What is a SWOT Analysis?

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  • 0:05 Business Mission Statement
  • 1:23 Situational Analysis
  • 2:06 Internal Strengths and…
  • 3:39 External Opportunities…
  • 4:45 Lesson Summary
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Lesson Transcript
Instructor: Sherri Hartzell

Sherri has taught college business and communication courses. She also holds three degrees including communications, business, educational leadership/technology.

In the business world, as in many other places, decisions aren't made lightly. Rather, management spends a long time considering the pros and cons of every choice. This lesson will teach you about one of the key ways they do that, the SWOT analysis.

Business Mission Statement

The foundation of any marketing plan is the firm's business mission statement. A mission statement explains the purpose of why a company is in business and what they're trying to accomplish. A business statement can't be created without analyzing the company and environmental conditions. A mission statement should be focused on the market and environment, and not just on companies' products or services.

When a company focuses too closely on their products or services rather than benefits to consumers, then the company is exhibiting marketing myopia. If a company writes a mission statement that says they're in the soda business rather than in the beverage business, they are limiting their opportunities.

An example of an excellent business mission statement is Apple's. The mission statement is 'Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.' This covers a lot of ground, and as we know, allows Apple to delve into many areas of the market. Once a mission statement has been created, then it is important to conduct a situational analysis on the overall business environment in order to compete effectively.

Situational Analysis

Have you ever had to decide whether to take a risk? Maybe the risk was buying a brand new car? Choosing your college? Most people make a list of the pros and cons to a choice before they make a final decision. Businesses also have research and analyze choices before choosing a path.

Their decision making process is called conducting a SWOT analysis, also known as a situational analysis. SWOT stands for internal strengths, internal weaknesses, external opportunities and external threats. The main purpose of the situational analysis is for marketers to understand the current and potential environments.

Internal Strengths and Weaknesses

The first part of the SWOT analysis is examining a company's internal strengths and weaknesses. In this step, a marketing manager looks internally at the company's resources, such as finances, engineering, marketing, employees and production, to see where they excel or need improvement. Marketing managers should not just look at the current situation of the firm, but also look at past historical sales, profit and cost data.

When looking for a company's strengths, it's important to ask what you're best at and what you're known for. Do you have a unique selling proposition? A USP, or unique selling proposition, is something that you're very good at, but your competition is not. Disney would be an example of a company with great internal strengths in the area of human resources and employee development. They are known for their excellent employee training via Disney University.

When looking for company weaknesses, a marketing manager asks what areas need improvement. What could our competitors view as a weakness? What issues could cost us sales? They then attack those areas and have a plan in place to protect and improve their situation.

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