Category Management Toolkit

SWOT Analysis
 SWOT Analysis Summary

What is SWOT Analysis?

Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis is a tool which can
be used to highlight the organisation’s strengths and weaknesses and the market
opportunities and threats currently faced. This can be used as the basis for formulating
management options.

While strengths and weakness relate to the resources and capabilities of the firm
(Internal), opportunities and threats relate to the business environment (External).
Analysis must be in comparison to competitors and in the context of the market and it
must focus on points that are relevant (i.e. a strength in an area which has little influence
on performance should not be included).

Where does it fit in with Category Management?

Gather Internal and External Data
Analyse Data and Generate Options
Development of a Source Plan

What is included in this guide?

Typical Application
Supplier SWOT Model
How to Use Supplier SWOT Analysis
General Comments

Which processes does the tool apply to?

Demand Management, SRM and Strategic Sourcing

Which other tools link to this guide?

Supply Market Research
Supply Market Analysis
Supplier Research
Supply Market Analysis
PEST Analysis
Portfolio Analysis
Hypothesis Tree
SWOT Analysis

Typical Application
SWOT analysis is typically used to generate a list of factors affecting an organisation’s
position within a market, industry or sector. It is a simple framework to guide more
detailed formal analysis.

It is best performed towards the beginning of a project but may also be useful in client
interviews or workshops by letting the participants brainstorm and prioritise within each
category. The key issues identified by the SWOT analysis can feed into a project’s
research programme and contribute to a hypothesis tree.

Supplier SWOT Model

The Supplier SWOT model is used to understand the market from a supplier’s perspective,
and gain insight into supplier strategies. This can be useful when understanding your
bargaining power with a supplier.

Strengths

A supplier’s strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage.

Examples of such strengths include:

Patents
Strong brand names
Good reputation among customers
Cost advantages from proprietary know-how
Excusive access to high grade natural resources
Favourable access to distribution networks.
Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of
the following may be considered weaknesses

Lack of patent protection

A weak brand name
Poor reputation among customers
High cost structure
Lack of access to the best natural resources
Lack of access to key distribution channels.
4

In some cases, a weakness may be the flip side of a strength. Take the case in which a
firm has a large amount of spare capacity. While this capacity may be considered a
strength that competitors do not share, it also may be a considered a weakness if the
large investment in developing the extra capacity prevents the supplier from reacting
quickly to changes in the strategic environment.

Opportunities

The external environment analysis may reveal certain new opportunities for profit and
growth. Some examples of such opportunities include:

An unfulfilled customer need

Hints & Tips
Arrival of new technologies
• Brainstorm all possible
Loosening of regulations
risk factors before
Removal of international trade barriers. analysing each in more
detail. SWOT analysis
Threats can never be complete,
apply the 80:20 rule in
Changes in the external environment also may present deciding where to
threats to the firm. Some examples of such threats stop.
include:

Shifts in consumer tastes away from the supplier’s products

Emergence of substitute products
New regulations
Increased trade barriers.

How to use Supplier SWOT analysis

Hints & Tips
A SWOT analysis is usually done in 4 phases:
• Try to be mutually
Phase 1: Define the market the supplier / exclusive and
organisation is competing in and list the key players collectively
in the market exhaustive (MECE).
Issues cannot be
Phase 2: Put yourself in your supplier’s ‘shoes’ and
both opportunities
view the world from their perspective and: and threats or
• Gather existing analyst reports, expert strengths and
interviews, annual reports, players analysis, weaknesses
strategic group analysis
• Draw out what seems to be the most important
themes in the research you have gathered
• Fit each item into the relevant section of the SWOT model and add any additional
conclusions you may have drawn.
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Phase 3: Review linkages with Political, Economic, Sociological and Technical (PEST)
model and other analysis undertaken
Phase 4: Relate the output to the strategies that the supplier may or may be about to
pursue. Potential SWOT strategies may include:
• S-O strategies pursue opportunities that are a good fit to the companies strengths
• W-O strategies overcome weaknesses to pursue opportunities
• S-T strategies identify ways that the firm can use its strengths to reduce its
vulnerability to external threats
• W-T strategies establish a defensive plan to prevent the firm’s weaknesses from
making it highly susceptible to external threats.

General Comments
After completing your SWOT analysis, ask yourself these questions:

How can the organisation leverage strengths to capitalise on the opportunities?

How can the threats identified be overcome?
What does the organisation need to do to overcome its weaknesses?
How will the organisation approach the identified opportunities?

A word of caution, SWOT analysis can be very subjective. Do not rely on it too much. Two
people rarely come up with the same final version of SWOT, so use it as a guide and not a
prescription. Adding weighting criteria to each factor increases validity.
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SWOT Matrix

Strength Weakness
• Skill, knowledge/experience • Missing assets needed to
• Organisational resource or compete, condition that places a
competitive capability supplier at a disadvantage
• Market advantage • Competitive liabilities or unproven
• Competitive assets abilities

• Patents • Lack of patent protection

• Strong brand names • A weak brand name
• Good reputation among customers • Poor reputation among customers
• Cost advantages from proprietary • High cost structure
know-how • Lack of access to the best natural
• Excusive access to high grade
resources
natural resources • Lack of access to key distribution
• Favourable access to dist ribution channels
networks

• An unfulfilled customer need • Shifts in consumer tastes away from

• Arrival of new technologies the firm’s products
• Loosening of regulations • Emergence of substitute products
• Removal of international trade • New regulations
barriers • Increased trade barriers

Opportunity: Threats:
• External characteristics that • Factors that may undermine
provide potential competitive existing business model– HR,
advantage or growth technology, new products,
regulation, politics, demographics
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