SWOT Analysis

If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantage. A strong competitive advantage, or a wide moat, gives a company sustainability, which, as investors, we're highly interested in.

In this article, we review a popular tool for evaluating competitive advantage, called SWOT analysis. SWOT analysis should be done on every company we're thinking of making an investment in.

SWOT stands for:

Strengths


Weaknesses


Opportunities


Threats

Analyzing these four factors will help you make better investment decisions. It's a brainstorming exercise, so take your time. A good SWOT analysis takes effort, but the more you put into SWOT analysis the better you will understand the company. Let's look at each factor in turn.

Strengths

First, we look at the company's strengths. What does the company do well? What makes it better than others? What does the company have, or do, that sets it apart from its competition?

These are important questions, and should include aspects of the company that made you consider it for investment in the first place. Look at branding, image, pricing power, size, market share, financial position (balance sheet strength), etc.

Here are some strengths to look for:

  • The size of the company relative to others in the industry

  • Balance Sheet strength

  • Cash flows

  • Perception of the company's products

  • Perception of the company's brand(s)

  • What advantages the company has over its competitors

  • In general, what does the company do well?

Weaknesses

Now that you've determined how wonderful the company is, it's time to look for the weaknesses. The same questions should be asked when looking for weaknesses. What does the company do poorly, or not so well? What are other companies doing better? What is keeping the company from greater success.

It's important that you don't gloss over this section. SWOT analysis is a brainstorming effort, so don't discount anything that comes to mind. If you perceive a weakness, list it. The weakness you fail to list today could be why your investment turns out poorly next year.

Some weaknesses to look for:

  • Deteriorating balance sheet

  • Poor perception of company's brand(s) and/or products

  • Advantages other company's have?

  • Lack of management or other employee talent

  • In general, what does the company do poorly?

Opportunities

We shift our focus to external factors when we look at opportunities. Here we try to identify areas of business we think the company is looking to enter, or should be looking to enter. We also look for opportunities to gain market share from competitors, or grow the company's market to new customers.

But there are more than just external opportunities. There are opportunities within a company that should be considered. Can the company combine product lines to increase sales? Maybe the company has duplicate costs that can be streamlined. Companies can always find ways to do things better.

Some opportunities to look for:

  • New markets for products

  • Financial or legal trouble for competitors

  • New technologies the company could adopt

  • Changes in regulatory / tax burdens

  • Strategic investments

  • Internal efficiencies

Threats

Finally, we need to consider threats to the company. Again, threats can be internal as well as external. In fact, I've found that internal threats usually come first, which opens the door to external threats. Therefore, it's important to do a good threat analysis.

Internal threats aren't usually classified as such, which I think is a mistake. Any internal problem is a threat to the company's well-being and should be evaluated alongside the external threats. For example, a company that relies on developing innovative products, such as Microsoft or Intel, faces the threat of losing engineering talent every day. This is an internal threat that could easily pave the way for external threats.

Some possible threats are:

  • Internal obstacles the company is facing.

  • Financial constraints on the company.

  • Cash flow problems.

  • The relative position of the company's largest competitors.

  • Technological advances in the industry (if the company isn't keeping pace).

  • New technologies that threaten to displace the company's products.

SWOT analysis is a brainstorming activity, and you should learn from it. Focus on the weaknesses and the threats when doing SWOT, because that's what will turn around and bite you after you make your investment. I'm not saying you should look only for the negatives, and ignore the company's potential. But you should analyze the risks with as much, or more, scrutiny then the opportunities. Opportunities don't always show up, but somehow risks always do.

About The Author

Chris Mallon is the editor and publisher of the Undervalued Weekly, a financial analysis newsletter. Chris holds a Master of Science in Finance and is the leading analyst for the Dynamic Investors partnership. He is available at chrismallon@dynamicinvestors.net or the through the website at chrismallon@dynamicinvestors.net.

Barrington South Lincoln Stretch rentals .. Lockport Chicago limo O’Hare
In The News:

A newly discovered security flaw with your iPhone or iPad could leave your personal information vulnerable to hackers. Kurt the CyberGuy explains.
Modeled after a traditional bell-shaped skirt worn by women in Kosovo, a theater's roof is draped entirely by solar panels to generate renewable energy on-site.
Kurt the CyberGuy explains how to protect yourself from malicious Chrome extensions that can steal sensitive information like password managers, crypto wallets and banking apps.
Stellantis' innovative STLA AutoDrive 1.0 system allows drivers to safely take their eyes off the road and their hands off the steering wheel.
Here are some travel hacks to save money on your next vacation including setting up price alerts, remaining flexible and checking for 24-hour price drops.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
One report claims at least 25 million people were targeted by infostealer malware between the beginning of 2023 and the end of 2024, capturing bank card details and passwords.
The LaserWeeder G2 uses lasers, artificial intelligence and advanced robotics to offer an alternative to chemicals traditionally used in farming.
Tech expert Kurt “CyberGuy" Knutsson says a malware app called SpyLend is posing as a financial tool, hitting 100,000-plus downloads.
Tech expert Kurt “CyberGuy" Knutsson says Clone Robotics’ Protoclone mimics humans with 1,000 muscles – too human for comfort.
Tech expert Kurt “CyberGuy" Knutsson urges you to use Apple’s App Privacy Report to see what your apps are really up to.
Tech expert Kurt “CyberGuy" Knutsson talks about how to smoothly transfer your data from an old laptop to a new one using cloud storage or external drives.
Kurt the CyberGuy offers tips to safeguard your personal information as scammers become more sophisticated with scam texts and other methods.
WeRide's unmanned electric delivery van, the Robovan W5, has 194 cubic feet of cargo space and can carry payloads up to about 2,205 pounds
Kurt the CyberGuy recommends deleting 16 browser extensions immediately in response to a report saying more than 3.2 million web users were affected by a security breach.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
A robotics firm in China claims a robot has performed the world's first humanoid robot front flip, which is significantly more difficult than a backflip.
A digital ID may be even more secure than a physical ID. Storing your driver's license in your Apple Wallet is an ideal solution for commuters.
A cybersecurity firm has shed some light on just how common tax scams have become. Kurt the CyberGuy offers his advice for how to protect your refund.
Lifesize Plans offers immersive walk-throughs that allow customers the opportunity to tour a home's design before construction actually begins.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
A man invested $4 million in bitcoin and lost it all with a single click when he was targeted by a vishing scam, which uses phone calls to trick people.
Expandable's Touchdown is a designer trailer that promises a luxury off-grid living experience and unfolds into a home in about 15 minutes.
Major employee screening company data breach affects 3.3 million people. Tech expert Kurt “CyberGuy" Knutsson explains what happened and gives five ways to protect your data.
Kurt “CyberGuy" Knutsson reveals mind-blowing tech that gives you sunlight on demand.

Strategic Planning and Total Quality Management

No matter what product or service you provide you will... Read More

Do You Really Need a Business Plan?

"I don't need a business plan."Neither did Alice in Wonderland."Would... Read More

Ten Steps To A Great Strategic Plan

Ask a small business owner about their strategic plan and... Read More

6 Steps To Laying Out Your Competitive Strategy

Why do so many companies languish and watch as their... Read More

Will and Vision

Remember Chux? The disposable diaper that took the market by... Read More

Documenting the Exit Strategy in Your Business Plan

All investors greatly desire and are motivated by a clear... Read More

Business Ideas: 3 Smart Ways To Generate Profitable Business Ideas Anytime

Creativity is one of the greatest tools for success in... Read More

The Top Five Reasons Strategic Plans Fail

"Most great plans aren't. They are just nice, high-level ideas."That's... Read More

Microsoft Great Plains in Agriculture ? implementation highlights

In this small article we'll concentrate on farmers associations and... Read More

10 Ways To Make Your Business Unique

1. Largest Selection -One way that you can make your... Read More

The Impact of Price Popularity on Profits

The goal of almost every business owner is to generate... Read More

How to Write a Business Plan in Five Steps

People often ask "What makes a good business plan? Or,... Read More

Business Planning and the ?Bozo? Factor

"Bozo" ? A clown with a forlorn look, always finding... Read More

More Uses for Your Business Plan

You have invested a lot of time and energy on... Read More

Innovate Today for Great Leaps Forward Tomorrow

How often does your company make a quantum leap forward?... Read More

TQM Total Quality Management, the book

Every decade we seem to come up with a buzz-word... Read More

Turning On The Lights

Fun From The StartFor those with the will to start... Read More

5 Strategies That Will Boost Your Business Productivity Today! - Part 2

Growing your own small business can be one of the... Read More

Microsoft Great Plains Implementation: Pharmaceutical Corporation Specifics ? overview

Microsoft Business Solutions Great Plains serves mid-size and large clients... Read More

Advice To Manufacturers Creating A Business Plan

If you are a manufacturer wanting to use your business... Read More

Break-Even Analysis

A significant advantage of some business ideas is that the... Read More

Is Plan B Ready?

Business owners and entrepreneurs are, by nature, risk takers and... Read More

Three Steps to Give Your Strategic Plan Traction

We all agree Strategic Planning is a critical part of... Read More

Consolidation in the Software Industry is Hardly New: Obsess About It or Risk Losing it All

Some analysts credit [Larry] Ellison with anticipating the consolidation in... Read More

Executive Summary for Business Plans of Franchisees

Writing a business plan for a franchised outlet of a... Read More

Downers Grove limo Chicago ..