The “analysis of strengths, weaknesses, opportunities, and threats” – SWOT for short – is an instrument of strategic management. Companies rely on SWOT to determine their own position among the competition and develop a business strategy. This is referred to as positional analysis.

With SWOT analysis, external, market-related opportunities and risks are compared with the company’s internal strengths and weaknesses. The goal is to provide strategic guidance for the business plan.

A SWOT analysis unfolds in three steps:
1. Creation of a risk-reward catalog (environmental analysis)
2. Creation of a strength-weakness profile (company analysis)
3. Combination of environmental and company analyses (SWOT matrix)

Each step of the SWOT analysis is based on detailed examinations, for which marketing experts have developed various approaches. In the following, we present the most popular models and methods for internal and external company analysis, and show how to create a SWOT matrix based on the gathered information. These serve as the basis for the strategic alignment of your company or individual areas of business.

Step 1: environmental analysis

In the first step of a SWOT analysis, businesses perform an environmental analysis: The organization’s surroundings are examined from a strategic point of view.
Every company is part of a branch. The branch is, in turn, integrated into an environment that has a direct impact on the company through political, economic, technological, social, and ecological developments. The goal of the environmental analysis is to determine all relevant opportunities and risks that result from environmental factors and could have an influence on the company’s success.

The difference between the micro environment and macro environment is central to strategic marketing. Environmental analyses are thus often limited to these levels.
The micro environment consists of a company’s industry, including all stakeholders. It’s different from the macro environment mainly in that it can influenced using relationship management with relevant stakeholders, and so can be controlled to a certain degree.

The most important instruments for analyzing the micro environment are:
• The stakeholder analysis and
• The industry structure analysis

Step 2: company analysis

The second step of the SWOT analysis is the company analysis. This helps those responsible to assess the performance of the organization. The company analysis takes place in the form of a three-step strengths and weaknesses analysis. These include:

– The creation of a resource profile
– The analysis of relevant competition
– The drafting of a strengths and weaknesses profile

The competition analysis
Competition analysis is an examination of the most relevant competitors in a sales market. The analysis is part of the competitive intelligence, or the systematic gathering and appraising of information about competitors, competing products, market developments, industries, patents, technological developments, and customer expectations.

Information about competitor companies is not as easy to obtain as data about your own company, and so is almost always available on a smaller scale.

The strengths and weaknesses profile
The strengths and weaknesses profile represents the strengths and weaknesses of the company in relation to the competition. Such benchmarking makes it possible to identify specific competencies. The purpose of this is to identify competition benefits as well as drawbacks.
This strengths and weaknesses profile of the company analysis goes together with the risk-reward catalog of the environmental analysis in the SWOT matrix.

Step 3: combination of environmental and company analyses

The third step of the SWOT analysis includes a comparison of external opportunities and risks as well as the internal strengths and weaknesses. In this step of analysis, combination possibilities that deduce measures for strategic management are in the foreground. They’re differentiated by four dimensions.

SO (Strengths – Opportunities): The combination of internal strengths with external opportunities helps companies calculate external chances with which you can use environmental opportunities for corporate success. Matching strategies can be developed in the SO dimension that can be used to grow strengths.

ST (Strengths – Threats): A combination of internal strengths with external risks should reveal which previously existing strengths could minimize the risk of environmental threats. The goal of the ST dimension: To develop neutralization strategies for protecting the company against risks.

WO (Weaknesses – Opportunities): Using a comparison of internal weaknesses and external opportunities, companies try to identify weaknesses that can create opportunities for the business. The goal of dimension WO: To develop conversion strategies for strengthening the previously weak areas within the company.

WT (Weaknesses – Threats): Through the combination of internal weaknesses and external risks, companies identify areas in which there’s an acute need for action to protect against possible damage. The goal of the WT dimension: To develop defense strategies for minimizing risks and avert threats.

Critical consideration of the SWOT analysis
The SWOT analysis is an established instrument of strategic marketing. Companies should be mindful though that this type of position analysis is a subjective approach. Selection of the success criteria as well as their weighting and evaluation in the context of internal analysis take place according to a subjective viewpoint. The significance of the company analysis also depends to a large extent on the accessibility and quality of the information about customers, competitors, and market developments. The same goes for sources that permit assumptions about changes in the company environment and the resulting opportunities and threats.

Share This

Share This

Share this post with your friends!