Understanding SWOT Analysis
The key to understanding SWOT analysis is breaking it down to each individual element. Every one of the four SWOT components provides insight on the marketing conditions affecting an organization or industry. Once you understand the characteristics of these individual pieces and see how they fit together the overall SWOT concept is easy to grasp.
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SWOT Basics
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The term SWOT refers to strengths, weaknesses, opportunities and threats. These are different types of marketing factors. Some are positive, some are negative, some are internal and some are external.
Internal factors originate from within the organization or industry the SWOT means to analyze. Business owners and other decision-makers have a certain level of control over internal factors. External factors on the other hand originate from outside the organization or industry.
Strengths
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Strengths are positive internal factors. Strengths add value in the mind of consumers. Most strengths improve quality, increase customer satisfaction, decrease costs or make purchasing the product or service more convenient.
Examples:
Central store locations
Expertise in a particular area -
Weaknesses
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Weaknesses are negative internal factors. Anything that decreases value or convenience may be considered a weakness. Weaknesses are related to reputation, product lines, and customer service standards. Like strengths, weaknesses are internal and are linked to a single entity.
Examples:
Crammed store layouts
Slow delivery
Opportunities
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Opportunities are positive external factors. Opportunities include developing customer markets, the availability of new channels to sell or advertise goods and technology advancements that make creating a product cheaper or easier. Any competitor can capitalize on opportunities but some are better positioned to do so.
Examples:
Selling products previously only available at traditional stores over the Internet
A growing elderly population increases the potential customer base for a variety of goods and services
Threats
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Threats are negative external factors. Threats endanger the livelihood of organizations and industries by making their goods or services more expensive, illegal or inconvenient to purchase. Threats can also come in the form of social and financial trends that shrink the customer pool or lessen the consumer's ability to make purchases.
Examples:
Rising gas prices threaten the SUV market
New legislation makes it harder to purchase a gun, threatening the pistol manufacturing industry
SWOT Layout
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SWOT findings are often arranged in a 4-by-4 cell table. Strengths are placed in the upper left cell. Weaknesses are placed in the upper right cell. Opportunities and threats make up the lower row. Opportunities go on the left, threats on the right.
This layout makes SWOTs easier to understand because you can reference factors by type. Positive factors are displayed on in the first column. Negative factors are displayed in the second column. Both internal types of factors are in the first rows and external factors are placed in the second row.
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