SWOT analysis & Porter's 5 forces

In this blog I would like to discuss SWOT analysis and Porter’s five forces. These are two significant methods that valuable to analyse and develop business strategy.

With regards to SWOT, it is a guidance, which gives opportunity to identify positive and negative positions INside your organisation and OUTside of it. Evaluation of the Strengths, Weaknesses, Opportunities, and Threats can be carried out not only for organisations but for a product, place, industry or person too. Also it could be effective at any stage of effort. SWOT analysis may be used to the following things: the first one is investigation of possible solutions to problems, secondly to do any decision-making when objective has been defined.  

This video involves a simple explanation of SWOT that gives a chance to better understand the idea.   

To give a practical example I have done the SWOT analysis to Apple Inc.

Internal		External
Strengths	Weaknesses	Opportunities	Threats
1.     Customer loyalty       2.     Brand awareness and reputation       3.     Successful marketing and advertising campaign	1.     Declining market share 2.     High price 3.     Changes in management	1.     High demand of IPhone 5 and IPad mini 2.     Growth of tablet and smartphone market	1.     Rapid technological changes 2.     Price pressure from Samsung 3.     Tax increases

According to Porter, the competitiveness of an industry is based on 5 factors. It does not enough to look only at direct competitors. There is an importance to consider four other factors, such as Threat of substitute products or services, Bargaining power of suppliers, Bargaining power of customers and Threat of new entrants. The level of certain industry identifies through the consideration all of these points. 

Example: Airline Industry.

1. Threat of New Entrants.
    This aspect has a low threat. There are low switching costs between brands; consumers tend to choose well-known companies.

2. Power of Suppliers.

    Currently, there are two manufactures Boeing and Airbus. Moreover, most firms have long-term contracts with their providers. So it has a high threat.

3. Power of Buyers.

    Firms usually occupy the certain niche of market, e.g. British Airways (it is a high price, service and refreshments during flights), but EasyJet (low price, no business class). So, each company has loyal customers. However, often purchase affected by time of traveling and name of airline does not make sense. There is a medium level of threat.

4. Threat of Substitutes

   This industry has a medium level because of existing alternatives such as car, train, and bus. However, planes stay the fastest way to achieve a destination.

 5. Rivalry among Existing Players

     The rivalry of existing firms is high because customers have a great amount of choice. The number of competitors stays the same during a long time.