SWOT analysis is a simple framework for generating strategic alternatives from a situation

analysis. It is applicable to either the corporate level or the business unit level and frequently
appears in marketing plans. SWOT (sometimes referred to as TOWS) stands for Strengths,
Weaknesses, Opportunities, and Threats. The SWOT framework was described in the late 1960's
by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in
Business Policy, Text and Cases (Homewood, IL: Irwin, 1969). The General Electric Growth
Council used this form of analysis in the 1980's. Because it concentrates on the issues that
potentially have the most impact, the SWOT analysis is useful when a very limited amount of
time is available to address a complex strategic situation.

The following diagram shows how a SWOT analysis fits into a strategic situation analysis.

Situation Analysis
          / \           
Internal Analysis       External Analysis
/ \                  / \
Strengths   Weaknesses       Opportunities   Threats
|
SWOT Profile

The internal and external situation analysis can produce a large amount of information, much of
which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to
reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the
internal aspects of the company as strengths or weaknesses and the external situational factors as
opportunities or threats. Strengths can serve as a foundation for building a competitive
advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a
firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities,
and deter potentially devastating threats.

Internal Analysis

The internal analysis is a comprehensive evaluation of the internal environment's potential

strengths and weaknesses. Factors should be evaluated across the organization in areas such as:

 Company culture
 Company image
 Organizational structure
 Key staff
 Access to natural resources
 Position on the experience curve
 Operational efficiency
 Operational capacity
 Brand awareness
  Market share
 Financial resources
 Exclusive contracts
 Patents and trade secrets

The SWOT analysis summarizes the internal factors of the firm as a list of strengths and
weaknesses.

External Analysis

An opportunity is the chance to introduce a new product or service that can generate superior
returns. Opportunities can arise when changes occur in the external environment. Many of these
changes can be perceived as threats to the market position of existing products and may
necessitate a change in product specifications or the development of new products in order for
the firm to remain competitive. Changes in the external environment may be related to:

 Customers
 Competitors
 Market trends
 Suppliers
 Partners
 Social changes
 New technology
 Economic environment
 Political and regulatory environment

The last four items in the above list are macro-environmental variables, and are addressed in a
PEST analysis.

The SWOT analysis summarizes the external environmental factors as a list of opportunities and
threats.

SWOT Profile

When the analysis has been completed, a SWOT profile can be generated and used as the basis
of goal setting, strategy formulation, and implementation. The completed SWOT profile
sometimes is arranged as follows:

 Strengths  Weaknesses      
 1. 1.
2. 2.
3. 3.
. .
. .
. .

 Opportunities       Threats
1. 1.
2. 2.
3. 3.
. .
. .
. .

When formulating strategy, the interaction of the quadrants in the SWOT profile becomes
important. For example, the strengths can be leveraged to pursue opportunities and to avoid
threats, and managers can be alerted to weaknesses that might need to be overcome in order to
successfully pursue opportunities.

Multiple Perspectives Needed

The method used to acquire the inputs to the SWOT matrix will affect the quality of the analysis.
If the information is obtained hastily during a quick interview with the CEO, even though this
one person may have a broad view of the company and industry, the information would represent
a single viewpoint. The quality of the analysis will be improved greatly if interviews are held
with a spectrum of stakeholders such as employees, suppliers, customers, strategic partners, etc.

SWOT Analysis Limitations

While useful for reducing a large quantity of situational factors into a more manageable profile,
the SWOT framework has a tendency to oversimplify the situation by classifying the firm's
environmental factors into categories in which they may not always fit. The classification of
some factors as strengths or weaknesses, or as opportunities or threats is somewhat arbitrary. For
example, a particular company culture can be either a strength or a weakness. A technological
change can be a either a threat or an opportunity. Perhaps what is more important than the
superficial classification of these factors is the firm's awareness of them and its development of a
strategic plan to use them to its advantage.
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying the
objective of the business venture or project and identifying the internal and external factors that are
favorable and unfavorable to achieve that objective. The technique is credited to Albert Humphrey, who
led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies.

A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources
and capabilities to the competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The following diagram shows how a
SWOT analysis fits into an environmental scan:

SWOT Analysis Framework

Environmental Scan
          / \           
Internal Analysis       External Analysis
/ \                  / \
Strengths   Weaknesses       Opportunities   Threats
|
SWOT Matrix

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage. Examples of such strengths include:

 patents
 strong brand names
 good reputation among customers
 cost advantages from proprietary know-how
 exclusive access to high grade natural resources
  favorable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of
the following may be considered weaknesses:

 lack of patent protection

 a weak brand name
 poor reputation among customers
 high cost structure
 lack of access to the best natural resources
 lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a
firm has a large amount of manufacturing capacity. While this capacity may be
considered a strength that competitors do not share, it also may be a considered a
weakness if the large investment in manufacturing capacity prevents the firm from
reacting quickly to changes in the strategic environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and
growth. Some examples of such opportunities include:

 an unfulfilled customer need

 arrival of new technologies
 loosening of regulations
 removal of international trade barriers

Threats

Changes in the external environmental also may present threats to the firm. Some
examples of such threats include:

 shifts in consumer tastes away from the firm's products

 emergence of substitute products
 new regulations
 increased trade barriers
The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may
have a better chance at developing a competitive advantage by identifying a fit between
the firm's strengths and upcoming opportunities. In some cases, the firm can overcome
a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors
can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

  Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies

 S-O strategies pursue opportunities that are a good fit to the company's
strengths.
 W-O strategies overcome weaknesses to pursue opportunities.
 S-T strategies identify ways that the firm can use its strengths to reduce its
vulnerability to external threats.
 W-T strategies establish a defensive plan to prevent the firm's weaknesses from
making it highly susceptible to external threats.

What do you undrstnd by differentiation strategy???

Ans:- differentiation strategy

1. marketing technique used by a manufacturer to establish strong identity in a specific market;

also called segmentation strategy. Using this strategy, a manufacturer will introduce different
varieties of the same basic product under the same name into a particular product category and
thus cover the range of products available in that category.
 2. positioning a brand in such a way as to differentiate it from the competition and establish an
image that is unique; for example, the Wells Fargo Bank positions itself as the bank that opened
up the West.

Dictionary of Marketing Terms

differentiation strategy

1. marketing technique used by a manufacturer to establish strong identity in a specific market;

also called segmentation strategy. Using this strategy, a manufacturer will introduce different
varieties of the same basic product under the same name into a particular product category and
thus cover the range of products available in that category. For example, a soda company that
offers a regular soda, a diet soda, a decaffeinated soda, and a diet-decaffeinated soda all under
the same brand name is using a differentiation strategy. Each type of soda is directed at a
different segment of the soda market, and the full line of products available will help to
establish the company's name in the soda category. This technique is quite costly to the
advertiser because each individual product must be marketed independently, since separate
marketing strategies are necessary for each market segment.
2. positioning a brand in such a way as to differentiate it from the competition and establish an
image that is unique; for example, the Wells Fargo Bank positions itself as the bank that opened
up the West. Also called product differentiation .