SWOT analysis


The overall evaluation of company’s strengths, weakness, opportunities, and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment.

A business unit has to monitor key macro environment forces like demographic-economic, natural, technological, political-legal, and social-cultural and significant micro environmental factors like customers, competitors, suppliers, distributors, dealers that affect its ability to earn profits. The business unit should set up a marketing intelligence system to track trends and important developments. For each trend or development, management needs to identify the associated opportunities and threats.

A major purpose of environmental scanning is to discern new opportunities. In many ways, good marketing is the art of finding, developing, and profiting from opportunities. A marketing opportunity is an area of buyer need and interest in which there is high probability that a company can profitably satisfy that need. There are three main sources market opportunities. The first is to supply something that is in short supply. This requires little marketing talent, as the need is fairly obvious. The second is to supply an existing or service in a new or superior way. There are several ways to uncover possible product or service improvements: by asking consumers for their suggestions by asking consumers to imagine an ideal version of the product or service. Another way is seeking the opinion of consumers by asking them to chart their steps in acquiring, using and disposing of a product (consumption chain method). The third source often leads to a totally new product or service.

Opportunities can take many forms, and marketers have to be good at spotting them. Consider the following,

* A company may benefit from converging industry trends and introduce hybrid products or services that are new to the market. Example: At least five major cell phone manufacturers released phones with digital photo capabilities.

* A company may take a buying process more convenient or efficient. Example: Consumers can now use the Internet to find more books than ever and search for the lowest price with a few clicks.

* A company can meet the need for more information and advice. Example: Guru.com facilitates finding professional experts in a wide range of fields.

* A company can customize a product or service that was formerly offered only in a standard form. Example: P&G Reflect .com Web site is capable of producing a customized skin care or hair care product to meet a customer’s need.

* A company can introduce a new capability. Example: Consumers can now create and edit digital “iMovies� with the new iMac and upload them to an Apple Web server to share with friends around the world.

* A company may be able to deliver a product or a service faster. Example: FedEx discovered a way to deliver mail and packages much more quickly than the US Post Office.

* A company may be able to offer a product at a much lower price. Example: Pharmaceutical firms created generic versions of brand-name drugs.

To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to determine the attractiveness and probability of success

1. Can the benefits involved in the opportunity be articulated convincingly to a defined target market(s)?

2. Can the target market(s) be located and reached with cost-effective media and trade channels?

3. Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits?

4. Can the company deliver the benefits better than any actual or potential competitors?

5. Will the financial rate of return meet or exceed the company’s required threshold for investment?

Some developments in the external environment represent threat. An environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit. Threats should be classified according to seriousness and probability of occurrence. To deal with them, the company needs contingency plans that spell out changes it can make before or during the threat. Once management has identified the major threats and opportunities facing a specific business unit; it can characterize that business’s overall attractiveness.