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Conducting a SWOT Analysis

Updated on February 19, 2013
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What is a SWOT

A SWOT analysis is a tool used by marketing professionals in most industries. When devising a strategic marketing plan, one of the first steps is to develop a SWOT. It is used as a tool in getting a perspective of a companies internal strengths and weaknesses, along with external opportunities and threats that may exist.The SWOT will act as a guide in determining what courses of action the company should take when setting out to achieve any goals or objectives. the SWOT matrix is a four box table in which strengths are in the upper left box, weaknesses are in the upper right box, opportunities are in the lower left box, and threats are in the lower right box. This is the basic and traditional layout of a SWOT matrix.

Strengths
Weaknesses
Opportunities
Threats

Things to Remember

It is important to remember several key points when developing a SWOT.

  • Be honest about it. Do not pretend the company has no weaknesses or imagine opportunities that aren't really there. Doing this will hinder the truth in the outcome of your analysis and prevent you from developing a attainable strategic plan.
  • Try not to confuse the four variables in the matrix. Threats are very different from weaknesses and strengths are very different from opportunities. If confused, the likelihood of a distorted plan increases.
  • Strengths and weaknesses are both internal variables that the company has the capability of changing. Opportunities and threats are external and the company has no real control over them.
  • Take all aspects of the business into consideration. Do not assume that expansion is a good marketing opportunity when the company is operating with little to no extra financial capital.

Strengths

The upper left box in the SWOT matrix is for strengths the company currently possesses. Strengths will obviously differ depending on the type of business. These can be thought of as advantages a company has in comparison with other companies in the industry. Keep in mind however, these are solely internal factors. It is best to begin with the what is considered the biggest strength first. For example, a strength for Harley Davison may be the fact that their customers are very loyal and do not consider other motorcycle brands when purchasing.

Others examples may include:

- Environmentally friendly company image.

- Large reserve of financial resources.

- Biggest percentage of market share in the industry

Weaknesses

Weaknesses are the second internal factor in a SWOT analysis. They are located in the upper right box of the matrix. These are attributes a company possesses that may be considered disadvantages in comparison to others in the industry. Again, do not confuse these with threats. A large competitor entering the market is not a weakness because it cannot be controlled. After the SWOT is completed, a company may choose to focus on turning weaknesses into strengths.

Examples may include:

- Limited financial resources

- High employee turnover

- Narrow product line and focus

Opportunities

Opportunities are the first external factor in the SWOT analysis. They are located in the lower left box of the matrix. Opportunities are potential courses of action the company could take when developing a specific plan. A company may choose to pursue opportunities in the final executive summary of the marketing plan. Opportunities are not strengths the company possesses. They are external options. Opportunities are pursued when a company chooses to focus on capitalizing on lucrative possibilities rather than building upon strengths or eliminating weaknesses.

Examples may include:

- Tapping into a new market of consumers

- Pursuing a joint venture or partnership with another company.

- Capitalizing on recent deregulation and reduced governmental restrictions on trade.

Threats

Threats are the second external factor to a SWOT analysis and are the bottom right box in the matrix. Like opportunities, threats are current conditions in the market that cannot be controlled by the company. In contrast to opportunities, threats pose possible negative consequences if not addressed. These are not current weaknesses the company possesses, but rather potential threats to a companies overall success and market share in an industry.

Examples may include:

- Entrance of competitors in the market

- Increased governmental regulations on the industry

- Decreasing sales in the overall industry we are in


Remember

A SWOT is not the only tool used in developing a solid marketing plan. It is however the first step and a good starting point to determine where you are as a company relative to others in the industry. All future courses of action will be in someway based on the information laid out in the SWOT analysis. Therefore, it cannot be stressed enough that one needs to be honest and impartial in developing all parts of the matrix.

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    • Kyricus profile image

      Tony 4 years ago from Ohio

      Actually, the SWOT analysis is a tool that can be by any department within a company and shouldn't be looked at as just a marketing tool.

      Each division in the company I work for is either working on or has completed a SWOT analysis for their own area's of responsibilities. All departments are taking part, all the way from Accounting, to warehouse receiving functions.

      It's a very useful tool if the analysis is done honestly.

    • Sethughes profile image
      Author

      Sethughes 4 years ago

      Thats a good point. My degree is in marketing so all of my studies and uses of the SWOT have been weighted toward marketing plans and case analysis. I agree it is one of the most useful tools for any company to use in order to make future related decisions.

      The honesty is crucial. Many may be tempted to lie to themselves and say they are stronger than they are or have opportunities that aren't really attainable.

      Thanks for the comments and for reading.

    • zsobig profile image

      Sophie 4 years ago from United Kingdom

      OMG, this brought back many old memories to me now. I studied marketing too, but I had no luck in finding a job in that field. I hope you will be much luckier - voted up!

    • Sethughes profile image
      Author

      Sethughes 4 years ago

      I think it is an interesting subject. I sure hope I have some luck getting a job too. Thanks for reading and for the encouraging words!

    • thelyricwriter profile image

      Richard Ricky Hale 4 years ago from West Virginia

      Very interesting article Seth. Voted up, useful, and interesting. I never studies marketing, but I do enjoy learning all I need to know. I want to get into it one day and knowledge is key in this field. Awesome article!

    • Sethughes profile image
      Author

      Sethughes 4 years ago

      Thank you very much for reading and voting. It is a very interesting area to study in the business department. Knowing things like SWOT will help tremendously in learning other marketing concepts.

      Thank you again!

    • the girls profile image

      the girls 4 years ago from Los Angeles, California

      Good hub Sethhughes! The SWOT analysis is a good tool in any organization. It also needs to be re-visited on a constant basis. It has to adapt with the "changing environment", and hopefully for the better :-)

    • Sethughes profile image
      Author

      Sethughes 4 years ago

      Thats a good point. An organization should never assume its strengths and weaknesses remain the same over an extended period of time. Thank you for reading!

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