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We discussed the marketing principles and the frameworks to develop strategies in the last post.
However, to grow a business, it’s important to have a deep understanding of yourself, your products and services
In other words, knowing about your company and your competitors enhances the chance of success.
One framework for analysis is SWOT analysis, which we will be learning about.
What is SWOT ANALYSIS?
SWOT analysis is a method for examining both internal aspects of a company and external environmental factors. It includes four key functions: “Strength”, “Weakness”,” Opportunity”, and “Threat”. It’s effective for understanding your position in the market and making an effective strategy for long term success.
This analysis helps to identify the relationship with competitors, uncover a new business opportunity, and anticipate a potential future challenge.
What is the advantage of using SWOT analysis?
1. Catching market trends and competitors’ action
By analyzing the external environment of companies, you can identify market opportunities where companies can maximize their strength as well as threats that might prevent them from achieving goals.
This analysis allows companies to detect market trends and competitors’ actions more quickly. It helps to enhance their ability to respond quicker to the market.
2. Finding problem inside of companies
By analyzing the internal aspects of a company, you can uncover problems found in daily work, such as lack of technology or information, communication difficulties, and inefficiencies of work.
Understanding these problems through the analysis enables companies to develop effective solutions and utilize their strengths to cover weaknesses in the process of making strategies.
So, how can we apply this analysis effectively?
Examples of SWOT analysis
1. Analyzing the external environment: opportunity and threat
Opportunities are factors that impact companies positively, while threats are that impact negatively.
Here are some potential components of opportunities and threats.
Opportunities:
- Development of technology
- Global trends
- Market growth
Threats:
- New regulations to restrict business opportunities
- And increase in the number of competitors
- Global recession
Examples
Opportunities:
- The development of automation technology enhances the manufacturing process.
- increased demand for certain products due to the influence of a popular singer.
- The global trend toward eco-friendly products has led to a rise of straws made from paper and it indicates that other eco-friendly products will increase their sales.
Threats:
- Inflation in the world has decreased customers’ interests to buy luxury products than before.
- The increase of the number of competitors has led to a fierce price war
- A new regulation restricts the use of social media in the country.
2. Analysis of strength and weakness
Strengths are positive factors of companies that can lead to growth, while weaknesses are negative factors that need to be solved.
Components of strength and weakness
Strength:
- Strong relationships among workers
- High-levels of academic knowledge among workers
- Unique technologies and skills that competitors don’t have
Weakness
- An environment that diminish employee’s motivation
- Shortages of workers and technology
- Inefficient work processes
Examples
Strength:
- Companies hire lots of workers with relevant academic knowledge and talents.
- Companies offer products with competitive and unique aspects due to their proprietary technology.
- A strong brand image, built on their high-quality product enhances competitiveness in the market.
Weakness
- Outdated systems lead to decreased work efficiency.
- Insufficiate technology and workers reduces efficiency.
- Work environment affects employee motivation negatively
Another Real-Life Example: Stripe
Let’s take a look at a company in everyday life. You might be familiar with Stripe, a company that primarily focuses on online payment services. In this case, we’ll examine their specific service, “Stripe Terminal.”
“Stripe Terminal provides platforms and businesses with developer tools, certified card readers, Tap to Pay on compatible iPhone and Android devices, and cloud-based device management.”
This service is designed for companies looking to adopt a digital payment system as an alternative to traditional, physical payment methods.
Now, what does the SWOT analysis look like for Stripe?
Strength:
- Stripe Terminal is highly customizable.
- Stripe excels in omnichannel payment solutions, seamlessly integrating in-store payments (via Stripe Terminal) with online sales (via Stripe’s payment gateway)
Weakness:
- Stripe Terminal’s transaction fees in person (2.7% + $0.05) and for domestic cards (2.9% + 0.30c/successful charge) are high.
- Over time, this can lead to higher overall costs for businesses processing large transaction volumes.
Opportunity:
- The adoption rate of digital payments has accelerated in-store payments and online payments because of COVID-19.
- The digital wallet is adopted with rapid rate, nearly 90% of smartphone users sending or receiving via p2p or mobile applications, such as Apple Pay.
Threat:
- Security issues due to the rise of online payments frauds, scamming, etc.
- Technical issues that cause customers’ uncomfortable experience.
You might be wondering why we’re using Stripe as an example, but you’ll find out in the next blog post. Stay tuned! 🙂
Advanced SWOT analysis: Cross SWOT analysis
Cross SWOT analysis is the next step after SWOT analysis, as it considers the combinations of a company’s internal and the external environment.
Strength + Opportunity
Strategy which utilizes the company’s strength to make better opportunity is called “SO strategy”.
Examples
- Workers with academic knowledge and the advancement in AI technology to enhance the market growth.
- As awareness of eco-friendly practices grows, companies can make a sustainable product or recyclable product, using their existing technology.
Strength + Threat
Strategy which utilizes strength to eliminate potential threats is called “ST strategy”.
Examples
- In response to increasing competition, companies can emphasize their high-quality product, uniqueness, and strong brand image developed through their long-term effort.
- By applying their academic knowledge, they can develop 5G technology to respond to the declingvalue of 4G products.
Weakness + Opportunity
Strategy which addresses their weakness by leveraging opportunities is called “WO strategy”.
Examples
- To reflect the eco-friendly trend, companies can grow a culture of innovation and risk-taking.
- To create a new product using AI technology, they can enhance workers’ knowledge through lectures by university professors.
Weakness + Threat
Strategy which addresses the weakness and eliminates threats is called “WT strategy”.
Examples
- To protect a company’s position in the market, they can renew their system to enhance manufacturing efficiency.
- To comply with the new regulations for the protection of private information, a company improves the security of its digital information systems.
SWOT analysis is a straightforward approach, so it sometimes leads to it being perceived as an outdated framework. Some people believe it’s too simple to be applicable in today’s complex market. Therefore, it’s important to utilize it with other frameworks, such as 3C analysis and the marketing mix.
Despite its simplicity, SWOT analysis is widely used across various fields. Understanding this framework can enhance the efficiency of creating a new strategy.
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