SWOT Analysis - Planning Online Business, E-Commerce | E-Commerce - B Com PDF Download

SWOT ANALYSIS

Evaluating Business Unit Opportunities

Now that we have learned how to identify industry value chains and break each value chain down into strategic business units, we can learn one popular technique for analyzing and evaluating business opportunities. Most electronic commerce initiatives add value by the reducing transaction cost, creating some type of network effect, or a combination of both. In SWOT analysis (the acronym is short for Strengths, Weaknesses, Opportunities and Threats), the analyst first looks into the business unit to identify its strengths and weaknesses. The analyst then reviews the environment in which the business unit operates and identifies opportunities presented by that environment and the threats posed by that environment. As shown in the following figure which shows the questions that an analyst would ask in conducting a SWOT analysis.

                            SWOT analysis questions

• By considering all of the issues that it faces in a systematic way, a business unit can formulate strategies that will take advantage of its opportunities by building on its strengths, avoiding any threats, and compensating for its weaknesses. In the mid- 1990s, Dell Computer used a SWOT analysis to create a strong business strategy that has helped it become a very strong competitor in its industry value chain. Dell identified its strengths in selling directly to customers and in designing its computers and other products to reduce manufacturing costs. It acknowledged the weakness of having no relationships with local computer dealers. Dell faced threats from competitors such as Compaq and IBM, both of which had much strong brand names and reputations for quality at that  time. Dell identified an opportunity by noting that its customers were becoming more knowledgeable about computers and could specify exactly what they wanted without having Dell salespersons answer questions or develop configurations for them. It also  saw the Internet as a potential marketing tool. The results of Dell's SWOT analysis appears in following figure:

                             Results of Dell’s SWOT Analysis

The strategy that Dell followed after doing the analysis took all four of the SWOT elements into consideration. Dell decided to offer customized computers built to order and sold over the phone, and eventually, over the Internet. Dell's strategy capitalized on its strengths and avoided relying on a dealer network. The brand and quality threats posed by Compaq and IBM were lessened by Dell's ability to deliver higher perceived quality because each computer was custom made for each buyer.