SWOT analysis is a basic, straightforward model that provides directionand serves as a basis for the development of marketing plans. Itaccomplishes this by assessing an organizations strengths (what anorganization can do) and weaknesses (what an organization cannot do) inaddition to opportunities (potential favorable conditions for an organization)and threats (potential unfavorable conditions for an organization). SWOTanalysis is an important step in planning and its value is oftenunderestimated despite the simplicity in creation.
The role of SWOTanalysis is to take the information from the environmental analysis andseparate it into internal issues (strengths and weaknesses) and externalissues (opportunities and threats). Once this is completed, SWOT analysisdetermines if the information indicates something that will assist the firm inaccomplishing its objectives (a strength or op nternal Analysis – The internal analysis is a comprehensive evaluation of the internal environment’s potential strengths and weaknesses. Factorsshould be evaluated across the organization in areas such as: y Company culture, image y Organizational structure y Key staff y
Access to natural resources y Position on the experience curve Y External Analysis – An opportunity is the chance to introduce a newproduct or service that can generate superior returns. Opportunities canarise when changes occur in the external environment. Many of thesechanges can be perceived as threats to the market position of existingproducts and may necessitate a change in product specifications or thedevelopment of new products in order for the firm to remain competitive. Changes in the external environment may be related to: y Customers y Competitors y Market trends y Suppliers y Partners y Social changes y New technology y
Economic / Political environmen Operational efficiency, capacity y Brand awareness y Market share y Financial resources y Exclusive contracts y Patents and trade secrets Analysis is instrumental in strategy formulation and selection. It is astrong tool, but it involves a great subjective element. It is best when usedas a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknessesand external threats. SWOT Analysis helps in strategic planning infollowing manner-a. It is a source of information for strategic planning. b. Builds organization¶s strengths. c.
Reverse its weaknesses. d. Maximize its response to opportunities. e. Overcome organization¶s threats. f. It helps in identifying core competencies of the firm. g. It helps in setting of objectives for strategic planning. h. It helps in knowing past, present and future so that by using past andcurrent data, future plans can be chalked out. SWOT PROFILE OF LU STRENGTHS1. Strong Market Research (door to door sampling is done once a year in Urban andRural areas). 2. Many variants (Almond Oil, Orchid Extracts, Milk Cream, Fruit Extracts, Saffron,Sandalwood Oil, and Honey to name a few). 3. Strong sales and distribution network backed by HUL. . Strong brand image. 5. Positioning focuses on the attractive beauty segment. 6. Dynamically continuous innovation of the product and brand rejuvenation ± newvariants ( Aromatic Glow and Chocolate Seduction and Lux White Spa body wash) and innovativepromotions (22 carat gold coin promotion ± µChance Hai¶). 7. Perceived to have high value for money (strong brand promotion but relatively lower price which is a winning combination in the popular segment). 8. Though it is in popular segment, it is having mass appeal/market presence across allsegments (15% of the soap market captured by Lux (sales / volume) 9.
Unique advantage of having access to resources and assets of HUL. WEAKNESSES1. Lux is mainly positioned as beauty soap targeted towards women, hence it lacksunisex appeal. 2. Usage rate/ wear rate is high and is generally mushy and soggy. 3. Some variants like the sunscreen, international variant did not do well in the market. 4. Certain advertisements like the recent one with Shah Rukh Khan resulted incontroversial interpretations of the message of the advertisement and lead to some lossof focus (of message of the advertisements). 5. Stock out problems – replenishment time is high in semi-urban/rural areas.
OPPORTUNITIES1. Soap industry growing by 4% in India. 2. Beauty segment¶s Compounded Annual Growth Rate (CAGR) is very high. Anindication of this is that Fair and Lovely¶s segment is increasing at a fast rate – Lux mustreinforce its presence in the beauty segment. 3. More promotions like price-off and samples. 4. Retentive strategy required as the soap segment is in the mature stage of its productlife cycle. 5. Line extension ± probably with more variants catering to the beauty segment likenatural, herbal soap etc. 6. Liquid body wash is currently in the growth stage ± Lux should come out with morevariants in this segment.
THREATS1. New entrants/local competitors/MNCs would increase the competition (Camay, P;G). 2. High internal competition ± Pears also catering the beauty segment (also from HULstable). 3. Excessive dependence on beauty segment makes Lux vulnerable to changingcustomer tastes. 4. Technological change makes the existing products obsolete ± Lux should focus ontechnological innovations like Body Wash. Conclusion It is not simply enough to identify the strengths, weaknesses, opportunities, andthreats of a company. In applying the SWOT analysis it is necessary to minimizeor avoid both weaknesses and threats.
Weaknesses should be looked at in order toconvert them into strengths. Likewise, threats should be converted intoopportunities. Lastly, strengths and opportunities should be matched to optimizethe potential of a firm. Applying SWOT in this fashion can obtain leverage for acompany. As can be seen, SWOT analysis can be extremely beneficial to those whoobjectively analyze their company. The marketing manager should have roughoutline of potential marketing activities that can be used to take advantage of capabilities and convert weaknesses and threats