SWOT Analysis Framework

This article provides an introduction to the powerful SWOT analysis framework. In a nutshell we’ll cover the definition, introduce the framework using a case study (ABC Soups), look at a sample template, consider a simple example (SWOT analysis of Starbucks) and list down the limitations of the SWOT tool.
 

SWOT Analysis Case Study | ABC Soups

The CEO of ABC Soups, which produces ready-to-eat soup mix, is worried: the company is recording good profits at the moment, but he fears that a couple of issues may affect its sustainability before long.

He wants to evolve strategies to manage these issues, and calls a meeting of his managers and team leaders. He even invites others, including lower-level employees and dealers, to the meeting—he knows almost anyone involved with the company can contribute.

At the meeting, the first thing to do is to identify ABC Soups’ strengths, weaknesses, opportunities, and threats (SWOTs), and then take up a SWOT analysis.

Most of the managers at the meeting are business-school graduates and know what “SWOT” is, but he explains the concept for the benefit of the other participants.
 

How to identify SWOTs

The CEO explains that a SWOT analysis is a tool for strategy development. In conducting the analysis, a business organisation places itself in a conceptual environment where there are both opportunities and threats.

It then identifies its inherent strengths and weaknesses, and plans how to make the best use of the opportunities available and minimise the threats. It also finds out how it can use opportunities to limit its weaknesses and to avoid threats. These steps together make up its strategies.

The CEO draws a “plus” sign on a display board to make four grids, and labels each of them as “Strengths,” “Weaknesses,” “Opportunities,” and “Threats” (SWOTs), respectively.

He invites the participants to identify the company’s SWOTs, reminding them that they should only use precise information drawn from the company documents for the analysis. The participants come up with the following data:

• Strengths: Good profits, product popularity, and safe ingredients of product
• Weaknesses: Poor performance of units in some regions and absence of easy-to-use packaging
• Opportunities: Growing market for ready-to-use food items and increasing popularity of instant soups
• Threats: Loss-making units eating up profits elsewhere and growing consumer awareness about harmful ingredients of packaged foods.

 

Using SWOT analysis to evolve business strategies

With the help of the SWOT analysis, the managers and the others at the meeting evolve strategies for maintaining the company’s profits and ensuring its sustainability.

Matching strengths (availability of funds and product popularity) with opportunity (increasing market for instant foods including soups), the participants identify opening more factories as a strategy.

Matching strength (safe ingredients of product) with threat (growing awareness about food safety), they decide upon a strategy of launching a high-profile awareness campaign about the safe ingredients of ABC’s soups.

Placing weakness (inadequate packaging) and opportunity (growing market) side by side, the participants see that it would be a good idea to sell the soup mix in a microwaveable container in which the consumer can cook soup directly.

Juxtaposing weakness (poor performance by some units) and threat (impact of loss-making units), they feel some of the loss-making units in some regions would have to be closed down.

Therefore, charting the results from the SWOT analysis, we have the following strategies evolved for ABC Soups:

• Strengths (funds’ availability and product popularity) ↔ Opportunity (growing market for instant foods including soups) = Open more factories
• Strength (safe ingredients of product) ↔ Threat (awareness of food safety) = Launch a campaign about safety of soup mix
• Weakness (inadequate packaging) ↔ Opportunity (growing market) = Sell soup mix in microwaveable container
• Weakness (poor performance by some units) ↔ Threat (impact of loss-making units) = Close down loss-making units

As seen in the example above, businesses should be able to identify their SWOTs to evolve strategies. To recognise SWOTs, managers can ask themselves the following questions:
 

SWOT Analysis Template

Here are some questions to ask in order to get a better idea of your company’s strengths, weaknesses, oppirtunities and threats.

Add other questions that may be relevant for your business and industry to create a SWOT analysis template that fits your corporate strategy.

Strengths (Internal Factors)	Weaknesses (Internal Factors)
What are we really good at? What are our best and unique skills? What internal talent do we have (staff)? What other resources do we have (funds)? What are our advantages over competitors?	What does our company lack (staff talent, funds, good location)? What departments or sections within the company are lagging behind? Where are we losing time and money? What skills aren’t up to the mark?
Opportunities (External Factors)	Threats (External Factors)
What are the market opportunities that we have? What are the changes in our external environment that we can take advantage of (changing laws, changing customer preferences)? Can we tap into new customer categories? Are there related businesses (products or services) that we can get into?	What expertise do we lack in our efforts to use opportunities? What is it that our competitors are doing better than us? What’s happening in the economy or industry that can adversely affect us? What are our biggest obstacles?

Strengths and weakness cover internal factors such as human resources, funds, infrastructure, and even past experiences, both good and bad.

Opportunities and threats relate to external factors such as changing consumer trends, economic and political factors, and laws.
 

SWOT Analysis Example: Starbucks

The SWOT analysis of Starbucks depicted in the image below is pretty basic. But it’s good enough to get a quick idea of how the SWOT tool can be used to analyze a business.

Image source: slidemodel.com 
 

When to use SWOT analysis

A SWOT analysis can be used at any stage in the life of a company. It can be used at the start, when it is being launched, or later, when it is implementing a new plan or reviewing plans mid-course. Of course, the analysis can also help find solutions to crises at any time.

Tips for SWOT analysis

• Managers and project leaders are “natural” participants at a SWOT meeting. However, a dealer or even a consumer volunteer can offer usable perspectives.
• A SWOT meeting is best held in a relaxed atmosphere, where participants can express their views frankly. It would be a good idea to allocate adequate time—a few hours, rather than a few minutes—to brainstorming.
• To identify strengths and weaknesses, only facts and confirmed data should be used, instead of opinions. Weakness or threats may hide an opportunity. Conversely, an opportunity easily identified can turn out to be a threat if competitors have also identified the opportunity.
• A SWOT analysis can be used in conjunction with core competency analysis and PEST (political, economic, social, and technological) analysis.
• Review meetings to discuss the progress of strategy implementation help keep plans on track.

 

Drawbacks and limitations of the SWOT Analysis Framework

A SWOT analysis helps only if the identification of strengths and weaknesses is done honestly and candidly. Care should be taken to ensure that it does not deteriorate into an exercise to justify a past decision or strategy.

The objective should be to answer the question “Where do we go from here?” for the sake of the company.
 

Personal SWOT Analysis Template

Before you leave the site, here’s a little bonus. The SWOT framework is quite flexible, and doesn’t just apply to the business world. You could use the tool to do a little self-analysis too.

Try filling up this personal SWOT analysis template to understand yourself better – as a professional, a student, a university applicant or just anyone else.

 
Found this lesson useful? You’ll like our online Mini MBA certificate course too. It covers other important strategy concepts (including powerful frameworks), as well as the wider range of super-essential business topics.

 
Image Sources: SWOT analysis of Starbucks: slidemodel.com | Personal SWOT Analysis rendestruction.blogspot.in