SWOT ANALYSIS

BY: DR. DEBAJANI PALAI

FACULTY: IMIT
MEANING

 SWOT ANALYSIS is the strategic thinking which requires the

evaluation of Strength, Weakness, Opportunity & Threats.
 It provides information that is helpful in matching the resources of
the firm to face the environmental competition.
 It creates a logical framework for strategic alternatives and
selecting the best one.
 It guides the strategist in strategy identification and formulation.
 Strength & Weakness are internal analysis of business whereas
Opportunity & threat are external environmental analysis.
CONT…

 Strength : It is an inherent capacity of the organization which

provides strategic advantage over its competitors.
 Weakness: It is an inherent limitation or constraint of the organization
which creates disadvantage to the organization.
 Opportunity: It is a favorable condition of the environment which
enables the business to strengthen its position.
 Threat: It is an unfavorable condition of the environment which
causes risk or damage to the position of the organization
Strengths

 A firm’s strengths are its resources & capabilities that can be used as
a basis for developing a competitive advantage.
 Examples of strengths:
 Patents
 Brand names
 Good-will
 Customer loyalty
 Technical-know-how
 Strong distribution network
 Competent personnel
CONT…
 Powerful strategy with valuable skill.
 Strong financial condition to avail resources timely.
 Company image & reputation.
 Attractive customer base.
 Market leader
 Superior intellectual capacity.
 Strong advertisement & promotion.
 Product innovation skill
 Use of e-commerce
 Wide geographic coverage
 Expansion of the organization
Weaknesses

 The absence of certain strengths create weaknesses.

 Examples
 Lack of patent protection
 Weak brand name
 Poor reputation among customers
 High cost structure
 Lack of access to resources
 Lack of access to key distributors
 Lack of skilled HR
CONT…

 No clear strategic direction.

 A weak balance sheet with high debt.
 Higher overall unit cost relative to key competitors.
 Calk of intellectual capital.
 Lack of cost control measures and cost accounting practices.
 Internal operating problems.
 Facing problems from rivals.
 Lack of e-commerce or global distribution channel.
 Weak reputation.
 Narrow product line.
 Shortage of resources & underutilization of resources.
 Lack of adaptability of technology & expansion of the organization.
Opportunities

 The external environmental analysis reveal certain new opportunities

for the growth of the organization.
 Examples
 Liberal policies and regulations
 Unfulfilled customer needs
 Adaptive with new technology
 Removal of international trade barriers
CONT…

 Expansion with new product line with broader range of customer

needs.
 Technological up gradation to enter in new business line.
 Integrating forward & backward.
 Falling trade barriers in attractive foreign markets.
 Opening to take market share away from rivals.
 Acquisition of rivals
 Joint venture
 New market expansion.

Threats

 Changing environment invite threats for business.

 Example
 New rules and regulations
 Change in consumer tastes away from firm’s products
 Availability of substitute
 Increased barrier
 Strong rivalry
CONT…

 Loss of sales to
 Entry of new competitors
 High cost of production with low technological innovation.
 Slowdown market growth.
 Adverse shift in foreign exchange rate.
 New policies and regulations.
 High bargaining power of customers.
 High bargaining power of suppliers.
 Adverse demographic change.
SWOT Matrix

 SWOT Matrix creates a scope for identifying the best fit between
firm’s strength with its opportunities.
 It also states that how to overcome a weakness and threat.
 Matrix is the combination of rows and columns. The SWOT analysis
profile consists of combinations of
 S-O
 WO
 S-T
 W-T
Cont…

STRENGTHS WEAKNESSES

OPPORTUNITIES S-O-STRATEGIES W-O-STRATEGIES

THREATS S-T-STRATEGIES W-T-STRATEGIES

CONT…

 S-O-STRATEGIES- Strategies pursue opportunities that are a good fit

to the company’s strength.
 W-O-STRATEGIES- Overcome weaknesses to pursue opportunities.
 S-T-STRATEGIES- Identify ways that the firm can use its strengths to
reduce its vulnerability to external threats.
 W-T-STRATEGIES- Establish a defensive plan to prevent the firm’s
weakness from making it highly susceptible to external threats.
IMPORTANCE OF SWOT ANALYSIS

 SWOT analysis presents the information about both internal &

external environment in a structured form.
 It compares external opportunities & threats with internal strength &
weaknesses.
 The strategist can be able to choose a suitable strategy by
analyzing SWOT profile which consists of combination of: high
opportunity with high strength, high opportunity with low strength,
high threats with high strength & high threats with low strength.
 It helps the managers to craft business model that will allow the
company to gain competitive advantage.
 Potential strength and competitive advantage, potential weakness
& competitive deficiencies, potential opportunities & threats to
company’s wellbeing.