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							1. SWOT Analysis

An Introduction to SWOT Analysis


SWOT is an acronym for strengths, weaknesses, opportunities and threats.

It is the culmination of much internal analysis and external research. Thinking about the
outcome, one can define SWOT analysis as the extent to which a firm’s current strategy,
strengths and weaknesses are relevant to the business environment that the company is
operating in.

SWOT analysis is often presented in a matrix form:




Strengths and weaknesses are internal aspects and Kotler (1988) suggests that these
should cover the four areas of marketing, financial, manufacturing and organisational.

Opportunities and threats look at the main environmental issues such as the economic
situation, social changes such as the population getting older and technological
developments including the internet.
A SWOT analysis example for a cosmetics manufacturer might
include:

Strengths
     Strong, experienced marketing team
     High brand recognition
     Well established consumer testing panel

Weaknesses
     Prices perceived to be too high
     Costs spiralling out of control due to increases from raw material suppliers
     Inconsistent brand identity

Opportunities
     Growth of the internet leading to an increase in the number of consumers willing
      to buy online
     New emerging teen market

Threats
     New ‘affordable luxury’ entrants to the market threatening to take share from
      premium brands
     Major competitor planning to integrate vertically and sell direct to the consumer
     Rise in popularity of nail spas leading to decline in demand for nail products
A SWOT can be performed for companies, departments and divisions as well as
individual people. Whatever the focus is the results will be very individual, even to
companies competing in the same sector. One company may see new technology
increasing the number of consumers who wish to buy online as an opportunity for
ecommerce yet another player in the market, without any in-house internet expertise, may
see this as a threat.

The importance of SWOT analysis lies in its ability to help clarify and summarise the
key issues and opportunities facing a business. Value lies in considering the implications
of the things identified and it can therefore play a key role in helping a business to set
objectives and develop new strategies. The ideal outcome would be to maximise
strengths and minimise weaknesses in order to take advantage of external opportunities
and overcome the threats. For example, the environment may present an opportunity for a
new product but if the company does not have the capacity to produce that product it may
either decide to invest in new plant and machinery or to just steer clear.

The biggest advantages of SWOT analysis are that it is simple and only costs time to
do. It can help generate new ideas as to how a company can use a particular strength to
defend against threats in the market. If a company is aware of the potential threats then it
can have responses and plans ready to counteract them when they happen.

There are also disadvantages of SWOT analysis. A typical SWOT analysis is a usually
a simple list and not critically presented. If a company is thinking about compiling lists it
may not be focused sufficiently on how to achieve its objectives. Taking a list approach
can also result in items not being prioritised. For example, a long list of weaknesses may
appear to be ‘cancelled out’ by a longer list of strengths, regardless of how significant
those weaknesses are.

A SWOT analysis is a strategic tool but it is generally not used in a formal way. However
there are now several pieces of SWOT analysis software available to help formalise the
process and give the analysis structure. This software can help companies brainstorm and
create a SWOT analysis and then present it as a report or presentation.

The best SWOT analysis will be more than a simple checklist. It will consider the
degree of strength and weakness versus its competitors to determine how good that
strength really is. A company may have a strong research and development team but a
competitor’s could be even stronger. A good SWOT should also look the size of an
opportunity or threat and show how these inter-relate with its strengths and weaknesses.
Free SWOT Analysis Example on ExxonMobil


Strengths

     A long established name that has been in existence for over one hundred years.
      This gives the customers a sense of security when dealing with the organization.
     The organization has diversified into many different areas of the energy industry
      and has many strong brands under its main umbrella group.
     The organization in the past has been able to survive without much damage to its
      reputation even after the Exxon Valdez oil spill. This is partly due to a few
      reasons, the good corporate citizenship of the organization, the correct and
      appropriate crisis management and crisis communication management strategy.
     The organization has been innovative in the past and continues to be very
      innovative currently too by spending a lot on research and development to come
      up with more efficient and effective ways to manage the energy resources and
      reduce the negative impact to the environment.
     The organization has a global presence and thus has access to a wider customer
      base and a larger market than other energy companies.
     The organization has a very strong presence in both India and China, the
      emerging markets that have been known to increase their energy demands
      exponentially thus the organization has been profiting from this at a higher rate
      than most other organizations.

Weaknesses

     The organization has been accused of not doing enough to go green and conserve
      the environment, rather that it is polluting and destroying the environment.
     There has been much negative publicity generated from the Exxon Valdez spill
      and also the human rights or rather the employee rights records of the
      organization has been under a cloud, which is a significant weakness of the
      organization.
     Inappropriate handling of the environmental interest groups is a very big
      weakness of the organization and can be detrimental to it in the future.
     Further the organization has been known for exorbitant profits in the last few
      years as energy prices were increasing, which gave it quite a lot of negative
      publicity that the organization did not handle very well and has cost it the good
      will of its consumers, who consider the organization to be becoming rich at the
      expense of the “poor consumer”.

Opportunities

     The biggest opportunities that are available to the organization currently is the
      increased demand of energy by developing economies in the South Asian and
      South East Asian regions likes Malaysia, Indonesia, Korea and Vietnam.
Threats

     The emerging economies of China and India that have been the biggest
      demanders of energy in the past few years are being hit by the recession in the
      developed economies and thus have reduced their rates of energy consumption
      that has caused the organization to loose out on projected levels of profit.
     The increased attention to the conservation of the environment has resulted in the
      reduction of the use of energy and energy savings and in the future this will only
      increase thus reducing the profitability of the organization.
SWOT analysis of British Telecom (BT)


Strengths
     BT (a BT Group plc subsidiary) is the UK’s lead broadband Internet provider and
      fixed line telecommunications operator that:
     Provides global telecommunication services in more than 170 countries
      worldwide;
     Participates in London and New York Stock Exchange and is listed in the FTSE
      100 Index;
     Provides most British fixed-line telephones with local loop and trunk network
      connections, and telephone exchanges;
     Operates more than 28 million UK telephone lines;
     Owns largest nationwide telecom coverage and penetration;
     On the basis of Universal Service Obligation, provides public call boxes fixed
      telephone lines nationwide;
     Extends communication operations on global markets through acquisition and re-
      branding of the domestic and overseas businesses, specifically: BT Infonet, 2005;
      BT Radianz, 2006; Dabs.com, 2006; PlusNet plc, 2007;
     International Network Services Inc, 2007; Comsat International, 2007; Wire One
      Communications, 2008; and Ribbit, 2008.
     Invests in new Internet Protocol century network 21CN.

Weaknesses

     BT main weaknesses are associated with the following factors:
     Underdevelopment of mobile business and lack of fixed-mobile convergence;
     Lack of business strategy towards the promotion of ‘cheap voice calls’;
     Occasional payphone problem due to BT operations;
     General complaints about customer services provided by BT.

Opportunities
     Transition to the new century network (21CN) in 2010 including the transfer of
      half of its customers by 2008;
     Expansion to more profitable products and services that are less regulated;
     Emphasis on telecommunications and IT solutions and broadband internet
      services;
     Extension of ‘BT Tradespace’ online service platform to serve small businesses;
     Advancement of ‘BT Vision’ to provide high-quality broadband television
      services;
     Expansion of Internet smart-phone services.
     Expansion of services on highly-dynamic UK telecom market and internationally;
     Contracting more overseas partners to further its global expansion;
Threats
     Fierce competition from BT’s main rivals: Carphone Warehouse; Google; O2;
      Orange and Vodafone);
     Global financial crisis;
     Workforce and management shortages in BT core business divisions, including
      retail, wholesale, Openreach, and BT Global Services);
     Overall increase of redemptions;
     Potential risk for BT bond markets;
     Fund management crisis with 6.6 b. slumps;
     Operating markets liquidity;
     Recent behavioural targeting scandal;
     Inability to foresee the successfulness of long-term projects considering current
      economi
SWOT analysis of Nike


SWOT analysis of Nike, Inc

Strengths
     Nike, Inc is listed in NYSE and positioned as a US headquartered worldwide
      sportswear trader and supplier that:
     Contracts with about 700 shops worldwide, runs offices in 45 countries, and
      manages factories in China, Indonesia, Taiwan, Thailand, India, Vietnam,
      Philippines, Pakistan, and Malaysia.
     Belongs to Fortune 500 companies which 2007 total revenue exceeded 16 b. USD
     Employs more than 30.000 people worldwide;
     Owns strong marketing strategy under Nike brand that assumes the involvement
      of world top-class athletes and sportsmen in Nike’s ‘Just do it’ advertising
      campaigns;
     Operates a chain of Niketown retail stores;
     Leads its international business operations through acquisitions and re-branding:
      Converse Inc, 2003; Starter athletic clothing, 2004; Umbro, 2008;
     Nike’s premium brand is used to manufacture and promote a wide variety of
      products for all types of sport-oriented and leisure activities;
     Manages the US premier training program SPARQ Training Program;
     Applies lunarlite foam and flywire materials to reduce the weight of manufactured
      shoes

Weaknesses
     Unwilling to disclose information concerning its partnering companies, which
      caused harsh criticism from CorpWatch and other companies;
     Contracts factories in Vietnam, China, Mexico, Indonesia;
     Violated overtime laws minimum wage rates and in Vietnam, 1996
     Provides poor working conditions, and tends to exploit cheap workforce overseas,
      especially in free trade zones where;
     Some of Nike’s ads are associated with US female empowerment;
     In 1990s, Nike was reported to apply child labour in Pakistan and Cambodia to
      produce soccer balls;
     Contracts overseas companies that apply non-transparent and inadequate labour
      regulations, involving child labour.
     Positioned as a permanent subject of criticism by anti-globalization groups;
     Forced Labour applications in partnering apparel factories in Malaysia, involving
      forced Labour and poor living conditions.

Opportunities
     Producing sportswear products from manufacturing waste;
     Extension of eco-friendly projects like ‘Reuse-A-Shoe Program’ aimed at further
      recycling;
     Emphasis on corporate marketing strategy through the promotion of corporate
      brand and sponsorship agreements;

Threats
     Textile industry adversely affects the environment, and therefore the company is
      permanently striving to maintain its eco-friendly reputation;
     Financial crisis may lead to job shortages in a number of Nike’s worldwide
      subsidiaries;
     The company has experienced negative publicity feedbacks due to its extensive
      advertising in mass media (Kasky v. Nike; Minor Threat at; Beatles song;
      Chinese-themed at, Horror ad etc).