SWOT Analysis and its importance
SWOT analysis is a basic framework that evaluates and monitors the external and internal environment of an organization and measures its strength, weakness, opportunities and threats. In order to understand the essence of SWOT analysis, it is important that we break down its components with respect to its operating environment.
External Environment: This consists of several external factors which explore the different opportunities that are available for a particular organization. Apart from this, it also evaluates the potential and current threats that might disrupt the organization’s strategic goals.
- Opportunities: This is an area in which a particular company in question can earn high profitability and succeed in a longer run. If we look at the scenarios of opportunity, we find that there are three possible scenarios. The first is to offer a product or a service which is in demand but short in supply. The second is to offer its products and services in a different and a better way. The final scenario is to offer a completely new and innovative product that the market has never seen. One of the best examples of this is Apple Inc., which spotted an opportunity in the music player market and introduced its iPod. With its innovated design and user interface, iPod soon became the undisputed market leader in the music player industry.
- Threats: This is a sort of a challenge that the company faces in the absence of proper marketing strategies. This may lead to loss of sales and reduction in overall profits. Although, there are always some form of minor threats in the market, the company in question cannot ignore the major ones, which have capability of hurting its market share.
Internal Environment: This deals with the internal situation of the organization. What are the strengths that can be used to its advantage and what are the weaknesses that can be eliminated?
- Strengths: This is probably the biggest factor that can determine the organization’s success or failure in the market. It needs to harness and take full advantage of its strength. It should be its unique selling proposition (USP). Apple Inc. makes full use of its superior brand image while marketing its expensive gadgets in the markets, and does it successfully!
- Weaknesses: Every business has some weaknesses; the question is how to correct these and how to make sure that they do not affect the overall marketing efforts. Some of the weakness can be ignored, but some need to be eliminated as early as possible, or it can lead to severe long term repercussions.
SWOT Analysis for McDonald’s
Let us analyse the market situation of McDonald’s, which is the world’s biggest fast food chain in terms of revenues.
Strengths: The biggest strength of McDonald’s is its powerful brand image and its presence in more than 120 different countries. This component is very important for the fast food chain’s success because by focusing and building on its strength, it can sustain its leadership in the food business. One of the best examples of its brand strength was ‘I’m lovin’ it’ campaign, which was launched in 2003 in more than 129 countries. After nearly ten years, McDonalds now has a loyal fan following. This can be concluded from the fact that if you ask any person about the origin of “I’m lovin’ it”, he or she would reply with “McDonald’s”!
Opportunities: This is extremely important for the fast food giant because of it can allow McDonald’s to come out of its comfort zone and try something new. The introduction of ‘Mc Cafe’ section to all of its outlets in America can be seen as a great opportunity for the fast-food giant, as it can compete with the likes of Starbucks and target a whole new customer base. Diversification of its menu is another great opportunity through which McDonald’s can compete with Subway and grab its market share. Finally, it needs to concentrate on developing markets such as India, China and Brazil, where the number of people who consume fast food is growing at a rapid pace.
Conclusion and how to use strengths and opportunities to your business advantage?