage
The SWOT analysis methodology involves, firstly, identifying the internal strengths and weaknesses of the company, as well as external opportunities and threats, and, secondly, establishing connections between them.
SWOT analysis helps answer the following questions:
Does the company use internal strengths or differentiating advantages in its strategy? If a company does not have a differentiating advantage, what are its potential strengths that could become one?
- Are the company's weaknesses its competitive vulnerabilities and/or do they prevent it from taking advantage of certain favorable circumstances? What weaknesses require adjustment based on strategic considerations?
- what opportunities give the company a real chance of success using its skills and access to resources? (opportunities without ways to realize them are an illusion; the strengths and weaknesses of a firm make it better or worse suited to exploiting favorable opportunities than other firms).
- what threats should a manager be most concerned about and what strategic actions should he take to ensure good protection?
The table provides examples of the main factors that should be taken into account in a SWOT analysis.
|
Potential Internal Strengths(S): |
Potential internal weaknesses(W): |
|
Clearly demonstrated competence |
Loss of some aspects of competence |
|
Adequate financial sources |
Unavailability of finance needed to change strategy |
|
The high art of competition |
Market art below average |
|
Good understanding of consumers |
Lack of consumer information analysis |
|
Recognized market leader |
Weak market participant |
|
A clearly defined strategy |
Lack of a clearly defined strategy, inconsistency in its implementation |
|
Leveraging economies of scale, cost advantage |
High cost of production compared to key competitors |
|
Own unique technology, best production facilities |
Outdated technology and equipment |
|
Proven reliable control |
Loss of depth and flexibility of management |
|
Reliable distribution network |
Weak distribution network |
|
High Art of R&D |
Weak positions in R&D |
|
The most effective advertising in the industry |
Weak promotion policy |
|
Potential external opportunities(ABOUT): |
Potential external threats(T): |
|
Possibility of serving additional consumer groups |
Weakening market growth, unfavorable demographic changes and the introduction of new market segments |
|
Expanding the range of possible products |
Increased sales of substitute products, changing customer tastes and needs |
|
The complacency of competitors |
Fierce competition |
|
Reducing trade barriers to entering foreign markets |
The emergence of foreign competitors with low-cost goods |
|
Favorable shift in exchange rates |
Unfavorable movement in exchange rates |
|
Greater availability of resources |
Strengthening supplier requirements |
|
Relaxation of restrictive legislation |
Legislative price regulation |
|
Easing business instability |
Sensitivity to instability in external business conditions |
Classic SWOT analysis involves identifying the strengths and weaknesses of a company’s activities, potential external threats and opportunities, and assessing them in terms of scores relative to industry averages or in relation to data from strategically important competitors. The classic presentation of information from such an analysis was the compilation of tables of strengths in the company’s activities (S), its weaknesses (W), potential favorable opportunities (O) and external threats (T).
Final SWOT matrix looks something like this:
At the intersection of SW with OT it is indicated expert review their mutual influence in points. The total sum of points in rows and columns shows the priority of taking into account a particular factor when forming a strategy.
Based on the results of the SWOT analysis, a matrix of strategic activities is compiled:
SO- activities that need to be carried out to use strengths to increase the company's capabilities;
WO- activities that need to be carried out to overcome weaknesses and take advantage of the opportunities presented;
ST- activities that use the organization's strengths to avoid threats;
W.T.- activities that minimize weaknesses to avoid threats.
Rules for conducting SWOT analysis
In order to avoid possible mistakes in practice and get the maximum benefit from a SWOT analysis, you must follow several rules.
- If possible, specify the scope of the SWOT analysis as much as possible. When conducting an analysis that covers the entire business, the results are likely to be too general and not useful for practical application. Focusing a SWOT analysis on a company's position within a specific market/segment will provide much more practical results.
- Be correct when classifying a factor as a strength/weakness or opportunity/threat. Strengths and weaknesses are internal features of a company. Opportunities and threats describe the market situation and are not subject to the direct influence of management.
- A SWOT analysis should show the real position and prospects of the company in the market, and not their internal perception, therefore strengths and weaknesses can be considered as such only if they (or their result) are perceived in this way by external customers and partners. They must correspond to objectively existing differences between the company’s products and competitors. Strengths and weaknesses must be ranked in accordance with their importance (weight) for buyers and only the most important ones must be included in the SWOT analysis.
- The quality of a SWOT analysis directly depends on objectivity and the use of diverse information. You cannot entrust it to one person, because the information will be distorted by his subjective perception. When conducting a SWOT analysis, the points of view of all functional divisions of the company must be taken into account. In addition, all identified factors must be confirmed by objective facts and research results.
- Vaginal and ambiguous language should be avoided. The more specific the formulation, the clearer the impact of this factor on the company’s business now and in the future, the greater the practical value of the results of the SWOT analysis.
Limitations of SWOT Analysis
SWOT analysis is only a tool for structuring available information; it does not provide clear and clearly formulated recommendations or specific answers. It only helps to visualize the main factors, as well as to estimate, as a first approximation, the mathematical expectation of certain events. Formulating recommendations based on this information is the job of the analyst.
The simplicity of a SWOT analysis is deceptive; its results are highly dependent on the completeness and quality of the source information. Conducting a SWOT analysis requires either experts with a very deep understanding of the current state and trends of the market, or a very large amount of work in collecting and analyzing primary information to achieve this understanding. Errors made during the formation of the table (inclusion of unnecessary factors or loss of important ones, incorrect assessment of weighting coefficients and mutual influence) cannot be identified in the process of further analysis (except for very obvious ones) - they will lead to incorrect conclusions and erroneous strategic decisions. In addition, the interpretation of the resulting model, and therefore the quality of conclusions and recommendations, highly depend on the qualifications of the experts conducting the SWOT analysis.
History of SWOT Analysis
Kenneth Andrews is considered the pioneer of the direction of strategic analysis aimed at finding a balance between the resources and capabilities of a company with factors and conditions of the external environment (. He developed a model that became the prototype of SWOT analysis. This model is based on four questions:
- What can we do (strengths and weaknesses)?
- What would we like to do (organizational and personal values)?
- What could we do (opportunities and threats from external environmental conditions)?
- What do others expect from us (intermediary expectations)?
The answers to these four questions served as the starting point for strategy formation.
SWOT analysis in its modern form appeared thanks to the work of a group of scientists at the Stanford Research Institute (SRI): R. Stewart (research director), Marion Dosher, Otis Benepe and Albert Humphrey (Robert Stewart, Marion Dosher, Dr Otis Benepe, Birger Lie, Albert Humphrey). Studying the organization of strategic planning in companies from the Fortune's 500 list (the study was carried out from 1960 to 1969), they eventually came to a system they called SOFT: Satisfactory, Opportunity, Fault, Threat. The model was later modified and renamed the SWOT presented above.
- Product (what are we selling?)
- Processes (how do we sell?)
- Buyers (who are we selling to?)
- Distribution (how does it reach customers?)
- Finance (what are prices, costs and investments?)
- Administration (how do we manage it all?)
Based on the factors identified during the analysis, strategic decisions were then made.
Accordingly, the question “how to do a SWOT analysis” is of particular importance in the life of an entrepreneur. Today we will talk about how to do a SWOT analysis. Or rather, let's develop one step by step instructions- a questionnaire, after which the same question () will be completely closed for you.
First, let's look at what a SWOT analysis is (I apologize in advance to those for whom this is unnecessary). SWOT analysis is a tool for planning and comparing four business elements. These elements are: Strengths, Weaknesses, Opportunities, and Threats. A correctly done SWOT analysis gives an entrepreneur a huge amount useful information necessary for making the right business decisions.
Learning to do swot analysis
SWOT analysis - 4-step instructions
For greater clarity, we will divide the SWOT analysis process into steps, each of which is represented by several questions. Answering these questions is, in essence, the process of conducting a SWOT analysis. So.
Step 1 — Scanning the business environment
In this step, by looking at our business environment, we must identify the factors that influence or may influence our business. All factors can be divided into internal and external. To determine these factors, answer the following questions:
1. What legal factors (laws and other regulations) affect (or may affect) my business?
2. What environmental factors affect (or could affect) my business?
3. What political factors affect (or may affect) my business?
4. What economic factors affect (or may affect) my business?
5. Which geographical factors affect (or may affect) my business?
6. What social factors affect (or may affect) my business?
7. What technological factors affect (or may affect) my business?
8. What cultural factors influence (or may influence) my business?
9. What market factors influence (or may influence) my business?
The answers to the first 9 questions give you information about external factors, i.e., about those impacts on your business that exist in your environment regardless of the existence of your business. All of these questions, one way or another, are worth asking yourself in order to fully understand what could have any impact on your business. Of course, different factors will have different influences on different businesses spheres, but this is precisely what you will understand by answering these questions.
10. Does (or can it influence) the competition factor affect my business?
11. Does (or can it influence) the management and business management factor affect my business?
12. Does the chosen business strategy factor (or can it influence) my business?
13. Does the business structure factor affect (or can it affect) my business?
14. Does the employee factor affect (or can it affect) my business?
15. Does the factor of my business goals influence (or can influence) my business?
16. Does (or can it influence) the leadership factor affect my business?
17. Does the operational management factor affect (or can it affect) my business?
18. Does the technology factor in business affect (or can it affect) my business?
Answers to questions 10 to 18 will give you information about the overall impact of your business's entry into the marketplace. The list may not be exhaustive; a lot depends on the field of activity, but these are the main points.
And so, having answered the above questions, you will have an almost complete set of factors on which your business depends to one degree or another. Next, you should analyze them and draw the right conclusions for yourself. In this regard, we move on to the next step of our instructions on how to do a SWOT analysis.
Step 2. Analysis of the business environment
In this step of the SWOT analysis, we must analyze in more detail all the factors listed above and understand what they actually represent for us and our business. Let's do this, as you guessed, in a few questions. Here they are:
19. Which legal factors could be a threat to our business and which could be an opportunity?
20. Which political factors could be a threat to our business and which could be an opportunity?
