SWOT Analysis
What is it for?
The SWOT analysis is probably the most used analytical tool for in marketing and strategy. Its purpose is to summarize the results of an environmental analysis. In other words, before you develop a marketing strategy you use the SWOT analysis to understand the situation your business is in.
There are many other tools that can be used to perform an environmental analysis, including PESTLE, Porter’s Five Forces, Value Chain analysis, and Stakeholder analysis. However, the SWOT analysis can be used to summarize the results of all the other analyses you perform, and to present them all in an easy-to-read diagram.
How do you use it?
You perform a SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis by identifying aspects of the business environment that have an impact on its performance. Some of these aspects will be internal, which means they are inside or within the control of your organization. If internal aspects are positive we call them ‘Strengths’, if they are negative we call them ‘Weaknesses’. Other aspects will be outside or beyond the control of your organization; we call these ‘Opportunities’ (positive) and ‘Threats’ (negative).
These aspects are simply displayed in a 2x2 matrix, as shown.
How do you teach it?
This is not a difficult framework to teach to students. It’s easiest to apply it to a company or brand that everyone knows, and to simply ask students to come up with Strengths, Weaknesses, etc. You can find thousands of SWOT analyses with a simple Google search.
However, there are couple of things that may come up:
To come up with items, you may want to suggest looking for aspects related to the company itself, the supply chain, customers and the overall market, competitors, and the macro-environment (e.g. technology, social trends, new legislation).
It may be necessary to define the company’s main competition to decide if something is a weakness or a strength. For example, if you’re performing a SWOT analysis for fast-food chain Five Guys, product quality may be a strength if you compare it with McDonalds, but a weakness if you compare it with a high-end gourmet burger restaurant.
Sometimes an aspect can be both a strength and a weakness. or both an opportunity and a threat. In that case I normally ask students to split it up into a positive and a negative component. If this isn’t possible, for example because the impact of something is unclear, simply put it in both boxes or in between.
Often when you ask for opportunities, students will suggest possible courses of action for the company, for example to develop a new product or move into a new market. However, these are not ‘Opportunities’ as defined by the framework: they are not external and they are not part of the current situation. Possible courses of action are important to discuss, but only after the SWOT analysis is completed. In the framework an ‘Opportunity’ is something that is happening already, outside the control of the company. For example: a favorable legislation, a strong competitor that goes bankrupt, or a consumer trend that will increase demand. Note: a lot of marketing experts get this wrong, and may disagree with my assessment.
