Market Research – SWOT Analysis
An essential part of market research – SWOT analysis is understanding your current market position. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. The purpose of conducting a SWOT analysis of your business is to determine your business venture’s strengths and weaknesses and identify and evaluate opportunities and threats in the market place.
Internal Factors
Strengths and weaknesses are what we call ‘internal factors’ and these as the owner of the business have control over, whereas opportunities and threats are ‘external factors’ and therefore you have no control over.
Strengths
Every business will have particular strengths. These could range from existing market share, product quality, excellent service, low operating costs, convenient location to management and staff skills.
Weaknesses
It will be an extremely lucky operator whose business has no weaknesses. These could range from a poor market position, insufficient investment capital, poor product range, a decline in the main customer base, a poor location and a lack of appropriately skilled staff. A detailed analysis of existing weaknesses is just as important as the identification of business strengths.
External Factors
You will be affected in some way by what goes on outside your business. The important thing about the external factors is that they are not controllable factors there is nothing you can do to stop these changes. You have to recognise the changes and how they can improve or damage your business.
The PESTL analysis encompasses the factors outside of your business that influence the survival of the business eg political, economic, sociocultural, technological and legal forces.
SWOT Analysis Case Study
Read through the case study. Write down all the strengths and weaknesses, opportunities and threats you can think of in relation to the Sweet Dreams Motel.
The Sweet Dreams Motel – Far North Queensland
The Sweet Dreams Motel is a 40-unit, no-frills operation in the less scenic part of a major Queensland resort town. The owner, Mr. Smith, firmly believes that there is a need for his style of low-cost family accommodation amid the luxury and beauty of the area. His rooms are large, family-style rooms (there is no television, for example). Although there is plenty of room for future expansion, the grounds are fairly bare with a bit of landscaping, but mostly grass.
Mr. Smith can serve breakfast to the rooms and provides tea-making facilities. There are now a lot of good restaurants and take-away in the area. Mr. Smith’s prices are less than half of what similar motels charge and only a fraction of what the big five-star properties are charging. And, really, he isn’t all that far away from the beach, shops and other attractions.
The problem is occupancy. He has some regulars who come every holiday period (and have been doing so for the four years he has owned the property). Overall, occupancy is about 50% year-round and he knows from the local tourist office that the other properties average around 68% occupancy year-round. New developments could mean trouble. This lack of occupancy can be quite frustrating for Mr. Smith. Cars pull in, drive around the parking areas, then drive away.
Currently, Mr. Smith does very little advertising in local district guides and the holiday papers, mainly because he really thinks word-of-mouth is the best form of advertising. He is a member of the local tourist committee, but too busy to go to meetings. However, he does receive the local statistics and knows the average stay in the area is 3.8 nights, and that local families and couples and increasingly overseas visitors are his potential customers.
He’s not desperate yet, but he’s getting worried and disillusioned. He thought he would be overrun with guests, but that hasn’t happened.
SWOT analysis of the Sweet Dreams Motel
Complete a SWOT analysis and then compare your analysis with the following points:
Strengths:
- Located in a popular tourist region
- Big rooms
- Large grounds and open areas
- Breakfast service to rooms
- Good restaurants and take-away nearby
- Low prices (but this is also a problem!)
- Regular customers (but not very many)
- Membership in the local tourist group
- Property large enough for coach groups
- Property is clean
- Access to information about the industry
- Mr. Smith acknowledges he has a problem – the first step towards solving it!
Weaknesses:
- No television (crucial for the family market)
- Bare and unappealing grounds
- Initial interest by people who drive in and look but then leave (probably because of the bare grounds)
- Location poor in relation to other services, attractions, etc.
- No separate restaurant services
- Low occupancy compared to other motels
- Very little advertising
- Only local advertising
- Uninspiring motel name
- Low rates being charged could be perceived as unappealing
Opportunities:
- Install televisions immediately
- Landscape the grounds and make them more attractive
- Add more outdoor facilities – playground, BBQ facilities, perhaps a pool or tennis courts depending on finances
- Increase the level of advertising
- Increase the rates being charged
- Work in with other attractions, restaurants, etc.
- Attend tourist group meetings – do more networking
- Add own restaurant or do-it-yourself catering facilities for guests
- Investigate other markets (backpackers, etc.)
Threats:
- Potential failure if occupancy doesn’t improve
- Potential failure if other properties begin cutting rates
- Potential problems if other properties begin big promotional campaigns
- Potential problems if more budget motels are built
Mr. Smith’s most important action is to raise rates immediately. At less than half the price of other motels, his price is too low which conveys a poor image. This combined with the bare grounds may be driving potential customers away. His rates can still be low but should be comparable to the rates of competitive properties.
Restaurant Marketing for Beginners
Businesses can survive for some time with poor record-keeping, insufficient finance or a lack of management skills, but they cannot survive without a market.
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