Analyze Your Company Using SWOTs
By Joan S. Adams <adams@pierian.net> +1-212-366-5380
The world changes, and so must your company.
SWOTs (Strengths, Weaknesses, Opportunities and Threats) are an important management consulting concept. Consultants use SWOTs to help a company “see itself,” for better and for worse. Companies are inherently insular and inward looking. SWOTs are a means by which a company can better understand what it does very well and where its shortcomings are.
SWOTs will help the company size up the competitive landscape and get some insight into the vagaries of the marketplace. SWOTs are not suited for helping executives in their day-to-day management—yet, every company should go through the SWOTs exercise at least once a year. This is one time where I will strongly suggest you bring an outside consultant in to help you. It is just about impossible to do your own assessment. That’s because you and your team all have prejudices, feelings, and history with the company, personal experiences that will color your view and thus give you a less than true SWOTs’ assessment.
Why do a SWOT analysis? The world changes—and so must your company. In order to make good changes, you must have a clear idea of where you are strong and weak, as well as see the possibilities for growth and whatever market pitfalls are lurking out there. After doing SWOTs, you can develop a solid business plan, a plan based on reality. In short order, you will have a good idea of what you have to do to continue your success. This assessment will help you define areas for improvement, seize opportunities in the marketplace and anticipate threats. Think about it—how can you possibly capitalize on your strengths and the current opportunities if you don’t know what they are? Similarly, how can you shore up your weaknesses and prepare for changes in the marketplace if you don’t know what they are?
You probably think you know your company pretty well. And you do—in a day-to-day kind of way. Using SWOTs, you will see where your company needs to go a year from now.
Breaking down SWOTs
- Strengths are internal to your company. These are things you control, things you own—patents, brand names, great location, a brilliant CEO, great product development, a “culture” of service. These are all strengths.
- Weaknesses are internal to your company. Weaknesses are also under your control—a terrible reputation, no management succession plan, old inventory, obsolete technology, bad quality control. These are all things you could improve but haven’t. Thus, these are weaknesses.
Strengths aren’t forever. Over time, strengths can suddenly turn into weaknesses. Having an extremely well known brand is great—until something goes terribly wrong and that brand becomes synonymous with failure (think Enron or Edsel). Building the best product or offering the best service is a strength—until the day comes that those products (think typewriters, turntables, horse buggies) or that service (think milk delivery, armor repair, horse shoeing) have become obsolete. - Opportunities are external to your company—a growing economy, reduced trade barriers, falling exchange rates, and new technology.
- Threats are also external—rising oil prices, terrorist attacks, and government regulations.
Opportunities for some are threats to others. Rising oil prices in the 1970s were a huge opportunity for Japanese carmakers to enter the U.S. market. Those same high prices hurt the Big Three badly.
Let’s take a company we all know and do a SWOTs analysis—Dell Computer. Dell doesn’t have an R&D lab. They don’t have patents on software or hardware. Their products are not “unique.” Yet, today, Dell is wildly successful.
- S What are Dell’s strengths?
- Dell has a brilliant supply chain management.
- Dell has NO stores, giving them a huge cost advantage.
- Dell has great name recognition, and low prices.
- W What are Dell’s weaknesses?
- Dell doesn’t have any proprietary technology.
- The company has no physical locations for returns, service, or repairs.
- Dell sells computers and peripherals, which involve complex technologies.
- O What are Dell’s opportunities?
- Dell can use its supply chain expertise with other products.
- Dell can readily partner with another company (Apple, Wal-Mart, etc.).
- Dell can add high value services to its product mix.
- T What are Dell’s threats?
- Foreign manufacturers can still undercut Dell’s prices.
- Shipping costs could hurt the price advantage.
- Computers are rapidly becoming commodities.
Having no stores is a strength for Dell, but it is also a weakness—customers have no place to “bring” their computer for service and repair. Computers are becoming so complex that buyers may no longer want to buy online. We want someone (think Best Buy’s “Geek Squad”) to come to our home to set it up. There could be an opportunity in there—or a threat.
SWOTs for a PVF supply house
Excellent Supply House has been an industrial supplier of PVF for 35 years. They do about $40 million in revenue and are located in the Northeast. They have good relationships with their suppliers. They have a great order book full of repeat customers, most of which are within 150 miles of the warehouse. Over the last few years revenues have been stable. Sales for 2004 were $38 million, the first drop in sales ever.
Here are the SWOTs for the Excellent Supply House:
Strengths, Weaknesses, Opportunities and Threats
- Strengths
- Excellent has a great sales force, with excellent product knowledge.
- Excellent has good long-term relationships with key suppliers.
- Excellent can deliver most orders in 24 hours.
- Weaknesses
- Excellent has not bought into IT. They are drowning in paperwork.
- Excellent has no market reach past 150 miles.
- Excellent’s marketing is weak. Sales to “new” customers are low.
- Opportunities
- PVF services (managed inventory, etc.) are becoming a bigger part of the market.
- Creaky infrastructure needs to be replaced throughout the East Coast.
- Partnerships are available with the right mechanical contractors, municipalities, etc.
- Threats
- There’s a huge consolidation going on in the industrial PVF realm. Some supply houses supply Fortune 500 companies nationwide.
- New materials and new vendors are coming into the market.
- Costs are rising and commoditization increasing.
Do these things sound familiar?
Set aside a half-day meeting. Bring in the consultant, your salespeople, warehouse manager, other key associates, and go through the exercise. The purpose of uncovering these Strengths, Weakness, Opportunities and Threats is to create an action plan. And never, ever get complacent. Make this exercise a habit. Do a SWOT analysis every year.