SWOTT analysis

A SWOTT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, Threats and Trends as they apply to a business objective. A SWOTT analysis examines internal and external factors that are significant to the objective.  Results of SWOTT analysis will be used in the strategic planning for the organization.

Before a SWOTT is started, a clear business objective must be defined.  First, the decision makers have to determine whether the objective is attainable, given the SWOTTs. If the objective is NOT attainable a different objective must be selected and the process repeated.
Strengths – A strength is a core capability, that your customers value, of your business where you have an advantage over your competitor(s),  i.e. you passed the “better than your competitors” test.
During your SWOTT analysis you will consider a variety of strengths from within your business. It is important to note that these strengths will all be internal to your business.
When completing your analysis you will find that your strengths will generally fit into two categories:
  • Tangible Strengths, these tend to be strengths that can be precisely identified, measured or realized
  • Intangible Strengths, these tend to be strengths that can not be physically touched or physically measured
Some possible tangible strengths that you may find in your business:
  • Consider your assets including plant and equipment
  • Do you have long-term rental contracts for your business locations?
  • Are your products unique or market leading?
  • Have you got sufficient financial resources to fund any changes you would like to make?
  • Do you have any cost advantages over your competitors?
  • Do you use superior technology in your business?
  • Is your business high volume?
  • Can your scale up your volume if you need to?
Some possible intangible strengths that you may find in your business:
  • Do you have or stock strong recognizable brands
  • Your reputation – are you considered a market leader? or an expert in your filed?
  • Do you have good relationship with your customers? (Goodwill)
  • Do you have strong relationships with your suppliers
  • Do you have a positive relationship with your employees
  • Do you have any unique alliances with other businesses?
  • Do you own any patents or proprietary technology?
  • Do you have a proven advertising process that works well?
  • Do you have more experience in your field?
  • Are you managers highly experienced?
  • Do you have superior industry knowledge?
  • Are you involved with industry associations?
  • Is your business Innovative?

Weaknesses – A weakness is a core capability of your business, that your customers value, where your competitor(s) have an advantage over youu, i.e. you failed the “better than your competitors” test.

During your SWOTT analysis you will consider a variety of weaknesses from within your business. It is important to note that these weaknesses will all be internal to your business.
When completing your analysis you will find that your weaknesses will generally fit into two categories:
  • Tangible Weaknesses, these tend to be weaknesses that can be precisely identified, measured or realized
  • Intangible Weaknesses, these tend to be weaknesses that can not be physically touched or physically measured
Some possible tangible weaknesses that you may find in your business:
  • Old or outdated plant and equipment
  • Narrow product line
  • Insufficient financial resources to fund changes
  • High costs (Not high price, high costs specifically refers to your operating costs)
  • Inferior technology
  • Low volume and restricted in your ability to scale up
Some possible intangible weaknesses that you may find in your business:
  • Weak or unrecognizable brand
  • Weak or unrecognizable image
  • Poor relationships with your customers
  • Poor relationships with your suppliers
  • Poor relationships with your employees
  • Marketing failing to meet objectives
  • Manager inexperience
  • Low R&D
  • Low industry knowledge
  • Low innovative skills
Opportunities – An opportunity is an environmental condition in your industry that can improve your organization’s competitive position relative to that of your competitors.
During your SWOTT analysis you will consider a variety of Opportunities to your business. These Opportunities will all be external to your business.
When completing your analysis you will find that your Opportunities will generally fit into two categories:
  • Industry Opportunities – Industry opportunities are opportunities in your industry environment and generally reduce the level of price competition in your industry. To discover more about your industry environment see porters five forces.
  • Macro Opportunities – Macro opportunities are in the broader environment that generally affect all businesses in your region.

Some possible Industry Opportunities are:

  • Expand your product range
  • Diversify your business interests
  • Expand into your customer’s field (Forward Integration)
  • Expand into your supplier’s field (Backward integration)
  • Expand your customer base (Geographically or through new products)
  • Placid competition
  • Export opportunities
  • Products or service in growth

Some possible Macro Opportunities are:

  • Favorable changes to legislation
  • Favorable changes to any import/export constraints
  • Favorable economic outlook favorable
  • Favorable cultural shifts
  • Technology that your business can utilize such as Ecommerce or Internet sales

Threats – A threat is a forecast environmental condition that is out of your control and has the potential to harm your businesses profitability.

During your SWOTT analysis you will consider a variety of threats to your business these threats will all be external to your business.
A common example: If you import goods for resale, then a negative shift in exchange rates will force up your costs, if you are unable to pass these costs on to your customers, your margins will reduce. So, exchange rate volatility could be a threat.
You will find that your threats will fit into two categories:
  • Industry threats – Industry threats are related to an increase in the competition in your industry or a reduction in market size. Generally industry threats threaten to reduce your businesses profitability.
  • Macro Threats – Macro threats are the kinds of things that affect all industries in your region. These also generally result in a risk of reduced profitability.
Some possible Industry Threats include:
  • Low cost imports, the threat of low cost imports affects almost any manufacturer in the developed world, with the possible exception of food manufacturing.
  • Consumer ability to shift to a substitute product and changing demand for substitute products, consider the manufacture of nails used in the assembly of house frames, if housing developers shifted from timber frames to steel framed houses, demand for nails would drop significantly.
  • Slow market growth or decline in market size, western countries the demand for alcoholic drinks remains pretty flat
  • Shifts in customer or supplier buying power reducing your margins, consolidation in the retail industry has shifted buying power to the retailer who can place suppliers for generic products under high price pressure.
  • The changing needs of buyers, (customers), take the McDonalds fast food chain as an example, Faced the threat of Australian customer needs changing towards a healthier life style. In response to this threat McDonalds has introduced several healthy eating options.

Some possible Macro Threats include:

  • Shifts in foreign exchange rates impacting your imports or exports. International tourism is often hit hardest by shifts in exchange rates. As your currency increases in value you will get less tourists visiting you, and more people in your country will seek affordable overseas holidays. A strong currency has a double impact, less international travelers and less domestic tourists.
  • Demographic changes, the aging workforce making it difficult to get skilled workers in many developed countries.
  • Industry Regulation, a good example is aged care facilities who are impacted by increasing regulation and increased costs to administer these new regulations.

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SWOTT Tips:

Strengths

Consider this scenario.

It is possible that every business in an industry has identified their customer service as a strength. It might be true that all businesses in an industry are good at customer service. However will your customers notice the difference?
No matter how good your business is at something, if you are not better than your competitors it is not a strength.
Opportunities and Threats
Opportunities and threats are external to your organization. It is possible that all businesses in your industry will identify similar opportunities and threats.
You should refer to your macro environment analysis and industry environment analysis to help you to identify your opportunities and threats.
Be careful about considering internal factors as Opportunites or Threats.  Common mistakes include expressing a weakness in terms of the solution so that is sounds like an opportunity. For example, a manager once told me that they have an opportunity to introduce psychometric testing into their recruitment processes. Although this may well be true. It is better to list this as a weakness in candidate selection.
When an opportunity is not an opportunity
The opportunity section of the SWOTT Analysis is the most commonly misunderstood, many people use the opportunity section to list solutions to their weaknesses and threats.
For example, they may list “we have an opportunity to improve employee retention” as an opportunity, where they should list “Poor Employee Retention or High Employee Turnover” as a weakness.
The SWOTT analysis is purely an analysis tool, it should contain independently verifiable statements of fact. In the macro and industry analysis you may identify opportunities that look like solutions, however you should include the statement of fact.
For Example: Instead of listing “We could promote a new environmentally friendly range” you could put “There is a shift in consumer buying patters towards more expensive but environmentally friendly brands, we could move into this market”. This second statement is an independently verifiable statement of fact.
The reason for this is that during your strategic analysis you have not yet made any decisions. Decision making comes after you have completed your SWOTT and developed options for action, then you will make your solution decisions.

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