Activity 15
SWOT

Figure 3.3 SWOT analysis

Overview

SWOT analysis emanated from the Stanford Research Institute in the mid-1960s. The model is a mnemonic (for strengths, weaknesses, opportunities and threats) representing the factors to consider when assessing a business or a proposition. It is a popular analysis tool within the category management process, as it helps the category team explore existing and new suppliers, as well as gain a perspective on the team’s possible leverage/negotiation position.

Elements

SWOT analysis necessitates an understanding both of an organisation’s environment and of its resource capabilities. The matrix is divided into four key areas:

• Strengths – These are positive internal attributes (e.g. highly skilled staff, intellectual property rights and corporate brand).
• Weaknesses – These are the internal weaknesses of the organisation (e.g. high overheads, old technology and poor internal processes).
• Opportunities – These are external factors that could influence the organisation (e.g. a supplier with an opportunity to introduce cost savings into the category).
• Threats – These are external risk factors (e.g. the threat of consolidation in the supply market, thus reducing the number of suppliers available to work with).

So what?

SWOT analysis is normally used in conjunction with a range of other analytical tools as part of the overall category management process.

It is often used to evaluate organisations; however, it can also be used on oneself for personal development purposes.

Category management application

• Highlights an organisation’s strengths, which may help the category team develop a category plan
• Can determine what opportunities may be available for further exploration by the category team
• Reveals potential threats in the supply market which could adversely affect the category project
• Enables comparison of important factors between the buyer and its supplier organisations

Limitations

SWOT is purely a ‘snapshot’ in time of the status quo. It does not provide direction or next steps. Some critics have argued that SWOT is not really an analytical tool and that it is purely a framework to structure facts and data concerning the current situation.

It should be noted that there is overlap between SWOT and STEEPLE (Activity 16), albeit SWOT considers both internal and external factors, while STEEPLE only considers external influences.

Template

The following template can be used to support category analysis:

• Template 15: SWOT