Doing a SWOT Analysis
August 28, 2010
Return to Joel West’s home
A SWOT analysis looks at the
for one or more firms in a given industry.
The goals of a SWOT analysis are (Hill & Jones, 7th ed., p. 19-20):
- identify strategies that fit a firm’s resources, capabilities (or
competencies) to its external environment;
- generate alternatives that apply a company’s strengths to exploit
opportunities and counter threats; and
- offer strategies to correct company weaknesses
Based on problems students had doing SWOT analysis (and the lack of help from
the textbook), here is some advice on how to do a SWOT analysis for this class.
Remembering the Differences
To keep clear how to apply a SWOT, remember this matrix
|Hill and Jones
- A strength could be a capability, a resource or a competence.
Not every firm can have the same strength, although more than one firm can
share a strength if other firms do not.
- A weakness is often relative to a competitor’s strength
— i.e. a strength of one firm is another firm’s weakness.
- Some opportunities and threats will apply
to all firms in an industry; others may apply only to some firms.
- List 2-6 items for each of S,W,O,T; not 20. If you think there are 20,
pick the most important 6. If this is a PowerPoint presentation, you can
use bullet points; if it is a written assignment, you need to write an essay
in complete sentences.
Strength vs. Success; Weakness vs. Failure
A strength (or weakness) is something different or unusual: if it is the norm
for the industry, then you would only mention the exception. Note that for
some attribute (e.g. distribution) there might be many companies similarly
situated, and thus this would be neither a strength nor weakness for these
If a strength is an attribute of a firm (e.g. its distinctive competence),
this is not the same as success, which is a result or outcome. A strength can
help explain a success, and often a success gives you a clue as to a strength.
Similarly a failure is not a weakness, but may have been caused by a weakness.
Sometimes success leads to a strength, but you need to explain why. A firm
that has high market share may have high brand name recognition, excellent distribution,
or enjoy economies of scale when compared to its smaller rivals. Remember something
is a resource, capability or a distinctive competency only if it leads to some
form of competitive advantage (Hill & Jones, 6th ed., Fig. 4.1, p. 111).
The source of competitive advantage is normally a strength: for example, if
the company has a strong brand or better-than-average distribution.
An activity is neither a strength nor weakness. Don’t tell us what they do,
tell us what they do better (or worse) than most of their competitors — and
Past, Present and Future
- Past. Don’t confuse a strength (or weakness) with an outcome. SWOT
analysis is never about
the past, but always about the present or future. A battle that’s been
fought and lost may have previously been a threat, but if there’s nothing
left to lose (e.g. you’ve
cancelled the product line) it isn’t a threat anymore. Similar, a past
failure might reflect a weakness — a weakness that the firm had —
but you need to explain what is today’s weakness (or strength, opportunity
or threat) and how it affects the firm going forward.
- Present. Things that are true today, clear, undeniable are likely
to be strengths or weaknesses. We know we have good products
and reputation (strengths), but
we also have a weak balance sheet and poor distribution (weaknesses).
- Future. Some that is likely (or at least high possible) to happen
in the future — to
us or competitors
— are opportunities or threats if they would have a significant impact
on performance. So if the union might or might not go on strike
next yea, that is a threat, while poor attitude among our workers
today is a weakness. Similarly, if we have
80% market share in
the U.S., that’s
a strength, but if we have the opportunity to increase our market share
in China from 0% to 30%, that’s an opportunity; if someone is seriously
challenging our 80% share, that could be a threat.