Analysing the internal environment

Marketing managers seldom start with limitless resources and a blank sheet of paper. They will have existing products, existing retailers or distributors, existing location and a legacy of brand attitudes and previous marketing communications. They will also have only finite resources with which to exploit opportunities. This means that a manager must carefully review internal factors against the external environment and competitor activity.
This review of an organisation’s strengths and weaknesses should lead to an identification of opportunities and threats. It is often referred to as a SWOT analysis. This is an acronym of the headings used:

• Strengths identified within the company;
• Weaknesses identified within the company;
• Opportunities identified when strengths are related to the external environment;
• Threats identified when weaknesses are related to the external environment.

Understanding an organisation’s strengths and weaknesses

Spencer Brace, Sales & Marketing Manager, Bournemouth International Airport.

Jon Weaver, Marketing Manager, Bournemouth Borough Council

A manager needs to review all of the organisation's activities and make a judgement about their merits relative to the competition and taking into account the external environment. Where the judgement of any aspect of the organisation is positive, they would be said to be a strength; where it is negative, this would be a weakness.

Although many large organisations will support decisions with sophisticated market and internal data, this is really a creative exercise involving judgement. Insight into new competitive advantages may come from attempting to review aspects of the organisation's operations in new ways. The main areas than might be considered are:

• sales volume;
• sales growth;
• market share;
• customer base and loyalty (number of active/repeat customers)
• customer attitudes to the brand;
• customers' uses for the brand;
• the organisation's physical resources;
• the organisation's intellectual resources (staff knowledge and copyrights and patents);
• relationships with suppliers, distributors and retailers.

Understanding an organisation's opportunities and threats
Opportunities and threats follow directed from the assessment of internal strengths and weaknesses against the external environment including competitor activity. Opportunities are identified from an assessment that suggests that an organisation is in a very strong position relative to competitors in an area with a very favourable external environment.

Threats are identified from an assessment that suggests that some aspect of the organisation's activity is very weak compared to competitors and /or were that activity faces a problematic external environment.

The more insightful, detailed and imaginative the analysis of strengths and weaknesess, the more likely that this will produce meaningful and exploitable opportunities and the more likely a organisation is to be able to respond to threats before they become serious.

From these assessments priorities can be identified. Opportunities and threats can be ordered according to which are likely to have the biggest impact on the organisation in terms of:

• profit or loss;
• market growth or decline.

Opportunities and threats may also be considered to be short term (less than a year) or longer term.

Example or PEST and SWOT analysis
Haven Holidays specialise in cheap family holidays in camping and caravan parks in Great Britain . This has been a market in decline. In the long term, a more affluent UK population, changing demographics (smaller families), the growth in cheap European flights, changing attitudes to holidays (people take more than one a year) and changing attitudes to the EU (people are more comfortable with European travel), are reducing the demand for this sort of holiday. However in the short term recession means that families have less money to spend, the pound has fallen in value against the Euro (making European travel more expensive) and international terrorism means that some people do not want to fly. In addition, young people are staying at home longer, other than when they are at University. Young people therefore have more disposable income and a greater desire for short breaks away from the family home. In the long term Haven's existing focus on low-cost holidays in the UK may have been seen as a significant weakness, but in the short term at least they are in a much stronger position. There are opportunities to exploit the market for people who do not wish to travel abroad and to exploit the market for shorter, second holidays. The longer term threats might be addressed by a focus on shorter breaks and a change in accommodation types to cater for smaller families or even for groups of young adults.