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A REAL SWOT ANALYSISSWOT ANALYSIS What is SWOT Analysis? A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats and is a simple and powerful way to analyze your company's present marketing situation. The best way to understand SWOT is to look at an actual example: AMT is a computer store in a medium-sized market in the United States. Lately it has suffered through a steady business decline caused mainly by increasing competition from larger office products stores with national brand names. The following is the SWOT analysis included in its marketing plan. STRENTH: Knowledge. Our competitors are retailers, pushing boxes. We know systems, networks, connectivity, programming, all the VARs, and data management. Relationship selling. We get to know our customers, one by one. Our direct sales force maintains a relationship. History. We've been in our town forever. We have loyalty of customers and vendors. We are local. WEAKNESSES: Costs. The chain stores have better economics. Their per-unit costs of selling are quite low. They aren't offering what we offer in terms of knowledgeable selling, but their cost per square foot and per dollar of sales are much lower.
Price and volume. The major stores pushing boxes can afford to sell for less. Their component costs are less and they have volume buying with the main vendors. Brand power. Take one look at their full page advertising, in color, in the Sunday paper. We can't match that. We don't have the national name that flows into national advertising. OPPORTUNITIES: Local area networks. LANs are becoming commonplace in small business, and even in home offices. Businesses today assume LANs as part of normal office work. This is an opportunity for us because LANs are much more knowledge and service intensive than the standard off-the-shelf PC. The Internet. The increasing opportunities of the Internet offer us another area of strength in comparison to the box-on-the-shelf major chain stores. Our customers want more help with the Internet, and we are in a better position to give it to them. Training. The major stores don't provide training, but as systems become more complicated, with LAN and Internet usage, training is more in demand. This is particularly true of our main target markets. Service. As our target market needs more service, our competitors are less likely than ever to provide it. Their business model doesn't include service, just selling the boxes. THREATS: The computer as appliance. Volume buying and selling of computers as products in boxes, supposedly not needing support, training, connectivity services, etc. As people think of the computer in those terms, they think they need our service orientation less. The larger price-oriented store. When we have huge advertisements of low prices in the newspaper, our customers think we are not giving them good value. SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. The SWOT framework was described in the late 1960's by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in Business Policy, Text and Cases (Homewood, IL: Irwin, 1969). The General Electric Growth Council used this form of analysis in the 1980's. Because it concentrates on the issues that potentially have the most impact, the SWOT analysis is useful when a very limited amount of time is available to address a complex strategic situation. The following diagram shows how a SWOT analysis fits into a strategic situation analysis. Situation Analysis
/ \ Internal Analysis External Analysis /\ /\ Strengths Weaknesses Opportunities Threats | SWOT Profile The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.
Internal Analysis:The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses. Factors should be evaluated across the organization in areas such as:
Company culture Company image Organizational structure Key staff Access to natural resources Position on the experience curve Operational efficiency Operational capacity
Brand awareness Market share Financial resources Exclusive contracts Patents and trade secrets
The SWOT analysis summarizes the internal factors of the firm as a list of strengths and weaknesses.
External Analysis:An opportunity is the chance to introduce a new product or service that can generate superior returns. Opportunities can arise when changes occur in the external environment. Many of these changes can be perceived as threats to the market position of existing products and may necessitate a change in product specifications or the development of new products in order for the firm to remain competitive. Changes in the external environment may be related to:
Customers Competitors Market trends Suppliers Partners Social changes New technology Economic environment Political and regulatory environment
The last four items in the above list are macro-environmental variables, and are addressed in a PEST analysis. The SWOT analysis summarizes the external environmental factors as a list of opportunities and threats. How to Perform a SWOT Analysis? A SWOT Analysis is an integral part of a marketing plan and can also be part of a business plan. Knowing what a SWOT Analysis is and how to perform one is very important. Conclusion:
SWOT helps a company to se itself for better and for worse. Companies are inherently insular and inward looking SWOTs are a means by which a company can better understand what it does very well and where its shortcomings are. SWOTs will help the company size up the competitive landscape and get some insight into the vagaries of the marketplace. SWOT analysis has been a framework of choice among many managers for along time because of its simplicity and its portrayal of the essence of sound strategy formulation - matching a firms opportunities and threats wit its strengths and weaknesses. Central to making SWOT analysis effective is accurate internal analysis the identification of specific strengths and weaknesses around which sound strategy can be built. SWOT ANALYSIS OF PEPSI-CO The following table shows the internal and external factors affecting the market opportunities for PepsiCo. This SWOT analysis also shows PepsiCo's internal strengths such as their experienced management team, a competitive product line, a global marketing realm, and the continuous efforts by their research and development to research trends in the industry and to be creative in exploiting those trends. Some possible opportunities noted in the SWOT analysis are the growing markets for specialized ethnic foods and healthier food products. Another opportunity is that the income of consumers is high enabling them to be less price sensitive, and convenience is becoming evermore important not only to the United States but to many countries around the world. Although PepsiCo has much strength, a few weaknesses lie in the fact that the company is so large and could possibly lose focus or have internal conflict problems. A few of the threats PepsiCo must stay aware of are the ease of reliability of its product line, the almost pure competition in pricing for its products, and the quickness of technological advances causing existing products to be no longer the most advanced. Internal Factors Strengths Weaknesses Management Experienced, broad base of interests and knowledge Large size may lead to conflicting interests Product Line Unique, tastes good, competitive price, and convenient
New one calorie products have no existing customer base, generic brands can make similar drinks cheaper Marketing Diverse, and global awareness May lose focus, may not be segmented enough Personnel International, diverse positions Possible conflicts due to so many people, possible trouble staying focused Finance High sales revenue, high sale growth, large capital base High expenses, may have trouble balancing cash-flows of such a large operation Manufacturing Low costs and liabilities due to outsourcing of bottling Lose control and quality standards Research & Development Continuous efforts to research trends an reinforce creativity May concentrate too much on existing products, intra-preneuralship may not be welcomed External Factors Opportunities Threats Consumer/Social Huge market in the healthy products and growing market for specialized foods for ethnic groups More expensive products than Coke, such a high price may limit lower income families from buying a Pepsi product Competitive Distinctive name, product and packaging in with regards to its markets
Not entirely patentable, constant replicability by competitors Technological Internet promotion such as banner ads and keywords can increase their sales, and more computerized manufacturing and ordering processes can increase their efficiency Computer