Welcome to the SWOT Analysis Video.
The APICS Dictionary 15th edition defines SWOT analysis as “an analysis of the strengths,
weaknesses, opportunities, and threats of and to an organization.”
The SWOT analysis is used to assess an organization’s ability to implement a strategy and defend
itself against competition.
During SWOT analysis, you will look both internally and externally.
Strengths and weakness are internal to the organization, while opportunities and threats
are external.
Strengths the organization currently possesses.
Strengths often include an organization’s core process and its core competencies.
Inherent weaknesses would prevent the organization from properly implementing their
goals or excelling.
Weaknesses can be competitive liabilities.
They may be things that an organization does poorly or things it cannot do at all.
Weaknesses may be insufficient resources—tangible resources, such as production capacity,
or intangible resources, such as a divisive or unethical organizational culture.
Weaknesses may also be missing or deficient capabilities.
Opportunities are conditions in the external environment that could convey a competitive
advantage to the organization.
This can include opportunities that already exist, or additional opportunities that would
be available to the organization if they pursued a particular path.
Threats can be environmental factors that will damage the organization’s current competitiveness
or profitability, such as the current political climate or legal changes.
They may be risks that can limit the success of a planned strategic action.
New threats could arise as a result of taking a particular step.
Let’s walk through an example of a SWOT analysis for a baby food company.
Our baby food company is based in the United Kingdom, but distributes throughout Europe.
They have been in business for over 50 years.
One of the biggest challenges for our company is the continually changing customer base
and consumer values.
Our company is contemplating a shift to producing products with 100% organic ingredients.
This strategy has been chosen instead of adding an organic product-line because research shows
that an ethical shift is appreciated by consumers.
After completing a SWOT analysis, we will have a better idea of whether or not this
strategy would be beneficial for our company.
Strengths: Our brand name and customer loyalty is strong.
We have strong networks for distribution and manufacturing.
We have a strong customer service team and market research department.
We have cash on hand to cover the sales ramp-up.
Weaknesses: Our marketing has not changed in recent years, instead relying on existing brand recognition.
We have limited presence in online retail environments.
We have a weak understanding of the evaluation process needed for organic suppliers.
Our supplier network is not currently focused on organic produce because of a limited shelf-life,
local regulations on fresh food ingredients, and other special conditions.
Opportunities: By switching to 100% organic, we would be the first major baby food company to make
this commitment as there are no companies currently committed to offering 100% organic
selections.
A growing number of families are seeking 100% organic food for their children.
We will also have the opportunity to serve new geographic regions such as China.
A growing number of consumers care about the mission of the company when purchasing their
goods.
Our profit margin could increase with increased pricing in our products.
Threats: Organic produce is more expensive than traditional produce which would force higher prices or
lower margins.
Birthrates are decreasing Supplier misrepresentation of non-organic
products as organic. Potential competitors in the market have stronger
online marketing strategies Strengths may allow an organization to act
on opportunities quickly, and may be a way to offset the threats as well.
Uncorrected weaknesses increase an organization’s vulnerability to external threats.
Opportunities can be realized as advantages or strengths if the organization has the resources
and capabilities to act on the opportunity.
Acting on opportunities generally requires building strengths and correcting weaknesses.
It may also create the potential for new threats that must be evaluated.
An organization becomes more vulnerable to external threats when it does not build its
competencies, correct its weakness, and commit to regular scanning of its internal and external
environments.
Threats are not always something a company can address, but understanding the threat
puts them in a stronger position to prepare for its reality.
The findings of a SWOT analysis can improve the choice, development, and execution of
a business strategy: Potential strategies must be checked for alignment
with the organization’s strengths.
Does the organization have the resources, capabilities, and competencies required to
execute the strategy?
Does the organization possess the strengths to seize this opportunity?
Our company has the maturity, brand recognition, and strong networks to allow us to implement
a 100% organic policy quickly and nearly seamlessly.
How can the organization address their weaknesses if this potential strategy is realized in
order to increase the chances for strategic success?
In our case, we must be sure that our strategy includes a fresh marketing and e-commerce
strategy which allows us to reach our target market quickly and easily.
We will also need to ensure we employ a regulatory team experienced in vetting organic growers.
Additionally, we will need to negotiate with new organic suppliers to ensure we have enough
organic produce.
How likely are the threats to the organization?
If they occur, what will the business impact be?
The threat of increased produce prices and environmental threats from the weather will
always be present and possible, but our economies of scale will help us to mitigate this threat.
We can also negotiate prices to our advantage as much as we can, and create strong relationships
with our suppliers.
Research shows consumers are willing to pay higher prices for organic foods, so we should
be able to mitigate our costs with higher prices.
A SWOT analysis can focus organizations
on opportunities that take advantage of competitive strengths.
It can advise on resources and capabilities that will require further development or alternately
steer the organization away from situations where it is at a competitive disadvantage.
A SWOT analysis can also point out negative outcomes that the organization must be able
to withstand, avoid, or prepare for.
A company could also seek out cooperation as an option if they seek an opportunity but
are not strong enough on their own, they can seek a partner and split the profit.
In this scenario, we feel that our strengths allow us to seize this opportunity successfully
as long as we take action to reduce our weaknesses and mitigate our threats.
Thank you for watching this video, and best of luck on your studies!