SWOT Analysis
The overall evaluation of a company’s strengths, weaknesses, opportunities, and threats is called SWOT analysis. It’s a way of monitoring the external and internal marketing environment.
The SWOT-explained
External Environment (Opportunity and Threat) Analysis
A business unit must monitor key macro environment forces and significant micro environment factors that affect its ability to earn profits.
It should track trends and important developments and any related opportunities and threats.Good marketing is the art of finding, developing, and profiting from these opportunities.
A marketing opportunity is an area of buyer need and interest that a company has a high probability of profitably satisfying.
There are three main sources of market opportunities.
- The first is to offer something that is in short supply.
- The second is to supply an existing product or service in a new or superior way. How? The problem detection method asks consumers for their suggestions, the ideal method has them imagine an ideal version of the product or service, and the consumption chain method asks them to chart their steps in acquiring, using, and disposing of a product.
- This last can often lead to a totally new product or service, which is the third main source of market opportunities.
Marketers need to be good at spotting opportunities created from:
- Converging industry trends.
These may open opportunities to introduce new hybrid products or services, the way cell phone manufacturers have released phones with Global Positioning Systems (GPS) and other features. - Making a buying process more convenient or efficient.
Mobil introduced Speed Pass, one of the first widely deployed RFID (radio-frequency identification) payment systems, to allow consumers to quickly and easily pay for gas at the pump. - Meeting the need for information and advice.
Angie’s List connects individuals with local home improvement and other services that have been reviewed by others. - Customizing an offering.
Timberland allows customers to choose colors for different parts of their boots, add initials or numbers, and select different stitching and embroidery. - Introducing a new capability.
Consumers can create and edit digital “iMovies” with the iMac and upload them to share with friends around the world. - Delivering products or services faster.
FedEx pioneered a way to deliver packages much more quickly than the U.S. Postal Service. - Offering a much lower price.
Pharmaceutical firms have created generic versions of brand-name drugs that often sell for less than the branded versions.
To evaluate opportunities, companies can use market opportunity analysis (MOA) and ask questions like:
- Can we articulate the benefits convincingly to the defined target market(s)?
- Can we locate the target market(s) and reach them with cost-effective media and trade channels?
- Does our company possess or have access to the critical capabilities and re-sources we need to deliver the customer benefits?
- Can we deliver the benefits better than any actual or potential competitors?
- Will the financial rate of return meet or exceed our required threshold for investment?
An environmental threat is a challenge posed by an unfavorable trend or development that, in the absence of defensive marketing action, would lead to lower sales or profit.
The company needs contingency plans to deal with major threats that have a high probability of occurrence and can seriously hurt the company.
Although minor threats can be ignored, the firm will want to carefully monitor emerging threats in case they grow more serious.
Internal Environment (Strengths and Weaknesses) Analysis
It’s one thing to find at-tractive opportunities and another to be able to take advantage of them. Each business needs to evaluate its internal strengths and weaknesses.
Clearly, the business doesn’t have to correct all its weaknesses, nor should it gloat about all its strengths. The big question is whether it should limit itself to those opportunities for which it possesses the required strengths or consider those that might require it to find or develop new strengths.
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