SWOT Analysis | What is SWOT Analysis? | Examples of SWOT Analysis

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SWOT analysis was originally conceived and developed in the 1960s and

its basic organising principles have remained largely unchanged in the

field of strategic management since that time (Kotler et al., 2013). It is,

as Ghazinoory, Abdi and Azadegan-Mehr (2011) comment, a systematic

framework which helps managers to develop their business strategies by

appraising the internal and external determinants of their organisation’s

performance. Internal environmental factors include leadership talent,

human resource capabilities, the company’s culture as well as the

effectiveness of its policies and procedures. In contrast, external factors

include competition, government legislation, changing trends, and social

expectations (Johnson, Scholes and Whittington, 2008).

The SWOT analysis framework involves analysing the strengths (S) and

weaknesses (W) of the business’s internal factors, and the opportunities

(O) and threats (T) of its external factors of performance (Ghazinoory,

Abdi and Azadegan-Mehr, 2011). Through this analysis, the weaknesses

and strengths within a company can correspond to the opportunities and

threats in the business environment so that effective strategies can be

developed (Helms and Nixon, 2010). It follows from this, therefore, that

an organisation can derive an effective strategy by taking advantage of

its opportunities by using its strengths and neutralise its threats by

minimising the impact of its weaknesses. Moreover, SWOT analysis can

be applied to both a whole company as well as a specific project within a

company in order to identify new company strategies and appraise

project feasibility.

Hollensen (2010) asserts that the strengths and weaknesses of a

company relate to its internal elements such as resources, operational

programmes and departments such as sales, marketing and distribution.

More specifically, a strength is an advantageous – or even unique – skill,

competency, product, or service that a business or project possesses that

allows it to create competitive advantages. This may include abstract

concepts, such as its possession of strong research and development

capabilities. A weakness on the other hand is a strategic disadvantage,

such as a skill that the business or project lacks which limits it and

creates potential risks in negative economic conditions. Achieving a

balance between such positives and negatives is therefore a necessary

pre-requisite for any company and it is also imperative that a company

continues to review its strengths and weaknesses to take account for

changes in its internal environment (Kotler et al., 2013).

An opportunity is, as Henry (2011) comments, a desirable condition

which can be exploited to consolidate and strengthen a strategic position.

Examples of this phenomenon would include growing demand for a

trendy new product which it could consider selling, such as that

announced by Burger King relating to the introduction of a black

cheeseburger (Molloy, 2014). A threat on the other hand, is a condition

that creates uncertainties which could potentially damage an

organisation’s performance or market share (Henry, 2011). Threats

include the introduction of new competing products or services, foreign

competition, technological advancements, and new regulations.

Examples of the fear of such external factors can be noted in the

comments of companies planning to relocate their headquarters and

registration bases from Scotland to England in the event of a ‘yes’ vote in

the Scottish referendum in September 2014 (Wright, Titcombe and

Spence, 2014). Therefore, a company needs to develop strategies to

overcome these threats in order to prevent the loss of its market share,

reputation, or profit. It must be noted, however, that opportunities and

threats exist in the environment and therefore are often beyond the

control of the organisation – but they do offer suggestions for strategic

direction. SWOT analysis, as a result, demands a great deal of research

into an organisation’s present and future position (Johnson, Scholes and

Whittington, 2008). The results of SWOT analysis provide a useful source

of information from which an organisation can go on to develop policies

and practices which allow it to build upon its strengths, diminish its

weaknesses, seize its opportunities, and make contingency plans or

measures to eradicate or curtail threats, as Kotler et al. (2013) observe.

SWOT analysis is widely used by managers because of its simplicity

(Hollensen, 2010). It is used as a planning tool that can be adapted to a

range of situations and projects. Whilst it is not the only technique

available to managers, it can often be the most effective if used properly

(Henry, 2011). The basis for a SWOT analysis is usually drawn from an

audit review as well as from independently carried out interviews with

staff and customers. Data is then analysed to arrive at a list of issues

which can be categorised into strengths, weaknesses, opportunities, and

threats. The key issues and company activities are then reassessed

through protracted discussions between managers and reduced further

to identify the most important issues and the potential impact that they

could have on the organisation. If too many issues are included in the

analysis, there will be a lack of focus in the development of a new

company strategy and thus it is important to ensure that such discussions

focus on a limited number of factors (Ghazinoory, Abdi and Azadegan-

Mehr, 2011). Additionally, the issues considered should be made in view

of customer opinions and perceptions, which would therefore require

objectivity. Ideally, a company should carry out a SWOT analysis on a

regular basis in order to assess its situation against its competitors in a

constantly evolving market environment (Fernie and Moore, 2013).

According to Stalk, Evans and Schulman (1992, p. 62), “the essence of

strategy is not the structure of a company’s products and markets but

the dynamics of its behaviour”.

It is also recommended that an organisation should develop and

undertake SWOT analysis on its competitors so that it is able to take into

account consumer perceptions and determinants of their buying

behaviour. This is particularly the case with issues such as quality, in

which perceptions may be more powerful than reality (Kaplan and

Norton, 2008). In today’s highly competitive and fast changing market

environment, managers may make a grave error when evaluating their

company’s resources; that is, not to assess them relative to the

competition (Kotler et al., 2013). A competitive analysis as part of the

SWOT framework is always necessary in order to determine an

organisation’s position in the wider market. Thus, for example, if a

project or business strength is the amount of capital it has to invest in

improved IT functionality, this may not be the case if its competitor is

investing double this amount to improve its own IT functionality. Thus, it

is no longer a strength but rather a weakness for the company. The same

competitive analysis should also be taken into account when assessing

opportunities and threats, as it depends on the relative situation of the

competing businesses (Johnson, Scholes and Whittington, 2008).

McDonald (1989, p. 16) states that the “SWOT device… whilst potentially

a very powerful, analytical device, is rarely used effectively”, and

recommends using a summary from a marketing audit to arrive at a

sound SWOT analysis; the analysis must be conducted rigorously so that

it prioritises the issues of paramount importance. Further, McDonald

suggests keeping it focused on critical factors only and to maintain a list

of differential strengths and weaknesses in comparison to competitors,

concentrating mainly on competitive advantages. Additionally, only

critical external opportunities and threats should be listed with a focus

on the real issues. Finally, according to McDonald (1989), the reader of

the SWOT analysis should be left with the main issues encompassing the

business to the extent that they are able to derive and develop marketing

objectives from them. At the end of the analysis, the organisation is left

with reasons behind their choices as well as their potential impacts,

which provides them with a stronger basis from which to form future

strategic decisions.

Example of a SWOT analysis of the McDonald’s Corporation

Strengths

Open door policy to the press

Ceres guidance and co-

ordination and active CSR

Selective supply chain

strategy

Rigorous food safety

standards

Affordable prices and high

quality products

Nutritional information on

packaging

Weaknesses

Inflexible to changes in

market trends

Difficult to find and retain

employees

Drive for achieving

shareholder value may

counter CSR

Promote unhealthy food

Promoted CSR meat imports in

error

Decentralised yet connected

system

Innovative excellence

programme

Promoting ethical conduct

Profitable

Opportunities

Attractive and flexible

employment

Positive environmental

commitments

Higher standards demanded

from suppliers

Corporate responsibility

committee

Honest and real brand image

Threats

Fabricated stories about the

quality of chicken

Unhealthy foods for children

Health concerns surrounding

beef, poultry, and fish

Labour exploitation in China

CSR at the risk of profit loss

Contributor to global warming

Local fast food restaurants

Political instability (e.g.

Russia)

Strengths

Open door policy to the press

At times of wider national food scandals, for instance those related to

BSE, McDonald’s operated an open door policy, allowing the press into a

limited number its restaurants and suppliers (Vrontis and Pavlou, 2008).

This was done as a deliberate measure to reassure the public of the

safety of McDonald’s.

Ceres guidance and co-ordination, and active CSR

McDonald’s, as Valax (2012) notes, co-ordinates with employees,

investors, environmental and corporate social responsibility (CSR)

organisations, such as Ceres, to improve its social and environmental

programmes. As a result of such policies, McDonald’s can be seen to be

continually updating its profile to take account of changes in consumer

preferences – keeping the firm relevant and allied to the desires of its

customers.

Selective supply chain strategy

McDonald’s works to ensure that its suppliers meet or exceed safety and

quality standards as well as complying with best practice with reference

to a sustainable food supply and animal welfare (Deng, 2009). Indeed, its

recent advertisement campaigns have laid a premium on the traceability

of products used.

Rigorous food safety standards

McDonald’s, as Vrontis and Pavlou (2008) observe, works hard to ensure

that high food safety standards are met through training, food, safety and

quality and menu development in each restaurant. This filters through to

its partners, ensuring that they operate ethically and meet social

responsibility standards. The high training required can also be noted by

reference to its endorsement of specific qualifications and training for

staff – thereby adding value to its workforce (Valax, 2012).

Affordable prices and high quality products

McDonald’s is an efficient provider of high quality foodstuffs and always

seeks to offer the best value to its customers, as noted by its 99p ‘value’

range (Harnack et al., 2008).

Nutritional information available on packaging

McDonald’s was one of the first fast food restaurants to disclose

nutritional information on its packaging and continues to seek new ways

in which it can provide nutrition and balanced active lifestyles for its

customers (Harnack et al., 2008). Indeed, there are sections of the

corporate website specifically tailored to this data.

Decentralised yet connected system

McDonald’s provides a core system of values, principles and standards

which managers adhere to in combination with its “Freedom within the

Framework” programme, which provides them with the flexibility to

respond to the diversity of its customers and local markets (McDonald’s

Corporation, 2013).

Innovative excellence programme

McDonald’s employs an array of mystery shoppers who visit premises

pretending to be customers. They inspect the premises as customers and

rate them accordingly. Many restaurants provide customer comment

contact numbers and employee satisfaction surveys. It may also be noted,

though anecdotally, that the firm responds quickly to mistakes and

problems raised with area managers.

Promoting ethical conduct

McDonald’s works hard to maintain its integrity with its shareholders

through open channels of communication (McDonald’s, 2013).

Profitable 

McDonald’s is profitable, as Wallop (2014) comments, with sufficient

capital. This allows it to grow and realise gains on its investments. Thus,

McDonald’s is able to offer help to charities as well as itself when in

need.

Weaknesses

Inflexible to changes in market trends

If customer trends move towards eating in a more eco-friendly or

organically-oriented manner, McDonald’s would be unable to follow this

trend without changing suppliers and incurring significant financial

losses (Wallop, 2014). McDonald’s could consider the introduction of new

products with the aid of market research, in coming years, to prepare

them for such potential change.

Difficult to find and retain employees

McDonald’s has had hostile relationships with unions and, although this

has been controlled, the company does find it difficult to find and retain

good employees (Valax, 2012). The company can build on its reputation

for developing top level managers by further increasing its graduate

recruitment portfolio.

Drive for achieving shareholder value may counter CSR

When McDonald’s profits fall, its stock price often falls as well; as a

consequence, it is often forced to take drastic action to resolve the

problem. (Wallop, 2014) This often relates to issues of social and

environmental responsibility. McDonald’s could be more proactive in

finding more long-term CSR suppliers and processes that provide lower

costs and higher profit margins, rather than being reactive.

Promotion of unhealthy food

Despite providing healthier product varieties, McDonald’s continues to

sell burgers that have 850 calories in them. . This could continue to harm

its reputation as an unhealthy fast food provider. McDonald’s could

research ways to reduce the calories in its products whilst still

maintaining their taste, or at the least provide low calorie burger options.

Much progress has been made in this arena – but it is suggested that

more needs to be done (Harnack et al., 2008). 

Promoted CSR meat imports in error

McDonald’s claimed to provide meat from socially and environmentally

responsible sources, but a court case found that meat had been imported

from Latin America, where rainforests were cleared to create green fields

for cattle (Deng, 2009). Where McDonald’s carries out CSR processes or

investments, it may wish to consider carrying out random checks to

ensure their standards are continually met, to minimise embarrassing

press.

Opportunities

Attractive and flexible employment

McDonald’s offers a variety of job opportunities and is proud to say that

42% of its top managers first started by serving customers (McDonalds,

2013). That the company offers a selection of different shift patterns as

well as employee benefits can be seen as further reasons as to why

McDonald’s attracts employees.

Positive environmental commitments

McDonald’s incorporates environmental commitments in its daily

operations, from the use of environmentally friendly products in

maintaining daily ‘drive-thru’ cleaning, to providing sustainable fish

sources, to using recycled packaging (McDonald’s, 2013). It was also a

pioneer of using bio-diesel and recycling fat from its fryers into a form of

fuel.

Higher standards demanded from suppliers

McDonald’s sets the standards it demands from suppliers for low cost

high quality, socially responsible supplies, in return for a long-term

business commitment (Yuece, 2012).

Corporate Responsibility Committee

McDonald’s has a standing Corporate Responsibility Committee that acts

as an advisor to its Board of Directors (McDonald’s, 2013).

Honest and real brand image

McDonald’s has built and maintains a trusting relationship with its

shareholders and customers through truthful marketing and

communications (Harnack et al., 2008).

Threats

Fabricated stories about the quality of chicken

Emails and websites have published fabricated information that

McDonald’s is using ‘monster-chickens’ in its products. McDonald’s could

build on its open door policy with the press and apply it to the web, to

combat false distribution of information (Kaplan and Norton, 2008).

Unhealthy foods for children

If competitors begin to offer premium healthy alternatives for children

with small gifts to encourage them to eat healthy, this would be a

significant threat to McDonald’s (Kotler et al., 2013). McDonald’s

positive strategy to provide a range of healthy products could include

further healthy products for children in addition to its present offering of

carrot sticks.

Health concerns surrounding beef, poultry, and fish

There are various initiatives working against hormone induced cows and

other issues such as bird flu epidemics and heavy metal levels in fish that

could reduce McDonald’s sales and cause profits and its share price to

fall (Johnson, Scholes and Whittington, 2008). McDonald’s could use its

purchasing power to its advantage to source supplies that have proven

health benefits. McDonald’s greater work with local farmers in the UK

with regard to the sourcing of beef and eggs can be seen as a step in the

right direction in this regard.

Labour exploitation in China

Chinese manufacturers exploit labour in their production of ‘Happy Meal’

toys (Valax, 2012). McDonald’s could use its purchasing power to its

advantage to demand that manufacturers provide toys without exploiting

labour.

CSR at the risk of profit loss

If share prices and profitability are under pressure, managers will

inevitably seek to resolve it at the risk of a CSR issue (Ceres, n.d.).

Contributor to global warming

McDonald’s is the largest consumer of beef in the world. Greenfields

used to supply this beef comes at the expense of rainforests, heavy use of

chemicals, fertilisers and pesticides (Ceres, n.d.). McDonald’s could use

its purchasing power to its advantage to source CSR suppliers.

Local fast food restaurants

Local restaurants which are less environmentally threatening than

McDonald’s and have less purchasing power may have better reputations

with local suppliers and customers (Wallop, 2014).

Political instability

Political instability can be a threat to the secure and continued operation

of a business. Even if local staff are employed, a tense political situation

can cause areas of operation to be closed, in the short- or long-term. An

example of this relates to McDonald’s in the Crimea and in Russia; for

the foreseeable future, McDonald’s restaurants are closed in the Crimea

as a result of the Russian invasion. In retaliation, Russia has temporarily

closed a number of McDonald’s restaurants in Russia (Wallop, 2014).

From the above SWOT of McDonald’s and the summary that follows it, it

can be seen how, by highlighting its position, an organisation can identify

areas that could be strengthened, seize opportunities, minimise threats

and diminish or eliminate weaknesses.

In summary, a SWOT analysis provides a systematic framework for

appraising an organisation’s internal and external position. It is a useful

tool but it must be constantly updated to enable the company to keep

abreast of developments and change its strategies accordingly. Whilst it

may be difficult for management to resolve all of the weaknesses and

threats highlighted, the company is at least made aware of them through

the conducting of a SWOT analysis and can refer to them when

implementing future strategies. The McDonald’s SWOT analysis case

study highlighted several CSR threats and weaknesses whilst

simultaneously highlighting strengths, such as its strong purchasing

power which could potentially be used to demand more socially

responsible production techniques from its Chinese manufacturers and

meat suppliers. It also showed how a more proactive and longer-term

approach to its strategies can help it to anticipate changing consumer

tastes and demands (Yuece, 2012).

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