“Opportunity is missed by most people because it is dressed in overalls and looks like work.”
By Thomas Edison
One of the advantages of this analysis is that it can be applied in any management situation, type of company or business area. The first step we must take is to describe the current situation of the company, identify the strategies, changes that occur in the market and our capabilities and limitations. This will serve as the basis for a historical, casual and projective analysis.
The internal analysis
It consists of detecting the strengths and weaknesses of the company that give rise to competitive advantages or disadvantages. To carry it out, the following factors are studied:
- Production. Production capacity, manufacturing costs, quality and technological innovation.
- Marketing. Line and range of products, image, positioning and quota in the market, prices, advertising, distribution, sales team, promotions and customer service.
- Organization. Structure, process of direction and control and culture of the company.
- Personnel. Selection, training, motivation and remuneration.
- Finance. Available financial resources, level of indebtedness, profitability and liquidity. Investigation and development . New products, patents and lack of innovation.
The external analysis
It is about identifying and analyzing the threats and opportunities of our market. It covers several areas:
- Market. Define our target and its characteristics. Also the general aspects (size and market segment, evolution of demand, consumer wishes), and other behavior (types of purchase, behavior when buying).
- Sector. Detect market trends to identify possible opportunities for success, studying companies, manufacturers, suppliers, distributors and customers.
- Competition. Identify and evaluate current and potential competition. Analyze your products, prices, distribution, advertising, etc.
- Environment. They are the factors that we can not control, such as economic, political, legal, sociological, technological, etc.
Define the Strategy
The SWOT helps to consider the actions we should take to take advantage of the opportunities detected and eliminate or prepare the company against threats, being aware of our weaknesses and strengths.
Once the objectives are set -which must be hierarchical, quantified, real and consistent-, we will choose the strategy to reach them through marketing actions. Let’s review the possible strategies with examples:
- Defensive. The company is prepared to face threats. If your product is no longer considered a leader, highlight what sets you apart from the competition. When the market share falls, look for customers that are more profitable and protect them.
- Offensive. The company must adopt growth strategies. When your strengths are recognized by the clients, you can attack the competition to exalt your advantages. When the market is mature, you can try to steal customers by launching new models.
- Survival. You face external threats without the internal forces necessary to fight against competition. Leave things as they are until the changes that occur.
Reorientation Opportunities are open to you that you can take advantage of, but lack the adequate preparation. Change of policy or products because the current ones are not giving the desired results.
What factors should be considered in a SWOT analysis?
Key capacities in key activities.
Skills and superior technological resources.
Property of the main technology.
Better manufacturing capacity.
Access to economies of scale.
Skills for product innovation.
Good image among consumers.
Products (brands) well differentiated and valued in the market.
Better advertising campaigns.
Well-designed and designed specific or functional strategies.
There is no clear strategic direction.
Inability to finance the necessary changes in the strategy.
Lack of some key skills or abilities.
Delay in Research and Development.
Higher unit costs compared to direct competitors.
Profitability below average.
Excess of internal operational problems.
Lack of experience and managerial talent.
Enter new markets or segments.
Serve additional groups of clients.
Expanding the product portfolio to meet new customer needs.
Rapid market growth.
Diversification of related products.
Elimination of trade barriers in attractive foreign markets.
Complacency between rival companies.
Entry of new competitors.
Increase in sales of substitute products.
Slow market growth.
Change in the needs and tastes of consumers.
Growing power of negotiation of clients and / or suppliers.
Adverse changes in exchange rates and trade policies of other countries.
Adverse demographic changes.