This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/business-document/SWOT-Analysis-124 SWOT (Strengths Weaknesses Opportunities Threats) Analysis is a consulting framework used to form a situational analysis of a company's internal strengths and weaknesses, and its external opportunities and threats.

1. 0
SWOT analysis—introduction
What It IsWhat It Is
• SWOT analysis is a situational analysis of the firm’s internal
strengths and weaknesses, and its external opportunities and
threats
• Strengths and Weaknesses are defined as:
• Characteristics of the enterprise or business processes, the
operational assets, and liabilities
• Tangible assets, such as an extensive distribution network
• Opportunities and Threats are defined as:
• Possibilities, constraints, and other factors that assist or hinder
the ability of an organization to achieve its goals
• External, environmental factors that can have positive or negative
effects for the enterprise, depending on its strengths and
weaknesses
• The underlying theory is that assessment of competitive position
should combine both an external and an internal analysis:
• SWOT analysis is a situational analysis of the firm’s internal
strengths and weaknesses, and its external opportunities and
threats
• Strengths and Weaknesses are defined as:
• Characteristics of the enterprise or business processes, the
operational assets, and liabilities
• Tangible assets, such as an extensive distribution network
• Opportunities and Threats are defined as:
• Possibilities, constraints, and other factors that assist or hinder
the ability of an organization to achieve its goals
• External, environmental factors that can have positive or negative
effects for the enterprise, depending on its strengths and
weaknesses
• The underlying theory is that assessment of competitive position
should combine both an external and an internal analysis:
Why We Use ItWhy We Use It
• Ascertain a company’s competitive position.• Ascertain a company’s competitive position.
Strengths & LimitationsStrengths & Limitations
• Benefits
• Provides a holistic, easily understood and applied structure for
strategic analyses
• Can be conducted at several levels of detail (e.g. “icebreaker”
versus structured framework for performing detailed competitor
analysis)
• Useful as input to strategy implementation
• Defining critical success factors and core competencies for a
client
• Prioritizing strategic alternatives
• Developing appropriate measures for a balanced scorecard
• Limitations
• Primary risk in using SWOT analysis is insufficient information
• Industry expertise required or key opportunities (threats) could
be missed
• Important data is often difficult to acquire even if the individuals
performing analysis are “asking the right questions”
• The data collected is often in a “raw” form, with no trends
identified or conclusions drawn
• Interviews with industry experts and client personnel often
result in unsubstantiated opinion and conjecture
• Analyst should always seek to verify data collected by seeking
support from a second or third source and “triangulating” on
result
• Benefits
• Provides a holistic, easily understood and applied structure for
strategic analyses
• Can be conducted at several levels of detail (e.g. “icebreaker”
versus structured framework for performing detailed competitor
analysis)
• Useful as input to strategy implementation
• Defining critical success factors and core competencies for a
client
• Prioritizing strategic alternatives
• Developing appropriate measures for a balanced scorecard
• Limitations
• Primary risk in using SWOT analysis is insufficient information
• Industry expertise required or key opportunities (threats) could
be missed
• Important data is often difficult to acquire even if the individuals
performing analysis are “asking the right questions”
• The data collected is often in a “raw” form, with no trends
identified or conclusions drawn
• Interviews with industry experts and client personnel often
result in unsubstantiated opinion and conjecture
• Analyst should always seek to verify data collected by seeking
support from a second or third source and “triangulating” on
result
Internal
Assessment
External
Assessment
– Weaknesses
– Strengths
– Opportunities
– Threats
Strategic
Choices

2. 3
The First Step Is To Define the Level and Scope of the SWOT
Analysis
Step 1: Determine the level and scope of the SWOT analysis
Analyst should determine level of detail required, and form of end deliverable
desired, at the outset of analysis
• Will deliverable be a text-based summary or quantitative analysis of market growth and
competitor costs ?
• This will help structure data collection and avoid non-value added work
• Level of detail is limited by time available to perform analysis
− Data collection requires significant time and resources
− Text-based trend summaries are the easiest to do, quantitative analyses are the most difficult
Scope of analysis should be determined to ensure data collection is efficient
• To focus analysis, markets of interest should be defined and boundaries should be set
for those markets
• Within selected of markets, primary competitors should be identified
• Scope of markets and competitors to be analyzed is defined by the time and resources
available to perform the analysis
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3. 6
Competitor Trend Analysis Helps To Pinpoint External
Threats
Competitor Trends
Identify the number, size, consolidation, vertical integration and rivalry of
competitors in the markets under analysis
For each competitor, focus on the relevant performance characteristics:
• Production capabilities (technologies)
• Capacity utilization
• Cost structure
• Strategy (low cost versus differentiation)
• Stated versus implied intentions
• Joint venture/alliance strategies
• “Reaction profile”
Limit number of competitors analysed to ensure necessary level of detail
• Analysis should focus only on relevant competitors*
• Competitors should be grouped in some way to scale effort down (representative
competitor should be selected for more detailed analysis)
* “Relevant” competitors should be identified by market share, growth rate, profitability, product quality, marketing spending, degree of
vertical integration, or cost structure. The goal would be to identify representative sample of competitors with differing strategies and
performance to determine reasons for their success or weakness.
This document is a partial preview. Full document download can be found on Flevy:
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4. 9
The Trend Summary Matrix Helps Summarize and Verify
External Opportunities and Threats
NOTE: Paper merchants play a facilitative role in the paper industry value chain, buying from the paper manufacturers and selling to paper retail
outlets and office-supply stores.
PAPER MERCHANT INDUSTRY
Trend Summary Matrix
# KEY
MARKET
TRENDS
EVIDENCE or
OBSERVATIONS
for TRENDS
IMPLICATIONS
Opportunities Threats
STRATEGIC
HYPOTHESES
(SO WHAT?) &
TREND LINK
COMPETITIVE
ADVANTAGE GAINED?
1. Historically
fragmented,
industry is
beginning to
consolidate and
grow primarily
through
acquisitions.
The top 3 competitors
combined have a 23%
market share.
Unisource acquired 10
companies in the first
6 months of 1996.
O - Consolidate
industry by buying
smaller companies
O - Companies w
strong financial
positions can gain
market share
T - Competitors
can also try to
consolidate the
industry.
T - It may be
difficult to enter a
segment, channel
or, geographic
market if
relationships with
customers are
captured by
competitors.
1. Access to customers is
critical to business success
2. Merchants should consider
ways to “lock in”
customers.
Based on the traditional
paper supply chain model ,
consolidation makes
merchants a stronger
gatekeeper to suppliers and
customers.
Ability to consolidate is
primarily dictated by one’s
access to capital.
Access to capital is not a
barrier for most large paper
merchants who are owned by
large paper manufacturers.
May gain advantage if able to
capture particular customer
segment, channel or geography
first.
2. Customers have
decreasing
amounts of brand
loyalty towards
paper merchants
Customers identify
w/sales reps and not
company
O - Define 80% of
customer base as
target accounts and
develop strong ties
to the company
(EDI, Special
buying programs,
special customer
service incentives)
T - If Sales Reps
leave for fear of
losing relationship
control to
merchant, they
have the power to
take the account
with them.
Merchants should consider
ways to “lock in”
customers.
Use a target account strategy
to broaden scope of product
offerings for national and
international customers
Strengthen relationship with
customer, enhance company
name equity.
Customers will recognize
brand equity
3. Merchants are
looking for
opportunities to
decrease the
commodity nature
of profits.
Paper Industry Sales
1994: $ 94 B
1995: $108 B
1996E: $104B
2000F: $137B
Average profit margin
is 2-4%
O - Merchants have
established
relationships with
customer purchaser.
Exploit for
opportunities in
other products (i.e.
industrial & office
supplies, furniture)
T - Limited
control over timing
of downturns in
paper market.
1. Access to customers is
critical to business success
2. Merchants should consider
ways to “lock in”
customers.
Diversify product line for
current customers to include
products that are not
correlated to paper market.
Will stabilize profits and cash
flow by offsetting paper
market downturns.
Provides ability manage
product portfolio by
profitability and cash flow by
product and channel (retail
channel and stationary product
segment).
This document is a partial preview. Full document download can be found on Flevy:
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5. 12
Client Performance on Each Critical Success Factor Should
Be Rated
Client’s strengths and weaknesses should be determined by rating the
client relative to each competitor on the critical success factors for that
external opportunity (e.g market entry) or threat (potential entrants)
• Analysis should be performed by creating matrix with critical success factors on
vertical axis and competitors on horizontal axis
• Rating scheme used should be “+” (client better than competitor), “-” (client worse than
competitor), or “0” (client the same as competitor)
• Level of analytical detail pursued when completing matrix is dependent on time and
resources available
• Example in next slide clarifies this discussion
This document is a partial preview. Full document download can be found on Flevy:
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6. 15
A Sample Strategic Hypothesis Develop Matrix Is Presented
Below
Strategic Hypothesis Development Matrix
Key Paper Merchant Industry Trends
Industry Consolidating
Customer Loyalty
Decreasing
Product Differentiation
Increasing
Critical Success Factors
Opportunity:
Acquire
Comp. A
Threat:
Costs Not
Competitive
Opportunity:
Acquire New
Customers
Threat: Sales
Reps Take
Customers
Opportunity:
Product Line
Extension
Threat: Over-
Extend
Product Line Overall
Strengths:
Brand / Product Image + + + + + 5
Breadth of Product Line + + 2
Advertising / Promo Skills + + + + + + 6
Management Skills + + + 3
Leadership + + 2
Organization Structure + 1
Weaknesses:
Manufacturing Cost Position - - - -3
Production Technology - - - -3
Flexible Facilities - - - -3
Degree of Vertical Integration - - - -3
Strategic Focus 1 1 2 2 -1 2 -----
NOTE: Client strengths are CSFs with largest number of positive entries (e.g. advertising , brand image). Weaknesses are CSFs with
largest number of negative entries. In this case, all CSFs have equal importance. Possible addition to matrix would be to include
“importance weights” to differentiate the critical success factors.
This document is a partial preview. Full document download can be found on Flevy:
http://flevy.com/browse/document/swot-analysis-124

7. 1
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