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Swot analysis

involves the collection and portrayal of information about internal and external factors which have, or may have, an impact
on business.
[2]

SWOT
is a framework that allows managers to synthesize insights obtained from an internal analysis of the companys strengths
and weaknesses with those from an analysis of external opportunities and threats.
[3]

Understanding the tool


What is SWOT analysis? The answer to the question is simple: its a tool used for situation (business or personal) analysis! SWOT
is an acronym which stands for:
Strengths: factors that give an edge for the company over its competitors.
Weaknesses: factors that can be harmful if used against the firm by its competitors.
Opportunities: favorable situations which can bring a competitive advantage.
Threats: unfavorable situations which can negatively affect the business.
Strengths and weaknesses are internal to the company and can be directly managed by it, while the opportunities and threats are
external and the company can only anticipate and react to them. Often, swot is presented in a form of a matrix as in the illustration
below:

Swot is widely accepted tool due to its simplicity and value of focusing on the key issues which affect the firm. The aim of swot is to
identify the strengths and weaknesses that are relevant in meeting opportunities and threats in particular situation. [4]

Benefits
Swot tool has 5 key benefits:

Simple to do and practical to use;

Clear to understand;

Focuses on the key internal and external factors affecting the company;

Helps to identify future goals;

Initiates further analysis.

Limitations
Although there are clear benefits of doing the analysis, many managers and academics heavily criticize or dont even recognize it
as a serious tool.[2] According to many, it is a low-grade analysis. Here are the main flaws identified by a research: [2][5]

Excessive lists of strengths, weaknesses, opportunities and threats;

No prioritization of factors;

Factors are described too broadly;

Factors are often opinions not facts;

No recognized method to distinguish between strengths and weaknesses, opportunities and threats.

How to perform the analysis?


Swot can be done by one person or a group of members that are directly responsible for the situation assessment in the company.
Basic swot analysis is done fairly easily and comprises of only few steps:
Step 1. Listing the firms key strengths and weaknesses
Step 2. Identifying opportunities and threats

Strengths and Weaknesses


Strengths and weaknesses are the factors of the firms internal environment. When looking for strengths, ask what do you do better
or have more valuable than your competitors have? In case of the weaknesses, ask what could you improve and at least catch up
with your competitors?

Where to look for them?


Some strengths or weaknesses can be recognized instantly without deeper studying of the organization. But usually the process is
harder and managers have to look into the firms:

Resources: land, equipment, knowledge, brand equity, intellectual property, etc.

Core competencies

Capabilities

Functional areas: management, operations, marketing, finances, human resources and R&D

Organizational culture

Value chain activities

Strength or a weakness?
Often, companys internal factors are seen as both, strengths and weaknesses, at the same time. It is also hard to tell if a
characteristic is a strength (weakness) or not. For example, firms organizational structure can be a strength, a weakness or
neither! In such cases, you should rely on:
Clear definition. Very often factors which are described too broadly may fit both strengths and weaknesses. For example, brand
image might be a weakness if the company has poor brand image. However, it can also be a strength if the company has the most
valuable brand in the market, valued at $100 billion. Therefore, it is easier to identify if a factor is a strength or a weakness when its
defined precisely.
Benchmarking. The key emphasize in doing swot is to identify the factors that are the strengths or weaknesses in comparison to
the competitors. For example, 17% profit margin would be an excellent margin for many firms in most industries and it would be

considered as a strength. But what if the average profit margin of your competitors is 20%? Then companys 17% profit margin
would be considered as a weakness.
VRIO framework. A resource can be seen as a strength if it exhibits VRIO (valuable, rare and cannot be imitated) framework
characteristics. Otherwise, it doesnt provide any strategic advantage for the company.

Opportunities and threats


Opportunities and threats are the external uncontrollable factors that usually appear or arise due to the changes in the macro
environment, industry or competitors actions. Opportunities represent the external situations that bring a competitive advantage if
seized upon. Threats may damage your company so you would better avoid or defend against them.

Where to look for them?


PESTEL. PEST or PESTEL analysis represents all the major external forces (political, economic, social, technological,
environmental and legal) affecting the company so its the best place to look for the existing or new opportunities and threats.
Competition. Competitors react to your moves and external changes. They also change their existing strategies or introduce new
ones. Therefore, the company must always follow the actions of its competitors as new opportunities and threats may open at any
time.
Market changes. The most visible opportunities and threats appear during the market changes. Markets converge, starting to
satisfy other market segment needs with the same product. New geographical markets open up allowing the firm to increase its
export volumes or start operations in a new country. Often niche markets become profitable due to technological changes. As a
result, changes in the market create new opportunities and threats that must be seized upon or dealt with if the company wants to
gain and sustain competitive advantage.

Opportunity or threat?
Most external changes can represent both opportunities and threats. For example, exchange rates may increase or reduce the
profits gained from exports. This depends on the exchange rate, which may rise (opportunity) or fall (threat) against the home
country currency. The organization can only guess the outcome of the change and count on analysts forecasts. In such cases,
when organization cannot identify if the external factor will affect it positively or negatively, it should gather unbiased and reliable
information from the external sources and make the best possible judgement.

Guidelines for successful SWOT


The following guidelines are very important in writing a successful swot analysis. They eliminate most of swot limitations and
improve it's results significantly:

Factors have to be identified relative to the competitors. It allows specifying whether the factor is a strength or a weakness.

List between 3 5 items for each category. Prevents creating too short or endless lists.

Items must be clearly defined and as specific as possible. For example, firms strength is: brand image (vague); strong brand
image (more precise); brand image valued at $10 billion, which is the most valued brand in the market (very good).

Rely on facts not opinions. Find some external information or involve someone who could provide an unbiased opinion.

Factors should be action orientated. For example, slow introduction of new products is action orientated weakness.
Apple Inc. is an American multinational corporation, which designs, manufactures and sells personal computers, consumer
electronics and software, and provides related services. The business has experienced a tremendous growth from 2001 when

it has introduced its iPod mp3 player. Apple Inc. is considered to be the most successful electronics company in the world.
You can find more information about the business in its official website or Wikipedias article.
SWOT
Apple SWOT analysis 2013

Strengths
1. Customer loyalty combined with expanding closed
ecosystem
2. Apple is a leading innovator in mobile device
technology

Weaknesses
1. High price
2. Incompatibility with different OS
3. Decreasing market share

3. Strong financial performance ($10,000,000,000 cash,


gross profit margin 43.9% and no debt)

4. Patent infringements

4. Brand reputation

6. Defects of new products

5. Retail stores

7. Long-term gross margin decline

5. Further changes in management

6. Strong marketing and advertising teams

Opportunities
1. High demand of iPad mini and iPhone 5

Threats
1. Rapid technological change

2. iTV launch

2. 2013 tax increases

3. Emergence of the new provider of application


processors

3. Rising pay levels for Foxconn workers

4. Growth of tablet and smartphone markets


5. Obtaining patents through acquisitions
6. Damages from patent infringements
7. Strong growth of mobile advertising market

4. Breached IP rights
5. Price pressure from Samsung over key components
6. Strong dollar
7. Android OS growth
8. Competitors moves in online music market

8. Increasing demand for cloud based services


Strengths
1. Customer loyalty combined with expanding closed ecosystem. While at first Apples closed ecosystem was a
weakness for the business, this has now changed. First, Apple now has a full range of apps, software and products that
are interlinked and support each other. Second, new products and supplements will be released soon (iTV), hence
expanding the ecosystem. Third, Apple has a strong customer loyalty, which increases due to Apples closed
ecosystem, which, in turn, is supported by customer loyalty. So the combination of Apples expanding closed
ecosystem and customers loyalty increases firms competitive advantage.
2. Apple is a leading innovator in mobile device technology. Apple has been chosen as the most innovative
business in the world for the 3rd time in 2012. Companys core competency of producing innovative products is the
strength the company builds upon and is able to bring the most innovative products to the market.
3. Strong financial performance ($10,000,000,000 cash, gross profit margin 43.9% and no debt).Apples
financial performance is one of the best among many companies. Company currently (end of 2012) holds about
$10,000,000,000 in cash, which can be used for acquisitions, buying back company shares and other matters. It also
has higher gross profit margin than its main competitors, which is equal to 43.9%. Company has no debt and is not
directly affected by interest rates or credit markets.

4. Brand reputation. Apple has a reputation of highly innovative, well designed, and well-functioning products and
sound business performance. Apple brand is valued at $76.5 billion and was the second most valuable brand in the
world in 2012.
5. Retail stores. Apples retail stores ensure high quality customer experience; provide direct contact with
knowledgeable staff and increases brand awareness. Besides, Apples stores are one of the most profitable in terms of
sales/ft2.
6. Strong marketing and advertising teams. Marketing is one of the strongest functional areas Apple has. It can sell
pricier products, build superior stores (they are more or less built to achieve marketing goals) and advertise their
products in a compelling manner.
Weaknesses
1. High price. Apples products cost much more than its competitors devices. Some critics argue that the price is
not justified. When theres such a fierce competition, Apple products price becomes a weakness because consumers
can easily opt for similar quality but lower price products.
2. Incompatibility with different OS. The iOS and OS X are quite different from other OS and uses software that is
unlike the software used in Microsoft OS. Due to such differences, both in software and hardware, users often choose to
stay with their accustomed software and hardware (Microsoft OS and Intel hardware).
3. Decreasing market share. The less market share Apple has, the less it can influence its potential customers and
persuade them to jump into using Apples closed ecosystem products.
4. Patent infringements. The firm is often accused of infringing other companies patents and has even lost some
trials. This damages Apple brand and its financial situation.
5. Further changes in management. Apple has lost Steve Jobs in 2012 and Tim Cook became the new CEO. Scott
Forstall and John Browett (chief of retail) left the company too and this will have an impact on companys management,
which, as many think, will be negative.

6. Defects of new products. This is not current Apple weakness but one that jumps out time to time. Some of Apples
iPod and iPhone releases had clear faults and thus disturbed sales of the products and firms reputation of superior
product performance.
7. Long-term gross margin decline. Current Apples gross margin is one of the highest in the tech industry but
analysts fear that due to increasing component prices and competition current margins will not be sustained. Hence,
glooming firms future financial performance.
NEW Apple SWOT Analysis 2015!
SEE APPLE SWOT 2015
Opportunities
1. High demand of iPad mini and iPhone 5. iPad mini sales will increase Apples market share in the tablet market
and, will strengthen firms competitive advantage.
2. iTV launch. iTV launch will support Apple TV sales and the products ecosystem.
3. Emergence of the new provider of application processors. Samsung, the main Apples competitor, is also the
only provider of application processors for Apples products. Apple has to find a new source for the component but
could not find a suitable one yet. Nonetheless, new manufacturers with superior engineering capabilities are arising
and its just a matter of time, when Apple will seize upon the opportunity of being less dependent on its direct
competitors.
4. Growth of tablet and smartphone markets. Growth of tablet and smartphone markets is a good opportunity to
expand firms share in these markets.
5. Obtaining patents through acquisitions. Apple lacks of some patents to sustain its growth and the best way to
acquire those patents is to acquire the firms holding them. In addition, Apple could develop new skills and
competencies.

6. Damages from patent infringements. Apple patents are often infringed by its competitors. Thus, collecting the
damages from the companies that do so is a viable opportunity to not only increase the cash reserves but to damage
the competitors reputation and sales as well.
7. Strong growth of mobile advertising market. Apple has developed iAd advertising platform, which allows
advertising on Apple iPhone, iPad and iPod touch. The growth of mobile advertising market is an opportunity which
could be further seized upon.
8. Increasing demand for cloud based services. Apple could expand its range of iCloud services and software as the
demand for cloud-based services is expanding.
Threats
1. Rapid technological change. One of the most severe threats Apple and the other tech companies are facing is rapid
technological change. Companies are under the pressure to release new products faster and faster. The one that
cannot keep up with the competition soon fails. This is especially hard when a business wants to introduce something
new, innovative and successful. Apple was able to bring very innovative products to the market so far but for the
moment, even Apple hasnt unveiled any plans for the new products (except iTV) and may lack new introductions to
keep up with competition.
2. 2013 tax increases. Tax increases in USA in 2013 will negatively affect Apple.
3. Rising pay levels for Foxconn workers. Pay levels for Foxconns workers already rose 3 times from 2010 to 2012.
Foxconn is the main manufacturer of Apple products and the rising pay level for Foxconns workers will likely raise the
prices for Apple products.
4. Breached IP rights. The companies that breach Apple patents might not be discovered soon and may benefit from it,
while weakening Apple at the same time.
5. Price pressure from Samsung over key components. Samsung has already asked Apple to pay higher price for its
application processors. Due to intense competition and no viable substitutes, Apple may be asked to pay even more.

6. Strong dollar. Apple earned more than half of its revenues from outside US. Dollar appreciation against other
currencies reduces potential profits from those countries.
7. Android OS growth. Android OS is the main competitor for iOS in mobile device market. The domination of Android
decreases iOS power over influencing consumers to join Apple.
8. Competitors moves in online music market. Apple faces threat from online music stores, such as Amazon, WalMart and online music subscription companies, such as Spotify.