SWOT Analysis

SWOT analysis in strategic planning and the interactions among the key factors in the application of this analytical tool.

Marketing audit is a systematic examination of key factors such as market environment, strategy, organisation, marketing system, productivity and function. These key factors affect an organisation’s marketing activities at a specific time.

First is the market environment audit refers to the macro environment such as technology and the tasks of competitors.

Second is the market strategy audit examines whether the strategy is in line with the business mission.

Third is the market organisation audit, which refers to the structure and functional efficiency such as interface efficiency.

Fourth is the market system audit examines the planning and control.

Fifth is the market productivity audit refers to profitability analysis and cost effectiveness analysis. Lastly, the market function audit refers to the marketing mix elements.

SWOT analysis is part of marketing audit, which is a tool for auditing an organization and its environment. SWOT is used to assess an organisation’s strengths, weaknesses, opportunities, and threats.

The example to better illustrate SWOT is XYZ Company. XYZ Company is a tyre manufacturing company.

Strength refers to the competitive advantages or core competencies that gives the firm an advantage in meeting the needs of its target markets. Examples for XYZ Company’s strengths are patents, robust reputation, a wide range of products to cater to consumers needs and wants, shortening of lead time, good marketing integrated system and providing value-added services such as after sales services. XYZ Company exercised its strength by producing consistency in meeting the needs of the target markets.

Weakness refers to any limitation that a company faces in developing or implementing a marketing strategy. Examples of XYZ Company’s weakness are high cost structure and insufficient supply to meet the huge demand. In order to reduce these weakness, XYZ Company implements cost saving strategies to reduce high cost structure and offers alternatives to the huge demand.

Thus, strengths and weaknesses are internal factors, which influences an organisation’s ability to satisfy its target market and are controllable by the organisation. Both strengths and weakness should be examined from a customer perspective because they are only meaningful only when they help or hinder the firm in meeting customer.

Opportunities refer to favourable conditions in the environment that could produce rewards for the organisation if acted upon properly. Examples of XYZ Company’s opportunities are arrival of new tyre moulding technologies and free trade agreements. In order exploit such opportunities, XYZ Company utilises new technology to achieve economies of scale and scope. XYZ Company devised business expansion plans to new regional markets by maximizing the usage of free trade agreements.

Threats refer to conditions or barriers that may prevent the firm from reaching its objectives. Example of XYZ Company’s threat is the escalating cost of raw materials. In order to minimise this threat, XYZ Company is signing long-term exclusive contracts with rubber suppliers to get rubber on a more favourable term. 

Thus, opportunities and threats are external factors, which exists independently of the firm and represent issues to be considered by all organisations.

In essence, an organisation matches internal strengths to external opportunities; it creates competitive advantages in meeting the needs of it customers. An addition, organisation should also act to convert internal weakness into strengths and external threats into opportunities

Next, XYZ Company, which is a tyre manufacturing company, is used to illustrate the interactions among the key factors in the application of SWOT analysis.

First is the interaction between strength and opportunity. XYZ Company’s strength is a wide range of products to cater and XYZ Company opportunities are the arrival of new tyre moulding technologies and free trade agreements. With the utilisation of new technology, XYZ Company achieves economies of scale and scope by producing large quantities and better quality products to customers. Furthermore, XYZ Company can target not just the local market but also expand its businesses to new regional markets by maximizing the usage of free trade agreements. This is the key success factor for XYZ Company as the strength facilitates the organisation in its efforts to exploit opportunities.

Second is the interaction between strength and threats. XYZ Company’s threat is cut throat competition as competitors lower their price, the customers will be attracted to such offers and switch to their competitors, as these are savings. However, XYZ Company has strengths such as value added service, call centre, after sales services and a comprehensive marketing information system. Furthermore, It has a good track record of prompt delivery of goods. Customers will think twice as the switching cost is high.  Therefore, XYZ Company has demonstrated these strengths overcome the threats that encompasses.

Third is the interaction between weakness and opportunity. XYZ Company’s weakness is the insufficient supply to meet the huge demand. For example, Off-The-Road (OTR) tyres are relatively large tyres, which are facing shortages worldwide, but the demand is huge. Therefore, the opportunity for expansion to regional markets with high demand is comprised. The next weakness is that XYZ Company’s tyres do not have Euro 4 and Dot certification. Huge capital is involved in applying these certifications and it is a liability. In order to counter this weakness, XYZ Company get loans from financial institutions.

Fourth is the interaction between weakness and threat. In this instance, the fact is clear that weakness impair the organisation ability to cope with threats. The threat that XYZ Company faces is perfect competition. There is no barrier to entrance and exit to market. There will be potential entrants or competitors to compete away the profits. Moreover, the weakness that XYZ Company’s brand is still not robust to contend with established brands. In order counter, XYZ Company devise plans to build strong branding in their products through marketing mix. So, as to gain customer’s confidences, owning the product generic recognition and setting the bench mark of quality tyres.

In conclusion, through exploring the interactions between factors with the SWOT analysis, it identifies the key internal strengths and weakness matched with external factors to indicate the organisation’s ability abilities to respond to key factors in the business environment