LESSON 4: SWOT ANALYSIS AND STRATEGIC FOCUS

Objectives:
1. Evaluate businesses using SWOT analysis.
2. Produce competitive advantages from the SWOT analysis.
3. Recommend a good strategy for an organization.

SWOT Analysis Overview

SWOT Analysis is a strategic planning tool used to identify and evaluate an organization’s
internal strengths and weaknesses, as well as external opportunities and threats. This framework
helps organizations understand their current position and develop strategies to achieve their
objectives.
Components of SWOT Analysis:

Category Definition Examples Purpose

Strong brand reputation,

Internal factors that Leverage strengths to
loyal customer base,
give the organization achieve objectives and
Strengths proprietary technology,
an advantage over maintain a competitive
financial resources, skilled
competitors. edge.
workforce.

Internal factors that Poor brand reputation,

Identify areas for
place the organization outdated technology, high
improvement and develop
Weaknesses at a disadvantage employee turnover, limited
strategies to mitigate
relative to financial resources,
vulnerabilities.
competitors. inefficient processes.

Emerging markets,
External factors that Capitalize on favorable
technological
the organization could external conditions to
Opportunities advancements, regulatory
exploit to its enhance growth prospects
changes, market trends,
advantage. and competitive positioning.
partnerships or alliances.

New competitors, economic Prepare for potential

External factors that
downturns, regulatory challenges by developing
could negatively
Threats changes, technological contingency plans and
impact the
disruptions, shifts in strategies to protect against
organization.
consumer behavior. adverse external conditions.

Major Benefits of SWOT Analysis:

• Cost-effective: Requires minimal resources, making it accessible for businesses of all
sizes.
 • Wide Range of Applications: Applicable in various contexts like business strategy,
project planning, and personal development.
• Promotes Discussion: Encourages collaboration among stakeholders, fostering a
comprehensive understanding of the situation.
• Provides Visual Overview: Offers a clear and structured visual summary of an
organization’s position.
• Offers Insight: Reveals critical insights by examining internal and external factors.
• Integration and Synthesis: Helps synthesize information from different areas of the
business, providing a holistic view.
• Fosters Collaboration: Involves different team members, ensuring diverse perspectives
are considered.

TOWS Matrix Overview

TOWS Matrix is an extension of SWOT analysis, developed by Heinz Weihrich. It helps
organizations develop actionable strategies by examining the relationships between internal
strengths and weaknesses, and external opportunities and threats.
TOWS Matrix Structure
The TOWS Matrix is organized into four quadrants, each representing a different strategic
approach:

Quadrant Description Strategy Example

A company with strong innovation capabilities

Strengths- Leverage strengths (strength) entering a rapidly growing market
Opportunities to maximize (opportunity), like Tesla using its innovation strength to
(SO) opportunities. capitalize on the increasing demand for electric
vehicles.

A company with a robust brand and loyal customer

Use strengths to
Strengths- base (strength) using this to withstand economic
counteract or
Threats (ST) downturns (threat), such as Apple leveraging its strong
minimize threats.
brand to maintain sales despite market volatility.

Address A company with outdated technology (weakness)

Weaknesses-
weaknesses by investing in new innovations (opportunity) to stay
Opportunities
utilizing competitive, like Ford investing in electric vehicle
(WO)
opportunities. technology to overcome its lag in the EV market.

A company reducing costs and focusing on core

Weaknesses- Develop strategies products to survive in a declining market, such as
Threats (WT) to minimize JCPenney closing underperforming stores and
focusing on its more profitable locations and products
Quadrant Description Strategy Example

weaknesses and to mitigate financial instability (weakness) and market

avoid threats. decline (threat).

Application of TOWS Matrix:

1. Strategic Planning: Helps create targeted strategies by analyzing the interaction between
internal and external factors.
o Example: A company with a strong internal R&D team (strength) and a growing
demand for innovation (opportunity) might focus on launching new products (SO
strategy).
2. Decision Making: Assists in making informed decisions by assessing all possible
scenarios and their implications.
o Example: If there is a market threat due to a new competitor but the company has
a strong distribution network, it can use that network to maintain market share (ST
strategy).
Examples of TOWS Strategies:

Strategy Type Example

A tech company with strong innovation capabilities entering a new,

SO (Aggressive Growth) rapidly growing market. For instance, Google expanding its AI
capabilities in new markets to drive growth.

A financial institution with a solid capital base implementing policies

ST (Risk Mitigation) to weather economic downturns, such as JP Morgan Chase using
its financial strength to withstand market volatility.

A traditional retail business adopting e-commerce to overcome its

WO (Transformation) lack of online presence, like Walmart investing heavily in e-
commerce to compete with Amazon.

A struggling firm reducing costs and focusing on core products to

WT
survive in a declining market, such as Kodak focusing on digital
(Survival/Retrenchment)
printing as it exited the film business.

Creating Strategic Focus with TOWS Matrix

Strategic focus is about aligning a company's strengths with available opportunities and ensuring
its strategies are well-rounded and adaptable to changes.
Major Directions for Strategic Focus:
Strategic
Description Example
Focus

Focuses on leveraging many Apple consistently innovates and expands

internal strengths and taking into new markets, using its strong brand
Aggressive
advantage of many external and financial resources to capitalize on
opportunities. global demand.

PepsiCo expanding into healthier snack

Utilizes many internal strengths to options to diversify its product line amidst
Diversification
navigate external threats. health-conscious consumer trends and
regulatory pressures.

Concentrates on improving many Netflix transitioning from DVD rentals to

internal weaknesses while taking streaming to address declining DVD sales
Turnaround
advantage of external and capitalize on digital consumption
opportunities. trends.

BlackBerry shifting its focus to software

Involves protecting against many
and cybersecurity after losing its
Defensive internal weaknesses and external
competitive edge in the smartphone market
threats.
to mitigate risks.

Blue Ocean Strategy

Blue Ocean Strategy, developed by Chan Kim and Renée Mauborgne, involves creating a new,
uncontested market space, making competition irrelevant. The goal is to:
• Find markets with little or no competition.
• Reconstruct market boundaries.
• Create and capture new demand.
• Avoid price wars and shrinking profits.
Example: Cirque du Soleil created a blue ocean by blending circus arts with theater to create a
new form of entertainment, avoiding direct competition with traditional circuses and theater
companies.
Conclusion: Good Strategy and Strategic Planning
A good strategy aligns an organization’s strengths with available opportunities while mitigating
threats and addressing weaknesses. Utilizing SWOT analysis and the TOWS matrix allows
organizations to develop comprehensive, actionable strategies tailored to their unique
circumstances.
Key Takeaway: SWOT analysis and the TOWS matrix are powerful tools that, when used
together, enable businesses to thoroughly analyze their environment and strategically position
themselves for success.