SWOT Analysis

Last updated May 24, 2023 Edit

• Business

• A method for analysing a business, its resources and its environment
• Often used as part of strategic planning
• Looks at
  • Internal Strengths
  • Internal Weaknesses
  • External Opportunities
  • External Threats

• Strengths
  • Technical ability
  • Motivation
  • Enthusiastic
• Weaknesses
  • Over reaching
  • Repetitive tasks such as revision are difficult
• Opportunities
  • Could get involved in open-source and build up a CV
  • Could get a part-time job
  • Could set up a small online store
• Threats
  • Hard to stand out
  • Burnout

• What the business does better than the competition
• What competitors do better
• Whether it is making the most of the opportunities available
• How a business should respond to changes in its external environment

• Positive factors
  • Strengths
  • Opportunities
• Negative factors
  • Weaknesses
  • Threats

• Strengths and weaknesses
  • Internal to the business
  • Relate to the current situation
• Opportunities and threats
  • External to the business
  • Related to changes in the environment which will impact the business

• Market share
• Economies of scale
• High quality
• Leadership skills
• Financial resources
• R&D capabilities
• Technological representation
• Brand reputation
• Protected IP
• Distribution network
• Employee skill
• High productivity
• Flexibility of production
• etc etc

• A source of competitive disadvantage

• Low market share

• Inefficient plant

• Outdated technology

• Poor quality

• Lack of innovation

• A weak brand name

• High costs

• Cash flow problems

• Undifferentiated product

• Inadequate distribution

• Quality problems

• Low productivity

• Skills gap

• Unmotivated staff

• etc etc

• An opportunity is any feature of the external environment which creates positive potential for the business to achieve its objectives.
  • Technological innovation
  • New demand
  • Market growth
  • Demographic change
  • Social or lifestyle change
  • Government spending programmes
  • Higher economic growth
  • Trade liberalism
  • Diversification opportunity
  • Deregulation of the market
  • etc etc

• Developing countries (Pakistan, India etc)
• Large amounts of change

• Pensioners are better off if they retired longer ago
• Pensions used to be more generous than they currently are
• Some OAPs have lots of disposable income

• Despite many being furloughed
• Many opportunities for growth have been enjoyed by some

• Any external development that may hinder or prevent the business from achieving its objectives
  • New market entrants
  • Change in customer tastes or needs
  • Demographic change
  • Consolidation among buyers
  • New regulations
  • Economic downturn
  • Rise of low cost production abroad
  • Higher input prices
  • New substitute products
  • Competitive pressure
  • etc etc

• It is an analytical technique to support strategic decisions
• Strategy should be devised around strengths and opportunities
• The keywords are: match and convert

• Match strengths with opportunities
• Convert weaknesses into strengths

• Outdated technology
  • Acquire a competitor with leading technology
• Skills gap
  • Invest in training and more effective recruitment
• Overdependence on a single product
  • Diversify the product portfolio by entering new markets
• Poor quality
  • Invest in quality assurance

For every perceived threat, the same change presents an opportunity for a business.

• Strengths
  • Growing customer base
  • 433 stores across 25 countries
  • Recognised brand
  • Low-cost of storage and transport of products due to flatpak
  • Franchise system reduces administrative burden
  • Committed to being climate positive by 2030
  • Prices are low
• Weaknesses
  • Franchisee system decentralises the business
  • Requires work to setup their products
    • Many people are increasingly “lazy” and do not want to build their own furniture
    • IKEA may need to develop a solution to allow them to remain competitive
  • Operating across countries and franchisees means that IKEA will need a lot of work to keep a consistent experience
    • Different countries will have different demographics, looking for different items
• Opportunities
  • E-commerce is growing rapidly, so moving more to the internet could help IKEA’s performance
  • Diversification of products
  • Provide sustainable solutions
  • Chinese market growth
    • Enter other growing markets
  • Advertising/marketing could accelerate growth
    • Viral advertising could be highly effective
  • A simpler store layout could lead to more customers coming in
• Threats
  • Partnership with Alibaba could disrupt relations with western countries
  • Amazon and similar companies may outcompete them on price
  • Legislation changes could force them to ditch their current Chinese-backed e-commerce platform in countries like the USA
  • Competitors could rapidly arise in developing countries and other regions where IKEA does not currently operate
  • Lower quality products could discourage potential customers

Business