SWOT analysis is looking at a businesses – strengths, weaknesses, opportunities, threats.
SWOT analysis is useful for a business looking at strategic planning for the future. How can the firm survive, grow and remain relevant.
Examples of strengths
- Current profitable orders.
- Existing brand loyalty and brand recognition
- Loyal customer base
- Mailing list and details of past consumers
- Owning shops/offices in appropriate location
- Existing technology and skilled labour forces.
Examples of Weaknesses
- Over-reliance on a small number of customers.
- Changing consumer demand – e.g. retail shops losing out to internet
- Changing product life-cycle
- High ratio of debt
- Difficulty in finding suitable management/workers
- For an exporting firm, an appreciation in the exchange rate, which makes exports less competitive
Examples of Opportunities
- Finding new export markets in developing countries like China
- Diversifying into new markets e.g. products and services which you can order through the internet.
- Improving the production process to reduce costs and increase profit margins.
- Consolidation of business to reduce costs
- Potential merger with rival firms.
- Selling overseas
Examples of Threats
- Declining market as people switch to electronic forms of communication and less demand for paper.
- Increasing competitiveness decreasing profit margins.
- Increasing costs of production.
- New firms entering the market
Future strategies may include:
- Developing market share in new countries.
- Introducing new range or products which meet changing circumstances.
- Looking to streamline production process and reduce costs:
- New technology that helps cut costs.
- Better working practises e.g. giving workers more performance related bonuses to encourage innovation and harder work.
- Get outside consultants. Sometimes existing managers can’t see the wood for the trees. Getting outside consultants in may help provide a fresh approach.
Things to watch out for
- Economic Climate – is this is a good time to invest with rising oil prices and slowing economy?
- Does the firm have enough expertise to diversify into new areas?
Example of SWOT analysis for major supermarket like Sainsbury’s
Strength
- 100 years in business and strong brand loyalty
- Having existing stores in major cities
- Having well-established supply chains
- Base of staff
- Low debt ratio
Weaknesses
- Caught between low-cost retailers like Aldi and higher end supermarkets like Waitrose.
- UK supermarket is saturated, with less room for growth
- Falling profit margin in competitive market
- Harder to make profit from online deliveries (cost is greater than what they charge)
Opportunities
- Expand product lines which have higher profit margins – e.g. organic food, sustainably produced
- Develop more local small supermarkets which can cater to trend to shop more frequently and less few big shops
- Develop automated technology – using self-service checkout tills can reduce labour costs. Possibility of more automation in areas like packing, transport and shelf stacking.
- – Though automated technology has its own problems – possibility of theft
Threats
- New low-cost supermarkets such as Aldi and Lidl are taking market share from big established firms. this shows brand loyalty is not that strong and customers are attracted by lower prices. Market share could slip further or put pressure on Sainsbury’s to lower prices and lower profits
- Amazon are entering in market for grocery deliveries. They have delivery network able to be very competitive.
- Business climate could change post-Brexit. Tariffs and custom forms will increase cost of importing goods from Europe.
- Sainsbury’s could suffer from economic downturn, though supermarkets tend to be relatively well insulated from recession (selling goods with low-income elasticity of demand)