A SWOT analysis is a key part of the situational analysis in your marketing plan and helps you develop marketing strategies. A SWOT analysis is a collection of information about internal factors (your company’s strengths and weaknesses) and external factors (your industry’s opportunities and threats) which have or could have an impact on your business.
Internal factors can be directly managed by your business. To determine your strengths and weaknesses, look at your
resources, including land, equipment, knowledge, brand equity, and intellectual property;
functional areas, including management, operations, marketing, finances, and human resources;
organizational culture; and
value chain activities.
It can sometimes be difficult to determine whether something is a strength, a weakness, or neither.
You should always consider various internal factors in relation to your competitors. If you have a 20% profit margin, you might automatically assume that it’s a strength. If your competitors, however, have a 30% profit margin, then your profit margin may be a weakness.
You can also determine whether something is a strength or weakness by asking questions to determine whether it exhibits VRIO characteristics. If a resource is not valuable, then it’s a competitive disadvantage, or a weakness, for your company. A resource that is valuable but not rare is a competitive parity and neither a strength nor a weakness. If a resource is valuable and rare, but easy for your competitors to imitate, then it’s a short-term strength for your company. If your resource is valuable, rare, difficult to imitate, and your company is organized to capture the value, then the resource is a long-term strength.
Your company’s strengths give you an advantage over your competitors. To begin thinking about your strengths, ask yourself the following questions:
What does my business do well?
What do my customers say I do well?
Which resources do I have?
What advantages do I have over my competition?
What unique resources do I have access to?
Your company’s weaknesses can be harmful if your competitors use them against you. To begin thinking about your weaknesses, ask yourself the following questions:
Which areas can I improve?
What areas do my competitors handle better than I do?
Where do I lack knowledge?
External factors are outside your company’s control and include political, economic, social, environmental, and legal factors. They also include changes in technology, your market, and your industry.
Opportunities are favorable situations that can give your company an advantage. Questions to consider when thinking about opportunities for your company include:
What trends in the marketplace favor my company?
What is my marketplace missing?
Where are my competitors failing to satisfy my target market?
Threats are unfavorable situations that can harm your company. When considering whether something is a threat to your company, consider the following questions:
What trends in the marketplace are working against my company?
How well are my competitors’ products doing in the market?
Can I keep up with changes in technology?
Are government regulations going to negatively affect me?
Prioritizing SWOT Factors
After you’ve compiled a list of three to five factors in each category, you should prioritize each factor to determine which factors will influence your company the most.
Determine how important each factor is and assign a value between 0.01 (unimportant) and 1.0 (extremely important) to each strength and weakness. Be careful about assigning 1.0 to a strength or weakness, however, because when you add the importance values of all your strengths and weaknesses, it should be equal to 1.0.
After you’ve assigned an importance value to each factor, you’ll assign a rating between 1 and 3. If the factor is a minor strength or weakness, you’ll assign a value of 1; if the factor is a major strength or weakness, assign a 3.
To determine the score, multiply each factor’s importance value by its rating. When developing your marketing strategy, you’ll want to focus on the strengths and weaknesses with the highest scores.
Opportunities & Threats
Prioritizing your opportunities and threats is like prioritizing your strengths and weaknesses. You’ll consider the importance and score of each factor, but instead of assigning a rating, you’ll assign a probability value.
If an opportunity or threat is likely to impact your company, assign a high probability of 3; if it’s unlikely to impact your company, assign a low probability of 1.
To determine the score of each factor, multiply the importance value by the probability.
How to Use Your SWOT Analysis
After you’ve prioritized your strengths, weaknesses, opportunities, and threats, you can use your analysis to develop marketing strategies for your company.
Opportunity-Strength Strategies use your strengths to exploit opportunities.
Opportunity-Weakness Strategies exploit opportunities to overcome your weaknesses.
Threat-Strength Strategies use your strengths to avoid threats.
Threat-Weakness Strategies minimize your weaknesses and avoid threats.