SWOT (originally was SOFT) ANALYSIS

It is a situation analysis in which internal strengths and weaknesses of an organization, and

external opportunities and threats faced by it are closely examined to chart a strategy. SWOT
stands for strengths, weaknesses, opportunities, and threats.
It is a unique management model that does not provide any insight of the correction or
gap to take appropriate correction. So much flexible it is to use at a suitable time (as per your
thought).
In the 1960’s and 70’s, Albert Humphrey (STANFORD UNIVERSITY) is said to have
developed this strategic planning tool using data from the top companies in America at the
time. (He categorized the factors as WHAT IS GOOD IN THE PRESENT-SATISFIES,
WHAT IS GOOD IN THE FUTURE-OPPORTUNITIES, WHAT IS BAD IN THE
PRESENT-FAULT, WHAT IS BAD IN THE FUTURE-THREAT). The background to
SWOT stemmed from the need to find out why corporate planning failed. The research was
funded by the fortune 500 companies to protect stop these failures. The Research Team
consisted with Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger
Lie.
A SWOT Analysis looks at the strengths, weaknesses, opportunities and threats that are
relevant to an organization in a new venture (situation). It allows users to look at the direction
an organization wishes to move towards in the future.
Purpose of using SWOT: It provides an action plan when a firm has to defend or attack and
it remains strong and vulnerable. It enables the professionals to look at the daily life problems
and business strategy with a new perspective.
Here are some examples for which a SWOT analysis is used:
• a company (its position in the market, • a opportunity to make an acquisition
commercial viability, etc)
• a potential partnership
• a method of sales distribution
• changing a supplier
• a product or brand
• outsourcing a service, activity or resource
• a business idea
• an investment opportunity
• a strategic option, such as entering a new
market or launching a new product
Strengths:
Internal attributes that is helpful to the organization to achieving its objective (to leverage)
 • Identify skills and capabilities that you • Advantages of proposition?
have.
• Capabilities?
• What can you do particularly well, relative
• Competitive advantages?
to rivals?
• USP's (unique selling points)?
• What do analysts consider your strengths?
• Resources, Assets, People?
• What resources do you have?
• Experience, knowledge, data?
• Is your brand or reputation strong?
• Financial reserves, likely returns?

• Marketing - reach, distribution, awareness?

• Innovative aspects?

• Location and geographical?

• Price, value, quality?

• Accreditations, qualifications,
certification-ns?

• Processes, systems, IT, communications?

• Cultural, attitudinal, behavioural?

• Management cover, succession?

Weaknesses:
Internal attributes that is harmful to the organization to achieving its objective (to remedy)
• What do rivals do better than you do? • Disadvantages of proposition?

• What do you do poorly? • Gaps in capabilities?

• What generates the most customer • Lack of competitive strength?

dissatisfaction and complaints?
• Reputation, presence and reach?
• What generates the most employee
• Financials?
dissatisfaction and complaints?
 • What processes and activities can you • Own known vulnerabilities?
improve?
• Timescales, deadlines and pressures?

• Cash flow, start-up cash-drain?

• Continuity, supply chain robustness?

• Effects on core activities, distraction?

• Reliability of data, plan predictability?

• Morale, commitment, leadership?

• Accreditations, etc?

• Processes and systems, etc?

• Management cover, succession?

In short, SWot provides a set of internal factors like, PRIMO-F

P: people, R: Resources, I: Innovation, M: Marketing, O: Operation, F: financial resources
Opportunities:
External factors that help the organization achieve its objective (prioritized, optimized)
• Where can you apply your strengths? • Market developments?

• How are your customers and their needs • Competitors' vulnerabilities?

changing?
• Industry or lifestyle trends?
• How is technology changing your
• Technology development and innovation?
business?
• Global influences?
• Are there new markets for your strengths?
(e.g. foreign) • New markets, vertical, horizontal?

• Are there new ways of producing your • Niche target markets?

products?
• Geographical, export, import?
• Are your rivals’ customers dissatisfied?
• New USP's?
 • Tactics - surprise, major contracts, etc?

• Business and product development?

• Information and research?

• Partnerships, agencies, distribution?

• Volumes, production, economies?

• Seasonal, weather, fashion influences?

Threats: External factors that is harmful to the organization to achieving its objective
(minimized and managed)
• Are customers able to meet their needs • Political effects?
with alternative products?
• Legislative effects?
• Are customers needed changing away
• Environmental effects?
from your product?
• IT developments?
• What are your competitors developing?
• Competitor intentions - various?
• Are your rivals improving their product
offerings or prices? • Market demand?

• Is new technology making your product • New technologies, services, ideas?

obsolete?
• Vital contracts and partners?
• Is your cash flow and debt position
• Sustaining internal capabilities?
healthy?
• Obstacles faced?
• Are your employees satisfied? Is turnover
high? • Insurmountable weaknesses?

• Is new competition coming? • Loss of key staff?

• Are sales growing slower than the industry • Sustainable financial backing?
average?
• Economy - home, abroad?

• Seasonality, weather effects?

In short, External factors can be expressed as PESTLE: (P: POLITICAL, E: ECONOMICAL,
S: SOCIETAL, T: TECHNOLOGICAL, L: LEGAL, E: ENVIRONMENTAL)
SWOT MATRIX TOWS MATRIX

The advantages are as follows:

● Low cost, Simplicity, Flexibility, Quicker, Collaborative

● Since its qualitative, it can be used as a discussion tool

● A good first step before a more in-depth analysis or a good summary of detailed
findings

● Takes into consideration of external business environment as well as internal

capabilities
Many disadvantages found in this regard are as follows-
 ● It may tend to persuade companies to compile lists rather than think about what is
actually important in achieving objectives

● No suggestions for solving disagreements

● It Can become too focused on the short term

● No obligation to verify statements or aspects based on the data or the analysis

● It also presents the resulting lists uncritically and without clear prioritization
Example in Hypothetical firm:

Strength Weakness

1. Marketing 1. Financial aspects

2. R&D 2. Global presence
3. Quality

Opportunity

1. Economic boom ADVANCE OVERCOME

2. New product 1. S1S2O2O4: Develop new product 1. W1O3: Merger with foreign
3. Market in European Countries 2. S1S2O3: Develop product as per the companies
4. Excess residual income research on the European market

Threat

1. Global Competitors AVOID AVOID & OVERCOME

2. Saturated market in the 1. S1T1: Increase brand loyalty 1. W1T2: Liquidate the products
present industry 2. S1T2: JUDICIOUS MARKETING & which are losses
ADVERTISING 2. W1T2: MERGER TO GAIN
MORE MARKET SHARE

BIG QUESTIONS:

● WHERE ARE YOU NOW? ASSESSMENT OF CURRENT POSITION BASED ON

THE STRENGTH & WEAKNESS
● WHAT IS HAPPENING NOW (INDUSTRY ANALYSIS, COMPETITOR
ANALYSIS, SOCEITAL ANALYSIS, SWOT)
● WHAT SHOULD THE BUSINESS BE DOING (EVALUATION OF STRATEGY)