SWOT Analysis

SWOT Analysis

Strengths, Weaknesses, Opportunites and Threats (SWOT).

SWOT<= /strong> a= nalysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps organizations to focus on key issues. SWOT stands for strengths, wea= knesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are e= xternal factors.

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In SWOT, str= engths and weaknesses are internal factors. For example:

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A strength could be:=

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Your specialist marketing experti= se.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    A new, innovative product or serv= ice.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Location of your business. <= /o:p>

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Quality processes and procedures.=

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Any other aspect of your business that adds value to your product or service.

A weakness could be:=

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Lack of marketing expertise.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Undifferentiated products or serv= ices (i.e. in relation to your competitors).

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Location of your business. <= /o:p>

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Poor quality goods or services. <= o:p>

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Damaged reputation.

In SWOT, opportunities and threats a= re external factors. For example= :

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An opportuni= ty could be:

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    A developing market such as the Internet.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Mergers, joint ventures or strate= gic alliances.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Moving into new market segments t= hat offer improved profits.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    A new international market. =

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    A market vacated by an ineffective competitor.

A threat could be:

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    A new competitor in your home mar= ket.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Price wars with competitors.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    A competitor has a new, innovative product or service.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Competitors have superior access = to channels of distribution.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Taxation is introduced on your product or service.

A word of caution, SWOT analysis = can be very subjective. Do not rely on SWOT too much. Two people rarely come-up with the same final version of SWOT.

So use SWOT as guide and not a prescription.

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Simple rules= for successful SWOT analysis.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Be realistic about the strengths = and weaknesses of your organization when conducting SWOT analysis.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    SWOT analysis should distinguish between where your organization is today, and where it could be in the futu= re.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    SWOT should always be specific. A= void grey areas.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Always apply SWOT in relation to = your competition i.e. better than or worse than your competition.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Keep your SWOT short and simple. Avoid complexity and over analysis

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    SWOT is subjective.

Once key issues have been identif= ied with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjuncti= on with other tools for audit and analysis, such as PEST analy= sis and Porter's Five-Forces analysis.

Example 1 - Wal-Mart SWOT Analysis.

Strengths. <= o:p>

·         Wal-Mart is a powerful retail bra= nd. It has a reputation for value for money, convenience and a wide range of products all in one store.

·         Wal-Mart has grown substantially = over recent years, and has experienced global expansion (for example its purchas= e of the United Kingdom based retailer ASDA).

·         The company has a core competence involving its use of information technology to support its international lo= gistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's effic= ient procurement.

·         A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.

Weaknesses.<= o:p>

·         Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.

·         Since Wal-Mart sell products acro= ss many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.

·         The company is global, but has ha= s a presence in relatively few countries Worldwide.

Opportunitie= s.

·         To take over, merge with, or form strategic alliances with other global retailers, focusing on specific marke= ts such as Europe or the Greater China Region.

·         The stores are currently only tra= de in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as Ch= ina and India.

·         New locations and store types off= er Wal-Mart opportunities to exploit market development. They diversified from large super centres, to local and mall-based sites.

·         Opportunities exist for Wal-Mart = to continue with its current strategy of large, super centres.

Threats.

·         Being number one means that you a= re the target of competition, locally and globally.

·         Being a global retailer means that you are exposed to political problems in the countries that you operate in.=

·         The cost of producing many consum= er products tends to have fallen because of lower manufacturing costs. Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in = some ranges. Intense price competition is a threat.

'Wal-Mart Stores, Inc. is the wor= ld's largest retailer, with $256.3 billion in sales in the fiscal year ending Ja= n. 31, 2004. The company employs 1.6 million associates worldwide through more than 3,600 facilities in the United States and more than 1,570 units . . .m= ore? Go to Wal-Mart Facts

Disclaimer: = Th= is case study has been compiled from information freely available from public sourc= es. It is merely intended to be used for educational purposes only.<= /span>

Example 2 - Starbucks SWOT Analysis.=

Strengths.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Starbucks Corporation is a very p= rofitable organization, earning in excess of $600 million in 2004.The company generat= ed revenue of more than $5000 million in the same year.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes = in almost 40 countries.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Starbucks was one of the Fortune Top 100 Companies to Work For<= /em> in 2005. The company is a respected employer that values its workforce.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    The organization has strong ethic= al values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in a= ll facets of our business.'

Weaknesses.<= o:p>

·         Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time. <= /p>
·         The organization has a strong presence in the United States of America with more than three quarters of t= heir cafes located in the home market. It is often argued that they need to look= for a portfolio of countries, in order to spread business risk.

·         The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow= to diversify into other sectors should the need arise.

Opportunitie= s.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Starbucks are very good at taking advantage of opportunties.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    New products and services that ca= n be retailed in their cafes, such as Fair Trade products.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge.

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    Co-branding with other manufactur= ers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.

Threats.

·         Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future? =

·         Starbucks are exposed to rises in= the cost of coffee and dairy products.

·         Since its conception in Pike Place Market, Seattle in 1971, Starbucks' success has lead to the market entry of many competitors and copy cat brands that pose potential threats.

'Starbucks' mission statement is = 'Establish Starbucks as the premier purveyor = of the finest coffee in the world while maintaining our uncompromising principles while we grow.' The following six guiding principles will help = us measure the appropriateness of our decisions' more? Then go to = Starbucks.

Disclaimer: = Th= is case study has been compiled from information freely available from public sourc= es. It is merely intended to be used for educational purposes only.<= /span>

Example 3 - Nike SWOT Analysis.

Strengths.

·         Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsor= ing the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage.

·         Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organization. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever t= hey can produce high quality product at the lowest possible price. If prices ri= se, and products can be made more cheaply elsewhere (to the same or better specification), Nike will move production.

·         Nike is a global brand. It is the number one sports brand in the World. Its famous 'Swoosh' is instantly recognisable, and Phil Knight even has it tattooed on his ankle.

Weaknesses.<= o:p>

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may lea= ve it vulnerable if for any reason its market share erodes. =

·<= span style=3D'font:7.0pt "Times New Roman"'>      =    The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of i= ts income is derived from selling into retailers. Retailers tend to offer a ve= ry similar experience to the consumer. Can you tell one sports retailer from another? So margins tend to get squeezed as retailers try to pass some of t= he low price competition pressure onto Nike.

Opportunitie= s.

·         Product development offers Nike m= any opportunities. The brand is fiercely defended by its owners whom truly beli= eve that Nike is not a fashion brand. However, like it or not, consumers that w= ear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its= own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes.

·         There is also the opportunity to develop products such as sport wear, sunglasses and jewellery. Such high va= lue items do tend to have associated with them, high profits.

·         The business could also be develo= ped internationally, building upon its strong global brand recognition. There a= re many markets that have the disposable income to spend on high value sports goods. For example, emerging markets such as China and India have a new ric= her generation of consumers. There are also global marketing events that can be utilised to support the brand such as the World Cup (soccer) and The Olympi= cs.

Threats.

·         Nike is exposed to the internatio= nal nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could me= an that Nike may be manufacturing and/or selling at a loss. This is an issue t= hat faces all global brands.

·         The market for sports shoes and garments is very competitive. The model developed by Phil Knight in his Stamford Business School days (high value branded product manufactured at a= low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share.

·         As discussed above in weaknesses,= the retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal. So if one store charges a price for a pair of sports shoes, the consumer could go to the store along = the street to compare prices for the exactly the same item, and buy the cheaper= of the two. Such consumer price sensitivity is a potential external threat to Nike.

'If you have= a body, you are an athlete' - Bill Bowerman said this a couple of dec= ades ago. The guy was right. It defines how he viewed the world, and it defines = how Nike pursues its destiny. Ours is a language of sports, a universally understood lexicon of passion and competition. A lot has happened at Nike in the 30 years More . . .

Disclaimer: = Th= is case study has been compiled from information freely available from public sourc= es. It is merely intended to be used for educational purposes only.<= /span>