Introduction to SWOT Analysis

SWOT Analysis is one of the important strategic planning models that help to evaluate the organization’s strengths, weaknesses, opportunities as well as threats by building on what the organization does well and addressing what the organization is lacking. The SWOT Analysis helps the organization to identify the available market opportunities as well as threats which further helps in effectively planning various organizations’ strategies.

SWOT analysis dimensions

The best way available to the organization to effectively use the SWOT Analysis is to match the organization’s strength with the available opportunities and to use different opportunities in an actionable manner. Then, the organization should try to convert its weaknesses into its strengths to further deal with various market rates.

The need for the SWOT Analysis

The SWOT Analysis can be done to pinpoint the areas where the business is performing well which helps to determine the critical success factors of the organization. The identification of the strengths of the organization also helps the organization to make sure that the strengthening factors are maintained. This also helps in ensuring the growth of the business.

Conducting a SWOT Analysis also helps to identify the areas of weaknesses. However, you need to consider that identifying the weaknesses is not enough. The organization also needs to minimize weaknesses before it becomes a huge problem for the organization.

The third factor that is considered in SWOT Analysis is opportunities. The SWOT Analysis helps to identify the opportunities that are available to the business organization and can help the organization to make greater profits. The consideration of the internal factors i.e. strengths and weaknesses also helps to identify the organization’s capabilities to seize an opportunity.

The other key benefit of the SWOT Analysis is counteracting the threats as depending upon the organization’s strengths and weaknesses, it can be determined how the organization can counteract various threatening factors or situations.

Consideration of all these factors under the SWOT model also helps the organization to use resources efficiently, focus on strengthening areas, seize various opportunities, establish a competitive position in the market, etc.

How to perform the SWOT Analysis?

To conduct a SWOT Analysis of an organization, you need to follow some steps which are listed as follows-

  • Determine the objective of doing the SWOT Analysis and decide on the strategy to analyze.
  • Create a grid by drawing a large square and dividing it into four smaller squares.
  • Label each box as strengths on the top left box, weaknesses on the top right box, opportunities on the bottom left box, and threats on the bottom right box.
  • After making a template for SWOT Analysis, you need to make a list of all strengths and weaknesses of the organization on the basis of the industry and market conditions.
  • Now, you need to be aware of the fact that the strengths and weaknesses are the internal factors of the organization but there are also various external factors that influence the overall operations of the organization. While doing the SWOT Analysis, you need to look at both the internal and factors affecting the organization. So, list out opportunities and threats facing the organization by considering various external market factors which include consumer trends, new technologies, government regulations, etc.
  • The last step in SWOT Analysis is to determine the strategies that can be adapted to address various business issues.

SWOT Analysis real example

Now, let us perform the IKEA SWOT Analysis. IKEA is a Swedish MNC that designs and sells a wide range of furniture, home accessories, and kitchen appliances. The Objective of the SWOT Analysis of IKEA is to analyze the strengths, weaknesses, opportunities, and threats to IKEA.

Strengths Weaknesses
  • Global presence through 445 stores around the world
  • Strong brand image
  • Higher product differentiation
  • Supply chain integration
  • Diversified product portfolio
  • Constant innovations
  • Strong financial position
  • Negative publicity due to poor working conditions and manipulative advertising
  • Low quality of products and services due to higher focus on cost reduction
  • Standardized products
  • Limited market presence in Asian markets
  • Environmental issues
Opportunities Threats
  • Business expansion by setting up more manufacturing facilities
  • Expansion in developing markets such as Brazil, Indonesia, Malaysia, Mexico, etc.
  • Launch of premium-quality furniture
  • Expansion of online business presence
  • Launch of greener products
  • Increase in demand of the premium furniture products
  • Increased competition
  • Increase in prices of the products due to higher tariffs as a result of the US-China war

The SWOT Analysis of IKEA depicts that the key strengths to IKEA include a strong brand image, global presence, higher product differentiation, supply chain integration, strong financial position, and constant innovation. However, there are various issues that IKEA faces in the current times which include low quality of products and services, limited market presence in Asian markets, negative publicity, etc. IKEA majorly focuses on offering low-cost products to customers which results in the delivery of low-quality goods to customers. However, the consideration of various strengthening factors such as consistent innovation, diversified product portfolio, supply chain integration, etc. supports that IKEA has the capability to launch premium quality furniture and expand in the line of greener products. In addition to this, the company also expanded its manufacturing units in developing markets such as Brazil, Indonesia, Malaysia, Mexico, etc. This also will help to counteract various threats which include a rise in the demand for premium products, higher competition, etc. The company is also facing the threat of an increase in prices of the products due to higher tariffs as a result of the US-China war which also will be mitigated through the expansion of the manufacturing units in developing countries and focus on supply chain integration.

Hence, SWOT Analysis is an important planning tool that can help the organization to look into its strengths, weaknesses, market opportunities, and business threats which can then help the organization to plan for the future effectively by looking at the ways to seize market opportunities and counteract various threats. Further, SWOT Analysis can also help the organization to respond to new trends, deal with competitive challenges, take advantage of new business opportunities, etc.