

John Burson  edited Tuesday, May 2, 2017

Subscribe

The SWOT analysis provides information that is helpful in matching the company's resources and capabilities to the competitive environment in which it operates. SWOT analysis helps in strategy formulation and selection.

Environmental Factors

Environmental factors internal to the company usually can be classified as strengths (s) and weaknesses (w),
and those external to the company can be classified as opportunities (o), or threats (t).

Such an analysis of the strategic environment is referred to as a SWOT analysis.

Mission = ______________________________________
v
Environmental Scan
/		\
Internal Analysis		External Analysis
Strengths s1= s2= s3=		Opportunities o1= o2= o3=
Weaknesses w1= w2= w3=		Threats t1= t2= t3=
v
SWOT Matrix ( see below)

fig #1 Diagram shows how a SWOT analysis fits into an environmental scan.

where:

Strengths

A company's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

• patents
• strong brand names
• good reputation among customers
• cost advantages from the proprietary know-how
• exclusive access to high-grade natural resources
• favorable access to distribution networks

Support  Questions:
1) What are your strengths?
2) What do you do better than other?
3) What unique capabilities and resources do you possess?
4) What do others perceive as your strengths?

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

• lack of patent protection
• a weak brand name
• poor reputation among customers
• high-cost structure
• lack of access to the best natural resources
• lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Ex: company has a large amount of manufacturing capacity.
a. strength, the capacity that competitors do not share,
b. weakness, if the large investment in manufacturing capacity prevents the company from reacting quickly to changes in the strategic environment.

Support  Questions:
1) What are your weaknesses?
2) What do your competitors do better than you?
3) What can you improve given the current situation?
4) What do others perceive as your weaknesses?

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:

• an unfulfilled customer need
• an arrival of new technologies
• loosening of regulations
• removal of international trade barriers

Support  Questions:
1) What trends or conditions may positively impact you?
2) What opportunities are available to you?

Threats

Changes in the external environmental also may present threats to the company. Some examples of such threats include:

• shifts in consumer tastes away from the company's products
• an emergence of substitute products
• new regulations
• increased trade barriers

Support  Questions:
1) What trends or conditions may negatively impact you?
2) What are your competitors doing what may impact you?
3) Do you have solid financial support?
4) What impact do you weaknesses have on the threats yo you?

The SWOT Matrix Template

The company should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance of developing a competitive advantage by identifying a fit between the company's strengths and upcoming opportunities. In some cases, the company can overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

Mission = ______________________________________
	Strengths s1= s2= s3=	Weaknesses w1= w2= w3=
Opportunities o1= o2= o3=	S-O strategies Use strengths to take advantage of opportunities, good fit for the company. so1= so2=	W-O strategies Overcome weaknesses by taking advantage of opportunities. wo1= wo2=
Threats t1= t2= t3=	S-T strategies Ways the company can use its strengths to avoid threats. st1= st2=	W-T strategies Establish a defensive plan to minimize weaknesses and avoid threats. wt1= wt2=
v
Strategy Map (see next tools)

fig#2: SWOT or TOWS Matrix

SWOT Analysis Example Business - Mcdonald's