Internal and external industry analysis

The SWOT analysis

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for
the development of marketing plans. It accomplishes this by assessing an organizations strengths
(what an organization can do) and weaknesses (what an organization cannot do) in addition to
opportunities (potential favorable conditions for an organization) and threats (potential
unfavorable conditions for an organization). SWOT analysis is an important step in planning and
its value is often underestimated despite the simplicity in creation. The role of SWOT analysis is
to take the information from the environmental analysis and separate it into internal issues
(strengths and weaknesses) and external issues (opportunities and threats). Once this is
completed, SWOT analysis determines if the information indicates something that will assist the
firm in accomplishing its objectives (a strength or opportunity), or if it indicates an obstacle that
must be overcome or minimized to achieve desired results (weakness or threat) (Danca, 2011).

Elements of SWOT Analysis

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 advantage from proprietary knowhow
 Exclusive access to high grade natural resources
 Favorable access to distribution networks

Weaknesses

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

 Lack of patent protection

  A weak brand name
 Poor reputation among customers
 High cost structure
 Lack of access to best natural resources
 Lack of access to key distribution channels

Opportunities

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

 An unfulfilled customer need

 Arrival of new technologies
 Loosening of regulations
 Removal of international trade barriers

Threats

Changes in the international environment also may present threats to the firm. Some examples of
these threats may include:

 Shifts of customer tastes away from the firm’s products

 Emergence of substitute products
 New regulations
 Increase 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 may can
be constructed. The SWOT matrix is shown below:
 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

Question:

SWOT Analysis Case Study

Read through the case study. Write down all the strengths and weaknesses, opportunities and
threats you can think of in relation to the Sweet Dreams Motel.

The Sweet Dreams Motel – Far North Queensland

The Sweet Dreams Motel is a 40-unit, no-frills operation in the less scenic part of a major
Queensland resort town. The owner, Mr Smith, firmly believes that there is a need for his style
of low-cost family accommodation amid the luxury and beauty of the area. His rooms are large,
family-style rooms (there is no television, for example). Although there is plenty of room for
future expansion, the grounds are fairly bare with a bit of landscaping, but mostly grass.

Mr Smith can serve breakfast to the rooms and provides tea-making facilities. There are now a
lot of good restaurants and take-aways in the area. Mr. Smith’s prices are less than half of what
similar motels charge and only a fraction of what the big five-star properties are charging. And,
really, he isn’t all that far away from the beach, shops and other attractions.

The problem is occupancy. He has some regulars who come every holiday period (and have
been doing so for the four years he has owned the property). Overall, occupancy is about 50%
year round and he knows from the local tourist office that the other properties average around
68% occupancy year round. New developments could mean trouble. This lack of occupancy
can be quite frustrating for Mr Smith. Cars pull in, drive around the parking areas and then drive
away.

Currently Mr Smith does very little advertising in local district guides and the holiday papers,
mainly because he really thinks word-of-mouth is the best form of advertising. He is a member
of the local tourist committee, but too busy to go to meetings. However, he does receive the
local statistics and knows the average stay in the area is 3.8 nights, and that local families and
couples and increasingly overseas visitors are his potential customers.

He’s not desperate yet, but he’s getting worried and disillusioned. He thought he would be
overrun with guests, but that hasn’t happened.

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Possible answer:
SWOT analysis of the Sweet Dreams Motel
Strengths:
 Located in a popular tourist region
 Big rooms
 Large grounds and open areas
 Breakfast service to rooms
 Good restaurants and take-away
nearby
 Low prices (but this is also a
problem!)
 Regular customers (but not very
many)
 Membership in the local tourist
group
 Property large enough for coach
groups
 Property is clean
 Access to information about the
industry
 Mr smith acknowledges he has a
problem – the first step towards
solving it!
Opportunities:
 Install televisions immediately
 Landscape the grounds and make
them more attractive
 Add more outdoor facilities –
playground, BBQ facilities,
perhaps a pool or tennis courts
depending on finances
 Increase the level of advertising
 Increase the rates being charged
 Work in with other attractions,
restaurants, etc (charge-back
facilities with nearby restaurants,
for example)
 Attend tourist group meetings –
do more networking
 Add own restaurant or do-it-
yourself catering facilities for
guests
 Investigate other markets
(backpackers, etc.)
Mr Smith’s most important action is to raise rates immediately. At less than half the price of
other motels his price is too low which conveys a poor image. This combined with the bare
Weaknesses:
 No television (crucial for the
family market)
 Bare and unappealing grounds
 Initial interest by people who
drive in and look but then leave
(probably because of the bare
grounds)
 Location poor in relation to other
services, attractions, etc.
 No separate restaurant services
 Low occupancy compared to other
motels
 Very little advertising
 Only local advertising
 Uninspiring motel name
 Low rates being charged could be
perceived as unappealing
Threats:
 Potential failure if occupancy
doesn’t improve
 Potential failure if other properties
begin cutting rates
 Potential problems if other
properties begin big promotional
campaigns
 Potential problems if more budget
motels are built
grounds, may be driving potential customers away. His rates can still be low, but should be
comparable to the rates of competitive properties.

Reference:

Danca, A. (2011). SWOT analysis [Online]. Available from:

http://www.stfrancis.edu/content/ba/ghkickul/stuwebs/btopics/works/swot.htm Accesed on: 2nd
April 2011.

QuickMba (2010). SWOT analysis [Online]. Available from:

http://www.quickmba.com/strategy/swot/. Accessed on: 2nd April 2011