The purpose of a SWOT analysis

by The Times 100 on Monday 1st February, 2010

Organisations can use a number of tools to help inform their strategic planning. One of these tools is a SWOT analysis. IKEA uses SWOT analysis to help it achieve its objectives. Its use helps the business to focus on key issues, especially relating to IKEA's goal of sustainability. SWOT analysis looks at the internal factors (strengths and weaknesses) and external factors (opportunities and threats) affecting a business. By recognising and understanding these factors, IKEA has been able to build on its strengths, such as its strong global brand, and take advantages of any arising opportunities e.g. the growing demand for 'greener' products. In addition, it has been able to minimise weaknesses and plan to safeguard itself against threats.

A SWOT analysis can be applied to other areas of business including the film industry. Avatar, James Cameron's 3-D sci-fi movie, has smashed box office records taking $1.9 billion worldwide in less than six weeks. It also reached the billion-dollar mark a mere 17 days after opening. So where does James Cameron go from here? Future successes may be dependent on the lessons learned from Avatar and an assessment of the internal and external factors affecting the film industry and this movie in particular. The increasingly popular 3-D format and its ability to attract both male and female audiences are no doubt strengths of this movie, although Cameron had worried that it might not 'align with people's emotional spiritual and political' beliefs. Opportunities will arise in the form of future ticket and DVD sales and there is speculation that Mr Cameron will be making a least two sequels. As far as threats are concerned, piracy is a big issue. Avatar is the most pirated film of all time, although these pirated versions are only in 2-D. Perhaps the biggest threat is the forthcoming Tim Burton movie - 3-D Alice in Wonderland which opens in March. (The Sunday Times 31st January 2010)

Questions

  1. What does SWOT stand for?
  2. What threats might the film industry as a whole experience?
  3. Using the case study, analyse the use of SWOT analysis in helping IKEA to develop as a sustainable business.
  4. Create a SWOT analysis for yourself to help you plan for your future career.

Answers to questions

  1. What does SWOT stand for? Strengths, Weaknesses, Opportunities, Threats
  2. What threats might the film industry as a whole experience? Rising cinema ticket prices, Competition for leisure time e.g. computer games, Uncertain economic climate may mean that people are more cautious about spending money on leisure activities
  3. Using the case study, analyse the use of SWOT analysis in helping IKEA to develop as a sustainable business, SWOT analysis has enabled IKEA to spot business potential in providing sustainable solutions, Identifies internal factors which are under its control, Uses Key Performance Indicators to help measure strengths or identify weaknesses, Has been able to use SWOT analysis for both products and processes, Identified opportunities have been explored and provide good returns, Has been able to plan to minimise weaknesses and counteract threats

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