Opportunity in SWOT

Contents

O is for Opportunities: Definition

Opportunities: Why include them?

Examples of Opportunities in SWOT Analysis

General Examples:

Specific Examples:

SWOT analysis is one of business analysis’ most important tools. Through looking at
the Strengths, Weaknesses, Opportunities, and Threats of a company, it can be quite easy to gain
an extensive outlook on their strategy, and how well it’s bound to work. The problem that most
run into when conducting a SWOT analysis, however, is deciding what factors fall into which
categories — a topic to which we’ve decided to dedicate an entire series of articles.

This article is the third installment in that series, which means we’ll be covering the definition
of Opportunities and giving relatable, informative examples. If you missed either one of the two
previous articles, about Strengths or Weaknesses, you can find them here and here, respectively.

So without further ado, let’s get into what Opportunities really are in SWOT analysis.

O is for Opportunities: Definition

Opportunities are a combination of different circumstances at a given time that offer a positive
outcome, if taken advantage of.

The key word in this definition is ‘circumstances’, because opportunities are said to be external.
That means that, unlike with Strengths, however hard anyone tries they cannot ‘create’
opportunities — they can only choose how to position themselves to gain maximum benefit from
them, or whether or not to grasp for them.

The simplest way to remember it is that opportunities are positive, and external: they benefit

those who can take advantage of them, but they cannot be ‘produced’ as and when desired.

Opportunities: Why include them?

Opportunities come in all different sizes, from hardly noticeable ones, to life-changing ones.
Recognizing the various opportunities that a company faces will help you to act on them and
leverage them (which can increase the success of your own organization or venture), or further
understand the situations that other businesses are facing.

Examples of Opportunitie
Practical examples always help to explain topics better than just words, so here are some both
general and specific examples of opportunities that you might come across in a SWOT analysis.

General Examples:

A new neighbourhood for an ice cream truck: the ability to begin selling in a new neighbourhood
would be beneficial to ice cream truck-ers, as they would have more people to sell to. This
makes the pursuit of this area a valid opportunity.

A big sporting event for an energy drink’s producers: a large sporting event would be a great
place for an energy drink producer to advertise, and sponsor athletes. They could spot the
opportunity to play a part in the event early, and secure themselves a cheap cut of the viewers’
attention.

Specific Examples:

Emerging markets for the entirety of the tech industry: what with the ever-growing increase
in global development, especially in less economically developed areas like Africa or the Far
East, there is lots of opportunity for those in technological fields. Increasing incomes will result
in many more individuals looking to technology (in the form of, for example, dishwashers,
computers or mobile phones) to improve their lives. This presents tech companies with a much
bigger market to profit from.

Plant-based meat alternatives for vegan eating movements (we don’t often feature concepts in
SWOT analyses, but that doesn’t mean they are excluded!): recent developments in plant-based
alternatives to meat might be leveraged to make veganism seem much more attractive. This is
certainly a big opportunity for those pushing the movement.

The 2016 Olympic Games for Brazil: the next (at the time of writing) set of Olympic Games will
be
held in Brazil — a huge opportunity for the country. This internationally acclaimed event will direct
the eyes of millions, if not billions, of people to Brazil, which gives it a chance to entice investors,
along with other notable figures.

For more examples, be sure to check out our complete SWOT analyses available here.

That’s all there is to opportunities in SWOT analysis. They are simply positive, external
factors that organizations or ventures can take advantage of, without being able to control.
Opportunities are worth identifying in both your own and others’ businesses, as either way they
provide information useful to planning. These favorable situations exist for all organizations out
there, but it is up to them to make the most of it.

Opportunities (external, positive factors)

Opportunities are external factors in your business environment that are likely to contribute to
your success.

Is your market growing and are there trends that will encourage people to buy more of what you
are selling?

Are there upcoming events that your company may be able to take advantage of to grow the
business?

Are there upcoming changes to regulations that might impact your company positively?

If your business is up and running, do 

customers think highly of you?

Opportunity In Various Field

The opportunities section is used to identify untapped markets or emerging business
opportunities that your company can leverage.

New Markets

One of the best opportunities a business can identify is a new or emerging market. Reaching an
emerging customer base early on allows you to entrench yourself as a leading provider if you
succeed. When unemployment is high and the economy slumps, for instance, colleges often
target displaced workers with promotions to get them to consider investing in more education
to better their position in the job market.

Technology

Technology evolves perpetually. This affects virtually all industries and has significant impact
in industries that manufacture or resell technology-based products. Apple was able to
transform itself at the turn of the century by shifting from its computer focus to the emerging
mobile technologies sector. In doing so, the company became established as a cutting-edge
mobile technology provider. While your small business may not have similar development
budgets, you do have the ability to anticipate changing consumer preferences to adapt your
product offerings. In retail, companies that recognize the importance of customer relationship
management software, supply chain management software or inventory control technology
often gain efficiency and cost advantages over less proactive competitors.

Regulations

In some industries, such as utilities, high levels of regulations serve as barriers to competition
but also limit your ability to adjust product and pricing strategies. More open markets with
minimal regulations allow innovative companies with quality, service or cost advantages to
aggressively target customers. However, they are often more competitive. Anticipation of looser
regulations in an industry can be viewed as an opportunity in SWOT. For example, when talks of
legalized Internet gambling picked up steam, a number of businesses began working to develop
technology and prepare business plans to take advantage of this potential new opening.

Economy

Some companies view an improving economy as an opportunity, while others benefit more
when the economy takes a turn for the worse. Moderate to upscale retailers like Target typically
do better when people have more discretionary money to spend. This is important to small
businesses that often rely on support from less price-sensitive customers willing to pay more
for specialized products and personalized service. When customers are doing well financially,
you have a real chance to lure them from low price competitors. Lower-priced retailers often rely
on a plethora of lower- to middle-income earners; thus, they may view higher unemployment and
a rough economy as a chance to pull in more bargain-hungry consumers.

The Connection Strength and Opportunity

The elements of the SWOT analysis are interconnected, especially with regard to strengths and
opportunities. When companies develop business strategies, they generally try to find scenarios
where their strengths as a company match up neatly with openings or opportunities in the
market. For instance, if your company is a leader in your industry and implements cutting-edge
technology and an untapped customer market wants the benefits that technology provides, you
have good alignment of your strengths and marketplace opportunities.

Difference Between Weakness and Opportunity

Some weaknesses can be addressed with proper effort and resources, while others simply
cannot be changed.

All business students and managers are familiar with SWOT analysis: an in-depth look at a
company’s strengths, weaknesses, opportunities and threats, conducted in an attempt to take
advantage of its strengths and opportunities, to address its weaknesses, and to thwart its
threats. At least in theory.

All business students as well as those involved in various levels of the strategic-management
process of most organizations have conducted this basic model of strategy formulation.
Unfortunately, many of these organizations fail to obtain the full value of such a critical analysis.
In my experience, most companies do a reasonably good job of evaluating their strengths,
particularly from a resource point of view. And their examination of threats is usually adequate
(although they often myopically focus on direct rivalries, as opposed to potential competition).
The distinction between opportunity and weakness, however, is muddled.

The central foundation of strategy formulation is to position the company in such a manner that
internal strengths are used to exploit environmental and competitive opportunities while also
mitigating potential organizational threats. But stopping here actually gives one a SOT analysis,
because the idea of weakness doesn’t enter into it. In fact, the notion of discussing weaknesses
has become anathema to strategy formulation in many companies. Too many senior executives
simply do not want to talk about them. Doing so is often seen as admitting defeat and appearing
vulnerable.

Organizational leaders must bear some of the responsibility for ignoring weakness. But many
who consult in this area also share some of the blame by referring to everything the company
lacks as an opportunity. We know managers recoil at the term weakness, so opportunity
becomes a generic pit into which a broad continuum of true opportunities and veiled
weaknesses are tossed. I’ve even witnessed a SWOT-analysis session where poor brand image
was earnestly listed as an opportunity. Nonsense! Although the possibility for improvement
may (or may not) exist, poor brand image clearly puts the company at a disadvantage when
compared to competitors. Moreover, falsely labeling true weaknesses as opportunities actually
puts the company at greater risk.

On the other hand, organizations with truly effective strategic processes understand that
not all weaknesses are identical. Some weaknesses can be addressed with proper effort
and resources, while others simply cannot be changed. Consider an analogy: I enjoy playing
basketball; unfortunately, I find myself 20 pounds beyond my ideal weight (OK, maybe 30, but
you get the point). I also happen to be blind in one eye from birth. Both my weight and my vision
are weaknesses that put me at some competitive disadvantage when I play. However, there is
an enormous difference between them. If I exercise more often and limit my caloric intake, I
can lose the weight and limit that weakness. But no matter how much effort or capital I put into
it, the vision in my blind eye is not going to improve. And therein lies a critical distinction when
examining organizational weaknesses. Companies often pour valuable organizational resources
into weaknesses that are not going to change, which limits their ability to use those same
resources to build upon strengths, take advantage of opportunities and pursue a sustainable
competitive advantage.

Furthermore, all weaknesses are not necessarily significant to the company. In fact, the impact
of some organizational weaknesses may be negligible. What is important is that organizational
leaders understand their weaknesses and also which strengths the organization might enhance
to counterbalance those limitations. They must not confuse true opportunity with current
inadequacies; rather, they should analyze their weaknesses to differentiate between those that
may be remedied and those that are unlikely to change in any meaningful way. To fail to do so
creates a culture and environment in which precious organizational resources are likely to be
wasted.

Opportunities are the same as threats ?

Although the theory is clear, many organizations, teams and individuals have problems in
practice with including opportunities in the risk process. We're not sure how to identify a
genuine opportunity, how to assess or prioritize it, what response options exist or how it should
be managed. But we don't seem to have the same difficulty with threats. If we believe risk
management could and should address both opportunities and threats, how can we bring our
practice into line with theory?

The secret to effective opportunity management is to recognize an opportunity is the same

as a threat, apart from the sign of the impact. Once we see this similarity, the way to address
opportunities becomes obvious. We can take the standard risk process we already use for
threats and apply it to opportunities, with simple modifications to recognize we are dealing with
positive upside risks.

So how are opportunities the same as threats? The definition of risk as "uncertainty that
matters" covers them both. Just like a threat, an opportunity is uncertain and it may not happen,
but if it does occur then it will have an effect on our ability to achieve one or more objectives.
The only difference is if a threat happens, it has a negative effect because it turns into a problem;
but if an opportunity happens, it has a positive outcome as it produces a benefit.

There are also similarities in the process for managing opportunities and threats. We can
identify opportunities using the same techniques that work for threats. Obviously, we can hold
a brainstorm session to think creatively about upside uncertainties, or we could produce an
opportunity checklist based on previous good experiences. But we can also use root-cause
analysis or decision trees to find potentially helpful things. And risk identification techniques like
SWOT Analysis or Force-Field Analysis naturally expose opportunities as well as threats.

When we want to rank risks, the importance of both opportunities and threats can be assessed
in terms of probability ("How uncertain?") and impact ("How much does it matter?"). The only
difference between them is that impact is positive for an opportunity and negative for a threat.
Then we can use a standard prioritization tool like the Probability-Impact Matrix or a heat map to
find the best opportunities.

We can also model the combined positive effect of opportunities on overall outcomes using
quantitative risk analysis techniques like Monte Carlo simulation or sensitivity analysis, with
exactly the same approach we use to model threats. The distinction here is opportunity impacts
are positive, producing savings in time or cost, or enhancing performance or reputation, etc.

Having found some good opportunities worth pursuing, we can develop appropriate risk
responses. This includes trying to exploit the best opportunities and enhancing others to
make them more attractive. We should also produce fallback plans to take advantage of any
opportunities that might happen spontaneously. In the same way that threat responses aim to
remove or reduce the negative effect of downside risks, opportunity responses are designed to
capture or improve the positive effect of upside risks.

It is clear that everything we know about downside risks (threats) is also true of upside risks
(opportunities). Once we realize that an opportunity is the same as a threat apart from the sign
of the impact, it will be easier to identify, assess and respond to opportunities — we just use
the same approach that already works for threats. And if we manage opportunities proactively,
we will turn some of them into additional benefits, including reduced timescales, lower costs
or enhanced performance. This will result in more successful projects and businesses, which is
good news for everyone.