Doing a SWOT Analysis
Last modified August 28, 2010

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Definition

A SWOT analysis looks at the

for one or more firms in a given industry.

Purpose

The goals of a SWOT analysis are (Hill & Jones, 7th ed., p. 19-20):

  1. identify strategies that fit a firm’s resources, capabilities (or competencies) to its external environment;
  2. generate alternatives that apply a company’s strengths to exploit opportunities and counter threats; and
  3. offer strategies to correct company weaknesses

General Advice

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 West
+
-
Internal Current Strength Weakness
External Future Opportunity Threat

Guidelines

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 companies.

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 why.

Past, Present and Future