SWOT analysis means the analysis and measurements
of strengths, weaknesses, opportunities and threats that the organization face
during its daily operations in the market. SWOT analysis conducted by a
business trying to decide if they should introduce a new product to their
range.
In SWOT analysis, the analyst first looks into
the business unit to identify its strengths and weaknesses. The analyst then
reviews the environment in which the business unit operates and identifies
opportunities presented by that environment and the threats posed by that
environment.
The SWOT analysis does not cover the entire
business, just the factors that may influence their ability to introduce a new
product. To get the most out of the SWOT, they have made specific statements in
each category. For example, rather than simply list 'competitors' as a threat,
they have included specific details about how their competitors are a threat.
Once you have read through this example SWOT
analysis, you can delete the entries that do not relate to your business, and
type your responses to build a SWOT analysis for your business.
Internal
environment
|
|
Strengths
(S)
|
Weaknesses
(W)
|
|
|
External
environment
Opportunities
(O)
|
Threats
(T)
|
|
|
Review the SWOT analysis
In the above example, each category
of this SWOT analysis could be expanded. The business can then assess the
results to decide if they can use their strengths to take advantage of the
opportunities and introduce the new product. After assessing the results, they
may decide that the weaknesses and threats need to be addressed before they can
make any changes to their existing product line.
When you have completed your SWOT analysis you
should review the results to help you decide the next step for your business.
Case Study
In
the mid-1990s, Dell Computer used a
SWOT analysis to create a strong business strategy that has helped it become a
very strong competitor in its industry value chain. Dell identified its
strengths in selling directly to customers and in designing its computers and other
products to reduce manufacturing costs. It acknowledged the weakness of having
no relationships with local computer dealers. Dell faced threats from
competitors such as Compaq and IBM, both of which had much stronger
brand names and reputations for quality at that time. Dell identified an
opportunity by noting that its customers were becoming more knowledgeable about
computers and could specify exactly what they wanted without having Dell
salespersons answer questions or develop configurations for them. It also saw
the internet as potential marketing tool. The results of dell’s SWOT analysis
are:
Strengths
- Sell directly to consumers
- Keep costs below competitors’ costs
Weaknesses
- No strong relationships with computer retailers
Opportunities
- Consumer desire for one-stop shopping
- Consumers know what they want to buy
- Internet could be a powerful marketing tool
Threats
- Competitors have stronger brand names
- Competitors have strong relationships with computer retailers
The
strategy that Dell followed after doing the analysis took all for of the SWOT
elements into consideration. Dell decided to offer customized computers built
to order and sold over the phone, and eventually, over the internet. Dell’s
strategy capitalized on its strengths and avoiding relying on a dealer network.
The brand and quality threats posed by Compaq and IBM were lessoned by dell’s
ability to deliver higher perceived quality because each computer was custom
made for each buyer.
