Chapter

Marketing Strategy

Chapter 4

SWOT: The Analysis of Strengths,

Weaknesses, Opportunities, and Threats

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Benefits of SWOT Analysis

SWOT analysis is simple in that it requires no extensive
training or technical skills to be used successfully, only an
understanding of the nature of the company and the industry
in which it operates.
SWOT analysis is flexible in that it can enhance the quality
of an organization's strategic planning even in the absence of
extensive marketing information systems.
SWOT analysis allows the marketing manager to integrate
and synthesize diverse information, both of a quantitative and
qualitative nature.
SWOT analysis can foster collaboration between managers
of different functional areas.

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Directives for a Productive SWOT Analysis

I
Stay Focused
Dont complete one generic analysis for the entire organization. In
most firms, there should be a series of analyses, each focusing on a
specific product/market combination.
Such a focus enables the manager to examine the specific mix of
product, price, promotion, and distribution presently being used in a
given market and to analyze the specific environmental issues that
are relevant to the particular product/market.
Separate product/market analyses can be combined to examine the
issues that are relevant for the entire strategic business unit, and
business unit analyses can be combined to create a complete SWOT
for the entire organization.
The only time a single SWOT would be appropriate is when an
organization has only one product/market combination.

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Directives for a Productive SWOT Analysis

II
Search Extensively for Competitors
The key is not to overlook any competitor, whether it be a current
rival or one on the horizon.
The firm should remain watchful for any current or potential direct
substitutes for its products. The firm must look for
Brand competitors
Product competitors
Generic competitors
Total budget competitors.

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Directives for a Productive SWOT Analysis

III
Collaborate with Other Functional Areas
The SWOT process should stimulate communication outside
normal channels.
The final outcome of a properly conducted SWOT analysis should
be an amalgam of information from many areas.
Managers in sales, advertising, production, research and
development, finance, customer service, inventory control, quality
control, and others areas should learn what other managers see as
the firm's strengths, weaknesses, opportunities, and threats.

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Directives for a Productive SWOT Analysis

IV
Examine Issues from the Customers' Perspective
Marketing planners must gauge the perceptions of each customer
segment that the firm is attempting to target
Examining every issue from the customers perspective includes
the firms internal customers: its employees
The following questions can assist in the analysis:
What do our customers (and noncustomers) believe about us as a
company?
What do our customers (and noncustomers) think of our product
quality, customer service, price and overall value, convenience, and
promotional messages in comparison to our competitors?
What is the relative importance of these issues, not as we see them,
but as our customers see them?

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Directives for a Productive SWOT Analysis

V
Separate Internal Issues from External Issues
Internal issues are the firm's strengths and weaknesses,
while external issues refer to opportunities and threats that
are present in the firm's external environments.
The key test to differentiate a strength or weakness from an
opportunity or threat is to ask, "Would this issue exist if the
firm did not exist?" If the answer is yes, the issue should be
classified as external.
Failure to understand the difference between internal and
external issues is one of the major reasons for a poorly
conducted SWOT analysis.

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Strengths and Weaknesses Analysis

Strengths and weaknesses exist inside the firm, or in key relationships between the
firm and its customers or other organizations (i.e.,channel members, suppliers,
alliance partners, etc.).
A strength is meaningful only when it is useful to satisfy a customer need. When this
is the case, that strength becomes a capability.
A customer-focused SWOT analysis can also uncover a firm's potential weaknesses.
While some weaknesses may be harmless, those that relate to specific customer
needs should be minimized if possible.
The role of the internal portion of SWOT is to determine where resources are
available or lacking so that strengths and weaknesses can be spotted.
The manager can then develop marketing strategies that match these strengths with
opportunities and thereby create new capabilities, which will then be part of
subsequent SWOT analyses.
The manager can also develop strategies to strengthen the firm's weaknesses, or find
ways to minimize the negative effects of these weaknesses.

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Opportunities and Threats Analysis

Ignoring the external environment is a mistake that can result in

an efficient organization that is no longer effective when changes
in the external environment impede the firm's ability to deliver
value to its targeted customer segments.
Such changes can occur in the rate of overall market growth and
in the competitive, economic, political/legal, technological, or
sociocultural environments.
Changes in the internal organizational structure can create internal
weaknesses that must be considered.

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SWOT-Driven Strategic Planning Should

Recognize
The assessment of the firm's strengths and weaknesses involves looking
beyond the firm's current products.
The successful achievement of the firm's goals and objectives depends
on its ability to transform key strengths into capabilities by matching
them with opportunities in the marketing environment.
Firms can convert weaknesses into strengths, and even capabilities, by
investing strategically in key areas (i.e., customer support, R&D,
promotion, employee training) and by linking key areas more effectively
(such as linking human resources to marketing).
Threats can often be converted into opportunities if the right resources
are available.

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SWOT Matrix
A method to appraise each strength, weakness, opportunity, and
threat to determine its total impact on the firm's marketing
efforts.
Its a four-cell array that managers can use to categorize
information at the conclusion of the SWOT analysis.
The manager should begin by assessing the magnitude (+3 = most
favorable & -3 = most unfavorable) and importance (3 = highest
importance & 1 lowest importance) of each element in the SWOT matrix.
These ratings should ideally be based on customers' perceptions rather
than those of the manager.
Those elements with the highest absolute numerical rankings should
receive the greatest attention

Find competitive advantages by matching strengths to

opportunities.

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Real vs. Perceived Capabilities and

Advantages
The problem lies in developing and maintaining capabilities and
competitive advantages that customers can easily understand, and
that solve specific customer needs.
Capabilities or competitive advantages that do not translate into
specific benefits for customers are of little use to a firm.
Many successful firms have developed capabilities and
competitive advantages based on one of three strategies:
Firms employing a strategy of operational excellence tend to focus on
efficiency of operations and processes.
Firms that focus on product leadership typically excel at technology and
product development.
Organizations that practice customer-intimacy work very hard to know
their customers and understand their needs better than the competition.

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Converting Weaknesses and Threats

Converting Threats into Opportunities
In some cases, conversion strategies depend on the investment of
additional resources, typically financial resources.
Finding new markets for a firm's products is a viable conversion strategy.
Identify major liabilities that occur when a weakness remains paired
with a threat.
Develop strategies that minimize those weaknesses or threats that cannot
be converted.
One strategy is to become a niche marketer.
Another strategy is to reposition the product.

Despite a company's best efforts, some weaknesses and threats simply

cannot be minimized or avoided. When this situation occurs, the firm is
said to have a limitation.
One way to deal with limitations is to diversify, thus reducing the risk of operating
solely within a single business unit or market.

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Keys to SWOT-Driven Strategic Planning

Look beyond the organizations products to assess its business
processes
Offer customers solutions rather than specific products
Match key strengths with opportunities to create capabilities
that can be developed into competitive advantages
Invest strategically in key areas to convert weaknesses into
strengths and threats into opportunities
Minimize the impact of limitations (unconverted weaknesses)
and liabilities (weaknesses paired with threats), especially those
that are obvious to customers or that put the organization at a
major competitive disadvantage