SWAT Analysis

Mastering the Art of SWOT Analysis
Mastering the Art of SWOT

Analysis
By Nada Nasri
Copyright © 2024 Nada Nasri. All rights reserved.

Helpful Harmful
Internal Strengths Weaknesses
External Opportunities Threats
Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri


SWOT Analysis: Benefits and Limitations
SWOT (Strengths, Weaknesses, Opportunities, Threats) is a widely recognized tool due to its simplicity and its ability to focus on
critical issues affecting a firm. The primary purpose of SWOT is to identify internal strengths and weaknesses and relate them to
external opportunities and threats in a specific situation.
Benefits of SWOT Analysis
SWOT analysis offers several key advantages:

1.Simplicity and Practicality: It is easy to conduct and apply.
2.Clarity: The framework is straightforward and easy to understand.
3.Focused Analysis: It highlights the key internal and external factors impacting the organization.
4.Goal Setting: It helps identify and align future objectives.
5.Foundation for Further Analysis: It serves as a starting point for deeper strategic evaluation.
Limitations of SWOT Analysis
Despite its advantages, SWOT analysis has faced criticism from managers and academics, with some dismissing it as a superficial
tool. The primary shortcomings include:
1.Lengthy and Unfocused Lists: Excessively long lists of strengths, weaknesses, opportunities, and threats dilute the analysis.
2.Lack of Prioritization: It does not rank factors by importance or impact.
3.Overly General Factors: Elements are often described in vague or broad terms.
4.Subjectivity: Many factors are based on opinions rather than objective data.
5.Ambiguity in Classification: There is no standard method to clearly distinguish between strengths, weaknesses,
opportunities, and threats.
3

How to Perform a SWOT Analysis
SWOT analysis can be conducted by an individual or a group of team members responsible for
evaluating the company's situation. The process is straightforward and consists of a few basic steps:
1.List the Firm's Key Strengths and Weaknesses
2.Identify Opportunities and Threats


Strengths and Weaknesses
Strengths and weaknesses are internal factors within the firm. To identify strengths, consider what
your company does better or what valuable assets it has compared to competitors. For
weaknesses, focus on areas where improvement is needed to match or surpass competitors.
Where to Look for Strengths and Weaknesses
Strengths and weaknesses are typically identified by analyzing the firm’s internal environment. To
find these, managers should focus on:
•Resources: such as land, equipment, knowledge, brand equity, intellectual property, etc.
•Core Competencies
•Capabilities
•Functional Areas: management, operations, marketing, finances, human resources, and R&D
•Organizational Culture
•Value Chain Activities


Strength or a Weakness?
Some factors within the organization may be both strengths and weaknesses. For example, a
company’s organizational structure could be an asset or a liability depending on how well it
supports business operations. To determine whether something is a strength or a weakness, use
these methods:
•Clear Definition: Broadly described factors can be both strengths and weaknesses. For
instance, "brand image" may be a weakness if the company has a poor brand but can be a
strength if the brand is highly valuable.
•Benchmarking: Compare factors with competitors. A 17% profit margin might be strong in
general but could be a weakness compared to competitors' average of 20%.
•VRIO Framework: A resource is a strength if it is valuable, rare, and difficult to imitate. If it
doesn’t meet these criteria, it may not provide a strategic advantage.


Where to Look for Opportunities and Threats
Opportunities and threats arise from external factors and often result from changes in the
macro environment, the industry, or competitors' actions.
•PESTEL Analysis: This tool helps identify external forces—political, economic, social,
technological, environmental, and legal—that can create opportunities or threats.
•Competition: Competitors' actions, such as changes in strategies or the introduction of new
products, can present new opportunities or threats.
•Market Changes: Shifts in the market, such as new segments or geographical regions, can
provide new opportunities or threats. Technological advancements can also make previously
niche markets profitable.
Opportunity or Threat?
Many external factors can be both opportunities and threats depending on the circumstances.
For example, exchange rate fluctuations can either increase or reduce profits from exports. In
such cases, it’s essential to gather reliable external information and make informed predictions
based on trends and forecasts.
7

Guidelines for a Successful SWOT Analysis
To create an effective SWOT analysis, follow these guidelines to improve accuracy and address its
limitations:
1.Identify Factors Relative to Competitors:

Assess each factor in comparison to competitors to clearly determine if it's a strength or weakness.
2.Limit to 3-5 Items per Category:
Keep the list concise by including 3-5 relevant items in each category. This prevents overly short or
excessively long lists.
3.Ensure Items Are Clearly Defined and Specific:
Provide specific details. For example, instead of simply stating "brand image," specify "brand image valued
at $10 billion, the most valuable brand in the market."
4.Use Facts, Not Opinions:
Base your analysis on factual data and external information or consult an unbiased source for clarity.
5.Focus on Action-Oriented Factors:
Identify actionable factors. For example, "slow introduction of new products" is an actionable weakness that
points to a specific area of improvement.
These steps will enhance the quality and utility of your SWOT analysis, making it a more valuable tool for
8
decision-making.

Mastering the Art of SWOT Analysis SWOT analysis basic example
Strengths Action Plan/Focus Area Weaknesses Action Plan/Focus Area
Increase R&D investments, explore new
1. Second most valuable brand in the Leverage brand value for strategic 1. Investments in R&D are below the
collaborations, and benchmark against
world, valued at $76 billion marketing campaigns and partnerships. industry average
industry leaders.
2. Diversified income (5 different
Maintain the income diversity strategy, Focus on improving cost management,
brands earning more than $4 billion 2. Very low or zero profit margins
cross-promote brands. pricing strategy, and product mix.
each)
Launch a customer service improvement
3. Strong patents portfolio (15,000 Utilize patents for licensing opportunities,
3. Poor customer service program, invest in training and
patents) strategic alliances.
technology.
Develop an employee retention plan with
4. Investments in R&D reaching 4 billion Continue strengthening R&D, prioritize
4. High employee turnover improved benefits and career
a year breakthrough innovations.
development programs.
Explore new acquisitions to enhance Identify and reduce inefficiencies, optimize
5. Competent in mergers & acquisitions 5. High-cost structure
portfolio and market reach. supply chain, and streamline operations.
Use reserves for strategic investments, Evaluate and consolidate underperforming

6. Have access to cheap cash reserves 6. Weak brand portfolio
acquisitions, or debt reduction. brands, reinvest in strong brands.
Revise company culture to encourage
7. Effective corporate social Continue CSR initiatives to strengthen 7. Rigid (bureaucratic) organizational
agility, collaboration, and faster decision-
responsibility (CSR) projects reputation and brand loyalty. culture
making.
Create a debt reduction plan, prioritize
Expand localized products in emerging
8. Localized products 8. High debt level ($3 billion) financial stability and cost-saving
markets, leverage customization.
measures.
Consolidate brand portfolio, focus on high-
Continue investing in workforce 9. Brand dilution (the firm has too
9. Highly skilled workforce performing brands and remove weak
development and retention. many brands)
ones.
Expand presence through partnerships,
10. Economies of scale or economies of Leverage economies of scale for cost 10. Poor presence in the world’s largest
acquisitions, or targeted marketing in key
scope reduction and market expansion. markets
global markets.
9

Opportunities Action Plan/Focus Area Threats Action Plan/Focus Area

Prepare for higher taxes by optimizing
1. Market growth for the main firm’s Capitalize on growth by increasing 1. Corporate tax may increase from
operations and exploring tax-saving
product production and marketing efforts. 20% to 22% in 2013
strategies.
2. Growing demand for renewable Invest in renewable energy products, Balance rising wages with productivity
2. Rising pay levels
energy innovate to meet demand. increases and invest in automation.
3. New technology that would drive Fast-track development and Seek alternative suppliers, improve
production costs by 20% is in integration of the technology to 3. Rising raw material prices negotiation strategies, and explore
development reduce costs. material substitutes.
Differentiate through innovation,
Leverage new trade agreements and
4. Our country’s accession to the EU 4. Intense competition customer service, and quality
access to the European market.
improvements.
5. The market is expected to grow by Focus on diversification, explore new
Adapt products/services to align with
5. Changing customer habits only 1% next year, indicating market markets, and improve existing product
evolving consumer preferences.
saturation offerings.
Invest in energy-efficient technologies
Increase product offerings targeting
6. Disposable income level will increase 6. Increasing fuel prices and optimize logistics to reduce fuel
higher-income segments.
dependency.
Take advantage of government Develop products and services tailored
7. Government’s incentives for ‘specific’
incentives to expand in targeted 7. Aging population for the aging demographic, focus on
industry
industries. healthcare solutions.
Ensure compliance with
8. The economy is expected to grow by Expand operations to capture market 8. Stricter laws regulating
environmental regulations, invest in
4% next year share during economic growth. environmental pollution
green technologies.
Strengthen e-commerce strategy, Enhance legal protections, ensure
9. Growing number of people buying
improve online presence and 9. Lawsuits against the company compliance, and improve customer
online
platforms. relations to reduce legal risks.
Implement hedging strategies,
Leverage low interest rates to secure
monitor exchange rates, and adjust
10. Interest rates falling to 1% financing for expansion and 10. Currency fluctuations
pricing strategies for international
innovation.
markets.
10


Advanced SWOT Analysis
In the advanced SWOT analysis, the goal is to overcome the limitations of a basic SWOT analysis,
particularly the lack of prioritization of factors. By evaluating the significance of each factor,
businesses can focus on the most impactful strengths, weaknesses, opportunities, and threats. The
key steps for performing an advanced SWOT analysis are outlined below.
Steps for Advanced SWOT Analysis
Step 1: Identify Strengths, Weaknesses, Opportunities, and Threats

This step involves recognizing and listing the strengths, weaknesses, opportunities, and threats
that a business faces. It should follow the process outlined in the basic SWOT analysis.
Step 2: Prioritize Factors
The next step involves assigning a level of priority to each factor based on its significance and
impact on the business. This process helps ensure that important factors are given due attention.
11


Prioritizing Strengths and Weaknesses
Strengths and weaknesses are evaluated on the following categories:
1.Importance:
1. Assign a number from 0.01 (not important) to 1.0 (very important) to each strength or
weakness based on how crucial it is to the organization's industry.
2. The sum of all weights for strengths and weaknesses combined should equal 1.0.
2.Rating:
1. Assign a score from 1 to 3 to each factor:
1. 1: Minor strength/weakness
2. 2: Moderate strength/weakness
3. 3: Major strength/weakness
3.Score:
1. The score is the result of Importance × Rating.
2. This helps prioritize the strengths and weaknesses. Focus on the most important strengths
and address the most critical weaknesses.
12


Prioritizing Opportunities and Threats
Opportunities and threats are evaluated on:

1.Importance:
1. Assign a number from 0.01 (low impact) to 1.0 (very high impact) based on how much
the external factor can influence the business.
2. The sum of all weights for opportunities and threats should equal 1.0.
2.Probability:
1. Assign a score from 1 to 3 to each opportunity or threat:
1. 1: Low probability of occurrence
2. 2: Medium probability
3. 3: High probability
3.Score:
1. The score is calculated by multiplying Importance × Probability.
2. This helps prioritize the opportunities and threats based on their potential impact.
13

Advanced SWOT Analysis of Company X
In this example, we adopt the previous SWOT factors and add prioritization through Importance, Rating, and Score. The cells
highlighted below show the most significant factors affecting the company, based on the scoring.
Strength Importance Rating Score (Importance × Rating)
Second most valuable brand in the world 0.03 1 0.03
Diversified income 0.01 2 0.02
Strong patents portfolio (15,000 patents) 0.15 3 0.45 (highlighted)
Investments in R&D reaching 4 billion a year 0.10 2 0.20
Competent in mergers & acquisitions 0.05 3 0.15
Access to cheap cash reserves 0.02 1 0.02
Effective corporate social responsibility (CSR) projects 0.03 1 0.03
Localized products 0.01 1 0.01
Highly skilled workforce 0.08 2 0.16
Economies of scale/economies of scope 0.02 3 0.06
•The most important strength for Company X is its strong patents portfolio with a score of 0.45, which is the highest score among the listed strengths.
This factor should be prioritized because it provides a clear strategic advantage.
•Investments in R&D are also important, contributing a score of 0.20, highlighting the company’s focus on innovation and long-term growth.
•The company's highly skilled workforce and competence in mergers & acquisitions are also strengths to consider, with scores of 0.16 and 0.15,
respectively.
Next Steps:
•Leverage the strong patent portfolio for further market expansion and competitive advantage.
•Enhance R&D investments to continue developing new technologies and products.
•Focus on retaining a highly skilled workforce to maintain operational excellence.
14

Advanced SWOT Analysis of Company X (Continued)
The following table expands the analysis by including Weaknesses, Opportunities, and Threats, with their respective Importance,
Rating (for weaknesses), Probability (for opportunities and threats), and Score. The most significant factors are highlighted.
Weakness Importance Rating Score (Importance × Rating)

Investments in R&D are below the industry average 0.03 2 0.06
Very low or zero profit margins 0.08 2 0.24
Poor customer services 0.10 2 0.20
High employee turnover 0.05 2 0.10
High-cost structure 0.03 3 0.09
Weak brand portfolio 0.02 1 0.02
Bureaucratic organizational culture 0.03 1 0.03
High debt level ($3 billion) 0.03 1 0.03
Brand dilution (the firm has too many brands) 0.01 1 0.01
Poor presence in the world’s largest markets 0.12 2 0.24
•Very low or zero profit margins and Poor presence in the world’s largest markets are the most significant weaknesses, with scores of
0.24 each. These weaknesses should be prioritized for improvement, as they have a high impact on the company’s financial performance
and growth potential.
•Poor customer services and investments in R&D below the industry average should also be addressed, but they have slightly lower
priority compared to profit margins and market presence.
Next Steps (Weaknesses):

•Focus on improving profit margins through cost-cutting measures and increasing operational efficiency.
•Expand market presence in key global markets to boost revenue growth.
15 •Enhance customer service and increase R&D investment to maintain competitiveness.


Importan
pportunity Probability Score (Importance × Probability)
ce
Market growth for the main business product 0.10 2 0.20
Growing demand for renewable energy 0.01 1 0.01

New technology is in development 0.13 1 0.13
Our country’s accession to the EU 0.05 3 0.15
Changing customer habits 0.05 1 0.05
Disposable income level will increase 0.02 3 0.06
Government’s incentives for ‘specific’ industry 0.03 2 0.06
Economy is expected to grow by 4% next year 0.01 2 0.02
Growing number of people buying online 0.08 3 0.24

Interest rates falling to 1% 0.02 3 0.06
•Growing number of people buying online is the most promising opportunity with a score of 0.24, reflecting a significant
market trend that Company X can capitalize on.
•The accession to the EU and market growth for the main business product are also important opportunities with scores
of 0.15 and 0.20, respectively.
Next Steps (Opportunities):

•Develop and enhance e-commerce capabilities to cater to the growing online buying trend.
•Leverage EU accession to explore new markets and increase export potential.
•Invest in renewable energy and technological advancements for long-term sustainability.
16

Import
Threat Probability Score (Importance × Probability)
ance
Corporate tax may increase from 20% to 22% in 2024 0.12 2 0.24
Rising pay levels 0.03 2 0.06
Rising raw material prices 0.09 3 0.27
Intense competition 0.07 1 0.07
Market is expected to grow by only 1% next year 0.05 3 0.15
Increasing fuel prices 0.01 3 0.03
Aging population 0.01 3 0.03
Stricter laws regulating environmental pollution 0.01 1 0.01
Lawsuits against the company 0.02 1 0.02
Currency fluctuations 0.09 2 0.18
•Rising raw material prices poses the greatest threat, with a score of 0.27, which could negatively affect production costs.
•The increase in corporate tax and the expected slow market growth also rank highly in importance, with scores of 0.24
and 0.15, respectively.
Next Steps (Threats):

•Develop strategies to mitigate rising raw material costs, such as securing long-term contracts or diversifying suppliers.
•Prepare for corporate tax increases by adjusting financial strategies and cost structures.
•Plan for slow market growth by focusing on innovation, diversification, and efficiency improvements.
17

Summary
A SWOT analysis is a strategic tool used to assess a company’s internal strengths and weaknesses,
along with the external opportunities and threats it faces. Strengths refer to the company's advantages,
such as strong brand equity, diverse revenue streams, skilled workforce, and patents. Weaknesses
highlight areas where the company lags, such as low profit margins, poor customer service, high
employee turnover, and organizational inefficiencies.
On the opportunity side, external factors like market growth, technological advancements, government
incentives, and consumer behavior shifts can provide growth potential. Conversely, threats include
external risks such as economic downturns, rising costs, competition, regulatory changes, and
environmental issues.
A successful SWOT analysis helps businesses prioritize key factors, identify areas for improvement,
and develop strategies to capitalize on strengths, mitigate weaknesses, and tackle opportunities and
threats effectively. However, a detailed and accurate evaluation, including prioritization of each factor, is
crucial for deriving actionable insights.
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Mastering the Art of SWOT Analysis

Mastering the Art of SWOT

Copyright © 2024 Nada Nasri. All rights reserved.

Mastering the Art of SWOT Analysis

Internal Strengths Weaknesses

External Opportunities Threats

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Benefits of SWOT Analysis

SWOT analysis offers several key advantages:

Limitations of SWOT Analysis

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Where to Look for Strengths and Weaknesses

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

1.Identify Factors Relative to Competitors:

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Use reserves for strategic investments, Evaluate and consolidate underperforming

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Opportunities Action Plan/Focus Area Threats Action Plan/Focus Area

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Steps for Advanced SWOT Analysis

Step 1: Identify Strengths, Weaknesses, Opportunities, and Threats

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Strengths and weaknesses are evaluated on the following categories:

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Mastering the Art of SWOT Analysis

Opportunities and threats are evaluated on:

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

Weakness Importance Rating Score (Importance × Rating)

Next Steps (Weaknesses):

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Mastering the Art of SWOT Analysis

Market growth for the main business product 0.10 2 0.20

Growing demand for renewable energy 0.01 1 0.01

Government’s incentives for ‘specific’ industry 0.03 2 0.06

Economy is expected to grow by 4% next year 0.01 2 0.02

Growing number of people buying online 0.08 3 0.24

Next Steps (Opportunities):

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Next Steps (Threats):

Copyright © 2024 Nada Nasri. All rights reserved. www.linkedin.com/in/nada-nasri

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