SWOT analysis

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)
Excellent sales staff with strong knowledge of existing products Good relationship with customers Good internal communications High traffic location Successful marketing strategies Reputation for innovation	Currently struggling to meet deadlines - too much work? High rental costs Market research data may be out of date Cash flow problems Holding too much stock Poor record keeping

External environment

Opportunities (O)	Threats (T)
Similar products on the market are not as reliable or are more expensive Loyal customers Product could be on the market for Christmas Customer demand - have asked sales staff for similar product	Competitors have a similar product Competitors have launched a new advertising campaign Competitor opening shop nearby Downturn in economy may mean people are spending less

 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.