SWOT Analysis | Principles of Marketing (2024)

A situation analysis is often referred to by the acronym SWOT, which stands forstrengths, weaknesses, opportunities, and threats.

Essentially, a SWOT analysis is an examination of the internal and externalfactors that impact the organization and its strategies. The internal factors are strengths and weaknesses; the external factors are opportunities and threats.ASWOT analysis givesan organization a clearpicture of the “situation” in which it operates and helps it identify which strategies to pursue.

Internal Factors

Strengths and weaknesses include the resources and capabilities withinthe organization now. Since the company has the mostcontrol over internal factors, it can craft strategies and objectives to exploit strengths and address weaknesses. Examples of internal factors include the following:

• Financial resources
• Technical resources and capabilities
• Human resources
• Product lines

All of these are controlled by the organization. Competitive positioning can also be a strength or a weakness. While competitors’ strategies and tactics are external to the company, the company’s position relative to the competitors is something that it can control.

External Factors

External factors include opportunities and threats that are outside of the organization. These are factors that the company may be able influence—or at least anticipate—but not fully control. Examples of external factors include the following:

• Technology innovations and changes
• Competition
• Economic trends
• Governmentpolicies and legislation
• Legal judgments
• Social trends

While a company can control how it positions itself relative to the competition, it can’t control competitors’ actions or strategies.

Benefits of aSWOT Analysis

A SWOTanalysisbenefits organizations in two key ways:

Encourages Realistic Planning

Imagine a growing company that isable to attract new customers more easily than the competition because it has a strong reputation and visible leader. Thesestrengths should be considered and exploited in the strategy. Now imagine that the company also has a poor history of delivering on customer commitments. If this weakness is not addressed, it will not only make itdifficult to retain customers but also likely damage the reputation of the company and its leader—which would eliminate key strengths. By conductinga situation analysis, the company is more likely to consider both of these factors in its planning.

Improves Ability to Forecast Future Events

What’s the worst thing that could happen to your business? Most organizations can answer this question because they have assessed the environment in which they operate. For instance, perhaps they know of pending legislation that mightadversely affect them. Or perhaps theyrecognizelegal risks, or unique challengesfrom past economic cycles. By considering threats and “worst-case scenarios” duringthe planning process, organizations can take steps to avoid them, or minimize the impact if they dothey occur.

SWOT AnalysisExample

A situationanalysis can benefit any organization. The example below shows the SWOT analysis for a fictional college.

Even this rudimentary analysis highlights some strategic issues, discussed below, whichthe college needs to consider.

Internal

The college has a number of strengths.Committed faculty and trusted leaders have collaborated to build academic programs that are showinghigh completion rates among students. The student advising program is also contributing to that success. Also, the college has excellent relationships with businesses in the community.

Among the weaknesses, the technology infrastructure is outdated. The college also employsa largenumber of part-time faculty members, but doesn’t provide them with adequate training orsupport.Nursing, one of the more expensive programs at the college, is not attracting enough students to keep it full. Also, the college has learned from some of its recent graduates that students are not receiving transfer credit at the local university for all of their courses taken at the college. The students wonder if the college faculty and advisers really understand their academic goals or the requirements of the four-year degree programs at the university.

By completing a SWOT analysis, the college can shape its strategies and objectives to align with both the internal resources and capabilities it has, as well as the external factors it faces.

External

The college leadership is feeling pulled by conflicting economic factors. The region has been through an economic downturn, which resulted in cuts tostate funding. At the same time, an economic recovery has just begun. During the previouseconomic recovery, collegeenrollment droppedwhen students who were pursuing additional education returned to the workforce. How might the timing of those two funding issues work out?The college is also being affectedby a local institution that is aggressively marketing to its students— especially students in the nursing program.

Still, there are opportunities. Students have expressed interest in more online courses and programs. That might also slow the local competitor, though it would also require the college to address its aging technology infrastructure. The college has identified a number of innovative programs that would enable students to earn degrees more quickly and at the same timeexpand its partnership and collaboration with local businesses.