What Is a SWOT Analysis?

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A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in
every difficulty. – Winston Churchill

What is a SWOT analysis?

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While there is some debate over who came up with the SWOT analysis, most
research suggests that Stanford professor Albert Humphrey was the father of this process.
Humphrey led a research project at Stanford University in the 1960s and 1970s that tried to
figure out why corporate planning failed within several big companies. The team started
breaking the data into categories like opportunities and threats. Eventually, other strategists
tweaked Humphrey’s categories into the SWOT formula that we know today.
The point of a SWOT analysis is to help you develop a strong business strategy by
making sure you’ve considered all of your business’s strengths and weaknesses, as well as the
opportunities and threats it faces in the marketplace.
A SWOT analysis encourages owners to evaluate their business, looking specifically
at strengths, weaknesses, opportunities, and threats that surround the company. A business
professor will tell you it’s always a good time to conduct a SWOT analysis. Any time you can
take to critically look at your business and see how it’s performing is a good thing. However,
there are strategic times when a SWOT analysis is most beneficial.
When you’re done, you’ll have the information you need to make key business decisions now
and in the future.

Ideal times to conduct a SWOT analysis:

 At the beginning of the year. It’s no coincidence that we’re running the SWOT Challenge
at the beginning of the year. As a new year begins, it’s a natural time to review the past
year and look ahead. By conducting an analysis at the beginning of a new year, you’ll be
ready to make decisions in the coming months.
 Do an annual check up. Just like you should visit the doctor annually, your SWOT
analysis should get a check up at least once a year too. You’ll be amazed how much can
change within a year. You might not need to conduct the analysis from top to bottom again,
but you should at least set aside a day to review it and make updates.
 Do a SWOT analysis when a shift occurs. If something big is changing in your business,
it’s time to do a new SWOT report. Maybe you just took on a big client and plan to
increase your revenue, or maybe the political support that you once had is shifting. When a
noticeable change like this happens, it’s always a good idea to re-evaluate where your
business stands.
 A SWOT analysis is vital for potential businesses. If you’re planning a business,
conducting a SWOT report is a great way to check the viability of your idea.

S.W.O.T. is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats.
A SWOT analysis is an organized list of your business’s greatest strengths, weaknesses,
opportunities, and threats.
Strengths and weaknesses are internal to the company (think: reputation, patents,
location). You can change them over time but not without some work.

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 Opportunities and threats are external (think: suppliers, competitors, prices)—they are
out there in the market, happening whether you like it or not. You can’t change them.

For Existing businesses can use a SWOT analysis, at any time, to assess a changing
environment and respond proactively. In fact, I recommend conducting a strategy review
meeting at least once a year that begins with a SWOT analysis and tehe report will:
 Give you a new perspective about your business
 Provide valuable information that can be used to make strategic decisions
 Allow you to access the health of your business in real time
 Identify areas for improvement
 Give employees a chance to weigh in on the overall wellness of the business
 Guide future plans

New businesses should use a SWOT analysis as a part of their planning process. There is
no “one size fits all” plan for your business, and thinking about your new business in terms of
its unique “SWOTs” will put you on the right track right away, and save you from a lot of
headaches later on and the report will:
 Highlight the benefits of your proposed business
 Identify potential problems
 Encourage you to think critically about starting a business
 Provide valuable information that you’ll need to consider now and in the future

How to conduct a SWOT analysis

To get the most complete, objective results, a SWOT analysis is best conducted by a
group of people with different perspectives and stakes in your company. Management, sales,
customer service, and even customers can all contribute valid insight. Moreover, the SWOT
analysis process is an opportunity to bring your team together and encourage their
participation in and adherence to your company’s resulting strategy.
A SWOT analysis is typically conducted using a four-square SWOT analysis template,
but you could also just make lists for each category. Use the method that makes it easiest for
you to organize and understand the results.
I recommend holding a brainstorming session to identify the factors in each of the four
categories. Alternatively, you could ask team members to individually complete our free
SWOT analysis template, and then meet to discuss and compile the results. As you work
through each category, don’t be too concerned about elaborating at first; bullet points may be
the best way to begin. Just capture the factors you believe are relevant in each of the four
areas.
Once you are finished brainstorming, create a final, prioritized version of your SWOT
analysis, listing the factors in each category in order of highest priority at the top to lowest
priority at the bottom.

Questions to ask during a SWOT analysis

I’ve compiled some questions below to help you develop each section of your SWOT
analysis. There are certainly other questions you could ask; these are just meant to get you
started.

Internal Factors
Strengths Weaknesses

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 Leadership and management skills Lack leadership and management skills
Core competences Key skills gaps
Resources Weak finances
Reputation Low quality and reputation
Product or service quality Products or services not differentiated
Market position
Capacity
External Factors
Opportunities Threats
Economic growth Economic downturn
New products or services New market entrants
Weak competitors Increased competition
Demographic change Slow growth
Change in political and economic Change in political and economic
environment environment
Market growth Technological threat
Global influences Global warming/ weather
New technology developments Demographic change

Strengths (internal, positive factors)

Strengths describe the positive attributes, tangible and intangible, internal to your
organization. Think of the experience and resources that are available to your business. They
are within your control.
 Financial resources. Think of revenue streams, investments, diversified income, and
grants.
 Physical items. Think of buildings and equipment.
 Intellectual property. Think of patents, copyrights, and trademarks.
 Human resources. Think of your employees, volunteers, mentors, and so on.
 Key players. Think of vital personnel to your business.
 Employee programs. Think of any programs that help your employees excel.
 Company workflow. Think of your work practices and how things get done.
 Company culture. Think of the environment that your company has created.
 Company reputation. Think of how your business has grown its reputation.
 Market position. Think of how your business is poised in the marketplace.
 Growth potential. Think of how your business is positioned for future growth.

Questions to ask to find your company’s strengths

 What do you do well?
 What internal resources do you have? Think about the following:
o Positive attributes of people, such as knowledge, background, education, credentials,
network, reputation, or skills.
o Tangible assets of the company, such as capital, credit, existing customers or distribution
channels, patents, or technology.
 What advantages do you have over your competition?
 Do you have strong research and development capabilities? Manufacturing facilities?
 What other positive aspects, internal to your business, add value or offer you a competitive
advantage?

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  What do we do that no one else does?
 What resources do we have at our disposal?
 What advantages do our employees have?
 What valuable assets does our company have?
 What do our customers like about our business?

Starter questions:
 What do you do well?
 What do you do that your competition can’t?
 Why do customers come to you?
Financial:
 What kind of financial resources do you have?
 Is your revenue diversified?
 What kind investments do you have for the future?
Physical:
 What kind of assets do you have?
 What are the benefits of your company’s space and building?
 What kind of equipment do you own?
Intellectual:
 What kind of intellectual property do you have in your business? List trademarks, patents,
etc.
Human resources:
 What kind of human resources do you have?
 Are there vital players in your company’s hierarchy?
 What kind of programs do you have that improve your business and employees?
Company workflow:
 What kind of processes do you have in place that makes your company efficient?
Company culture:
 What kind of working culture has your company created in the workplace?
Company reputation:
 How does your clientele or community view your company?
 How did you achieve your reputation?
Market position:
 Does your company have an edge in the marketplace that your competitor doesn’t?
 What plans do you have in place to improve your market position?
Growth potential:
 What plans do you have for growth?
 Do you have potential to grow in certain sectors where your competitors don’t?
 What’s the main reason you’re able to grow?

Tips to list your company’s strengths

1. Be truthful. It probably goes without saying, but if you’re not truthful during this process,
the entire analysis won’t be effective.
2. Allow for feedback. As you’re brainstorming strengths, make sure your employees are
comfortable offering their feedback. You may not agree on some strengths, but it’s best to
talk them through.
3. Stay focused. You want to hear many viewpoints, but when you get several people in a
room, time can get away from you. Keep the group on task.
4. Keep your list of strengths handy. Keep your list in an accessible spot. You’ll analyze all
of the data that you collect over the next few days at the end of the week.

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 Weaknesses (internal, negative factors)
Weaknesses are aspects of your business that detract from the value you offer or place
you at a competitive disadvantage. You need to enhance these areas in order to compete with
your best competitor.
Every owner wants to believe his or her business is running smoothly, so this piece of the
report might not be your favorite. However, it’s vital information. You need to truthfully
access the weaknesses within your business for this analysis to be effective. Weaknesses are
internal factors that take away from your business or leave you at a disadvantage. The same
categories that applied to your strengths column can be reapplied here.
 What factors that are within your control detract from your ability to obtain or maintain a
competitive edge?
 What areas need improvement to accomplish your objectives or compete with your
strongest competitor?
 What does your business lack (for example, expertise or access to skills or technology)?
 Does your business have limited resources?
 Is your business in a poor location?
 What are we bad at?
 What do our competitors do better than us?
 What do our customers complain about?
 What disadvantages does our team carry?
 What is holding us back?
 Which resources are we lacking?
 What could we improve?

Starter questions:
 In what areas does your company struggle?
 Are there reasons that customers select competitors over you?
 Does something specific stop you from performing at your best?
Financial:
 Are financial resources holding you back? If so, how?
 Does your business get its revenue from one main stream? If so, is diversification a
concern?
 Are you preparing for your financial future?
Physical:
 Are any of your physical assets creating a problem?
 What condition is your office in?
 What condition is your equipment in?
Intellectual property:
 Are any of your patents, trademarks, or copyrights in jeopardy?
 Is there any government red tape that’s keeping a patent from moving forward?
 Does your company take too long to file for patents, etc.?
Human resources:
 What kind of human resources do you have?
 Are there any departments that are lacking or inefficient?
 Are employee programs in place to improve your business? If so, are they working?
Company workflow:
 What areas could be improved upon when it comes to workflow?

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 Company culture:
 Are you happy with the company culture that you’ve created? If not, why?
Company reputation:
 How does the public see your company? Are you happy with that image?
Market position:
 What kind of position does your business hold in the marketplace?
Growth potential:
 What plans do you have for growth?
 Are your competitors growing in ways that you can’t?
 What keeps your business from growing?

The categories where you might find weaknesses include:

 Financial resources. This includes revenue streams, investments, diversified income, and
grants.
 Physical items. Consider buildings and equipment that you rent or own.
 Intellectual property. Patents, copyrights, and trademarks fall into this area.
 Human resources. Think of your employees, volunteers, and mentors.
 Key players. Think of vital personnel to your business.
 Employee programs. Think of any programs that help your employees excel.
 Company workflow. This includes best work practices.
 Company culture. This is the environment that your employees work in.
 Company reputation. Think of how your business has grown its reputation.
 Market position. You’ll consider how your business fits in the overall market.
 Growth potential. Think of how your business is positioned for future growth.

Tips to list your company’s weaknesses

1. Be open-minded. As your employees suggest weaknesses, remain open-minded. It’s likely
that an employee will bring up a weakness that you hadn’t thought of, or disagree with.
When it happens, don’t be judgmental.
2. Be critical of your business. Now isn’t the time for rose-colored glasses, now is the time
for pure honesty. Be prepared to look at your business inside and out critically.
3. Remember, every business has weaknesses. When you’re finished talking about the
negative aspects of your business, you might feel a bit deflated. Remember, every business
has weaknesses. Today is just part of a larger process that will help you better access your
business.
4. Keep your list of weaknesses handy. Keep your list in an accessible spot. You’ll analyze
all of the data that you collect over the next few days at the end of the week.

Opportunities (external, positive factors)

Opportunities are external attractive factors that represent reasons your business is
likely to prosper. Opportunities, as you might guess, are factors that can contribute to your
growing success. These factors are typically outside of your control, which is why they are
consider external factors.A good entrepreneur is always on the hunt for new opportunities.

 What opportunities exist in your market or the environment that you can benefit from?
 Is the perception of your business positive?
 Has there been recent market growth or have there been other changes in the market the
create an opportunity?

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  Is the opportunity ongoing, or is there just a window for it? In other words, how critical is
your timing?

 What potential regulation changes could help our business?

 Is the market changing in a favorable way?
 Is the current economy going to affect us in a positive way?
 What opportunities have we not pursued yet?
 What new opportunities are becoming available?
 Is our cost of goods going down?
 Is there a way for us to acquire useful resources that we do not already have?

Questions to ask to find opportunities

To help you brainstorm possibly opportunities, we’ve created a list of questions to help. The
questions are broken up by the categories that we just went over. If a question doesn’t apply
to your business, simply move on to the next.
Economic trends:
 Is the economy in your area looking up?
 Will the economy enable your audience to make more purchases?
 Are economic shifts happening that impact your target audience?
Market trends:
 How is your market changing?
 What new trends could your company take advantage of?
 What kind of timeframe surrounds these new trends? Could it be a long-term opportunity?
Funding changes:
 Do you expect an increase in grant funding or donations this year?
 How will funding changes help your business?
Political support:
 Do you anticipate a shift in political support this year?
 What opportunities could be created with new political partnerships?
Government regulations
 Are any regulations shifting that could lead to a positive change?
Changing relationships:
 Are there positive changes happening within any of your outside business relationships?
 Are vendors changing or expanding?
 Has your partner decided to move on, creating an opportunity to work with someone new?
Target audience shift:
 How is your demographic shifting?
 What opportunities can you think of that can move with these changing demographics?
 Is your audience expanding? If so, how can you capitalize on this increase?

Here are a few categories to consider when looking for business opportunities:

 Economic trends. Look at the economy in your area.

 Market trends. Your target market could be driving new trends that could open doors for
your business.
 Funding changes. Think of donations, grants, or other sifting revenue streams that aren’t
within your control.
 Political support. Consider changes in political ties.

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 Government regulations. Think of regulations that are changing that might afford you
new opportunities.
 Changing relationships. Consider shifting relationships with vendors, partners, or
suppliers.
 Target audience shift. Your target market might be expanding, aging, or shifting.
Tips to list your opportunities
1. Do your research. Finding answers to some of these questions might require some
digging. Don’t be afraid to make some calls, set up meetings, and do some market research
to gauge upcoming changes.
2. Be creative. To find an opportunity where your competitors cannot will take skill and
creativity. Don’t be afraid to think outside the box when you’re listing possible
opportunities.
3. Keep your list of opportunities handy. We’ll add to your SWOT analysistomorrow, so
keep your list of opportunities in a safe spot.

Threats (external, negative factors)

Threats include external factors beyond your control that could place your strategy, or
the business itself, at risk. You have no control over these, but you may benefit by having
contingency plans to address them if they should occur. A threat to your company is an
external factor, something that you can’t control, that could negatively impact your business.
You may be thinking, if threats are outside of my control, why should I spend time identifying
them? By knowing your threats, you might be able to find a strategy to minimize them, or at
least, come up with a plan to handle them in a way that won’t shut down your business.
Identifying threats is all about being prepared and taking proactive steps to minimize the hurt.
Coming up with a list of threats can be difficult. These issues don’t spring to mind as easily as
your strengths, but there are certain categories that most external threats fall into.

 Who are your existing or potential competitors?

 What factors beyond your control could place your business at risk?
 Are there challenges created by an unfavorable trend or development that may lead to
deteriorating revenues or profits?
 What situations might threaten your marketing efforts?
 Has there been a significant change in supplier prices or the availability of raw materials?
 What about shifts in consumer behavior, the economy, or government regulations that
could reduce your sales?
 Has a new product or technology been introduced that makes your products, equipment, or
services obsolete?

Questions to ask to find threats

These categories should get your wheels turning. By thinking through each category, outside
threats should come to mind.
We’ve also created a list of questions that coincide with the categories above to help you
think critically about the threats that could be out there.
Economic trends
 Is the economy in your area in a recession?
 Will the economy negatively impact your customers’ ability to make purchases?
 Are economic shifts happening that impact your target audience?

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 Market trends
 How is your market changing?
 What new trends could hurt your company?
 Is there more competition in your market that’s pushing you out?
Funding changes
 Do you expect a decrease in grant funding or donations this year?
 Will funding changes hurt your business? If so, how?
Political support
 Do you anticipate a shift in political support this year?
 Is there reason to be concerned over political shifts?
 What does your business stand to lose because of political changes?
Government regulations
 Are any regulations shifting that could cost more money or hurt production?
 What kind of damage could new regulations have?
Changing relationships
 Are any outside business relationships changing?
 Is there any turmoil with partners or vendors?
Target audience shift
 How is your demographic shifting?
 What threats accompany these changing demographics?
 Is your audience changing in a way that you can’t accommodate?
You can use these categories to brainstorm possible threats to your business:
 Economic trends. Examine the economic conditions that impact your business.
 Market trends. Think about changing or shrinking market trends.
 Funding changes. Think of donations, grants, or other shifting revenue streams that aren’t
within your control.
 Political support. If political support is shifting, you’ll want to analyze its impact.
 Government regulations. Think of regulations that are changing that might hurt your
business.
 Changing relationships. Consider shifting relationships with vendors, partners, or
suppliers.
 Target audience shift. Your target market might be shrinking, aging, or shifting.
Tips to find threats
1. Do market research. As you’re looking into possible threats, you’ll want to conduct
market research to see how your target audience is shifting.
2. List every threat you can think of. If you think of a threat, list it. Even if that threat has
consequences that won’t be felt immediately, it’s still better to have it on your radar.
3. Threats exists, don’t panic. Listing threats may cause some anxiety, but remember that all
businesses have threats. It’s better to know about threats than it is to turn a blind eye to
them. Plus, we’ll give you some strategies tomorrow to help you minimize these threats.

Examples of a SWOT analysis

For illustration, here’s a brief SWOT example from a hypothetical, medium-sized computer
store in the United States:

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TOWS analysis: Developing strategies from your SWOT
analysis
Once you have identified and prioritized your SWOT results, you can use them to
develop short-term and long-term strategies for your business. After all, the true value of this
exercise is in using the results to maximize the positive influences on your business and
minimize the negative ones.
But how do you turn your SWOT results into strategies? One way to do this is to consider
how your company’s strengths, weaknesses, opportunities, and threats overlap with each
other. This is sometimes called a TOWS analysis.
For example, look at the strengths you identified, and then come up with ways to use those
strengths to maximize the opportunities (these are strength-opportunity strategies). Then, look
at how those same strengths can be used to minimize the threats you identified (these are
strength-threats strategies).
Continuing this process, use the opportunities you identified to develop strategies that will
minimize the weaknesses (weakness-opportunity strategies) or avoid the threats (weakness-
threats strategies).
The following table might help you organize the strategies in each area:

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Once you’ve developed strategies and included them in your strategic plan, be sure to
schedule regular review meetings. Use these meetings to talk about why the results of your
strategies are different from what you’d planned (because they always will be) and decide
what your team will do going forward.

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 SWOT Analysis Examples
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Turning Your SWOT Analysis into Actionable Strategies

Prioritizing and finalizing your SWOT analysis
 All information should be on your template. At the beginning of the challenge, you
probably downloaded this foursquare template. All of your information should be here. If
you need a template, download it now and transfer your information to it. It’s easier to read
and understand if it’s in this format rather than on separate pieces of paper or computer
files.
 Look at other examples. If you haven’t done so already, take a look at a few completed
SWOT reports so you know what yours should look like. Here are a few SWOT examples
you can look at.
 Use bullet points. Everything listed in your analysis should be in a bulleted format. You
don’t need complete sentences.
 Boil down each point. Each bullet point should be short—a few words will do. If you need
to, simplify your points.
 Refine your information. If you came up with a healthy list for each of your strengths,
weaknesses, opportunities, and threats, it’s time to refine the information. Check for
redundancies, combine bullets where necessary, and eliminate any information that isn’t
vital.
 Prioritize your information. It’s time to go through each section and rank the information.
Put the most important or pressing item on top of each square.
From SWOT analysis to strategies
A list of strengths, weaknesses, opportunities, and threats makes for a handy business guide,
but you’ll want to take this exercise one step further to create strategies and plans to improve
your business.
The exercise you’re about to do is called a TOWS analysis. It helps you make connections
between each quadrant of your analysis. You’ll work around the square, combining
information from two quadrants to create actionable strategies. Here’s how:
 Strengths–Opportunities. Use your internal strengths to take advantage of opportunities.
 Strengths-Threats. Use your strengths to minimize threats.
 Weaknesses-Opportunities. Improve weaknesses by taking advantage of opportunities.
 Weaknesses-Threats. Work to eliminate weaknesses to avoid threats.
The chart below is a great visual explanation of this exercise.

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 Here’s an example of a completed TOWS analysis from the University of San Francisco,
which shows a TOWS analysis for Volkswagen.

Your finished product

When you’re finished with the SWOT and TOWS analysis, you’ll have an insightful look at
your business that’s accompanied by a list of strategies that you can implement to better your
business.
Take this list of strategies and start implementing them. If some strategies are long-term
plans, break them into steps and put each one on your calendar so you can implement the
change over time.
Now that you have this business resource, you’ll want to keep it handy. Hang it on your office
wall, or keep it on your desktop so you can reference it throughout the year as you make
decisions.
Your hard work has paid off. Aside from strategic plans, here are additional benefits from
your participation in the SWOT Challenge:
 Improved focus. This analysis should put everyone on the same page. It identifies what
you should be working toward this year.
 Conversation starters. With everyone working on the same goals, managers and
employees can continue to build strategies.
 Identify unknown aspects. You’ll likely discover aspects of your business that you didn’t
know about. From unknown strengths to hidden threats, uncovering this information will
help you move forward.
 Strategies for success. Above all else, you walk away with strategies to help your
business.

IKEA
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SWOT Analysis of IKEA: What’s the Brand’s True Strength?
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IKEA is well-known around the world for being that Swedish company offering
inexpensive products for your home. It’s a staple for people with lower income who
still desire design, but at a lower cost. And although this is exactly how IKEA became
such a popular worldwide brand, it’s also a problem.

SWOT analysis of IKEA: Strengths

IKEA knows the ins-and-outs of their customers. If they didn’t, the company would have a
hard time providing what their customers want. And what their customers want are a
collection of affordable furniture and home appliances.
If IKEA didn’t know this is what their customers want, they wouldn’t be able to sell so many
units. Nor would they bother to put in so much work into the development and design of their
countless products.
Countless designs.
IKEA designers create stylish, newly designed products. But it goes further than physical
decorations. The products are developed for easy transport and assembly. In the store, you’re
able to see the finished, assembled piece. But when you walk out, you’re given each item in
bits and pieces because it’s easier to put in your car and take home.
Affordability.
The inexpensiveness of IKEA products is the true strength of the brand. Maintaining that
same level of cost-effectiveness is what keeps customers coming back for more.
The company searches for new ways to drive down costs, but without affecting the
appearance of their products that consumers have come to expect.
A supplier’s dream.
IKEA is able to buy bulk quantities of products because of a long lasting relationship with
their suppliers. For IKEA, buying large quantities is cheaper than buying a few pieces at a
time. It’s also great for suppliers. The suppliers don’t worry about large quantities of
inventory taking up space in their warehouses. They know IKEA can take the inventory and
sell it hundreds of millions of customers.
Brand recognition.
IKEA is one of the most recognizable and well-known furniture brands worldwide. The brand
has more than 600 million customers annually. And you can currently shop for IKEA
products in more than 38 countries. Combine the brand recognition with the low-cost
furniture options, and it’s no wonder IKEA is as popular or as well-known as it is.

SWOT analysis of IKEA: Weaknesses

Bad press.
IKEA has had a few run-ins with bad press. Employees have complained about poor
treatment. The brand has faced ridicule for advertising techniques in non-western countries.
And the worst offense: children being hurt or killed in relation to IKEA furniture. IKEA has
also had to recall dangerous products because they’ve led to injuries.
Although the saying “any press is good press” may come into mind, in IKEA’s case, bad
press leads to distrust from their customers.
Low quality.
IKEA products are known for being lesser quality. This seems to be a byproduct of offering
inexpensive products. How can it be affordable and high quality? IKEA has yet to find a
solution.

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On social media, you’ll likely find someone criticizing IKEA’s less than stellar product
quality.
And because they can’t live up to greater quality expectations, other companies now have the
opportunity. Whether these companies can provide both quality and cost-effective furniture
and kitchen appliances is yet to be determined.

SWOT analysis of IKEA: Opportunities

Few countries.
IKEA is only in 38 countries. This is a relatively low number considering how well-known
the company is. They can branch out further, especially since IKEA is barely featured in
developing countries. Places like Malaysia, Mexico, and Brazil are just a few locations IKEA
should consider moving into.
Online shopping.
Additionally, you can purchase IKEA products through their website. Online shopping is
becoming more popular as years go on. Especially around holidays like Black Friday, where
people want to avoid long lines for fantastic sales.
IKEA is in a firm spot to accentuate their sales by offering more products online. Considering
the company has more than 800 million online visitors, it’s definitely a sales channel IKEA
should focus more efforts into.
Grocery stores.
Did you know about IKEA’s food outlets? With the growing demand for healthy food
options, IKEA can push its grocery businesses into grocery stores.

SWOT analysis of IKEA: Threats

Some of the weaknesses of the IKEA brand are threats too.
Fast competition.
For instance, the competition for furniture products is growing. We’re seeing global brands
like Walmart offering inexpensive home products. Although their catalogue isn’t as expansive
as IKEA’s, that may only be a matter of time.
Possible lawsuits.

Then there’s the bad press. Depending on the specifics, IKEA may be subject to lawsuits from
consumers who were injured by IKEA products. In truth, it doesn’t even require a lawsuit to
crush a business. All it takes is a mob of angry consumers on social media to create more bad
buzz, bad reviews, and intense backlash. IKEA needs to be aware of how they’re viewed
online to counteract this perception.
Increase in cash.
Additionally, growing income can be a problem for the company too. As consumers have
more excess cash, they’re less likely to buy cheap, low-quality products. Unfortunately, that’s
the basis behind the IKEA brand. And since their quality is on the low-side, consumers will
look for high quality, even if it costs a bit more.

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How to Come up with Hundreds of Business Ideas

For some people, coming up with ideas is as easy as spotting chewing gum on the sidewalk.
For others, it’s nearly impossible.
For me, new idea generation isn’t just easy, it’s something I’m doing all the time and often
without trying. I do not believe this is an innate ability, but rather a “skill” that I’ve learned
and practiced over the entire course of my life.
While this “learning” has primarily been subconscious, as I’ve run into more and more people
who struggle to come up with new ideas, I’ve made an effort to become conscious of how I do
it and where I do it best. The fact that research on the subjects of creativity and innovation has
become so popular certainly helps too.
I fully believe that anyone who puts in enough practice and who makes a conscious effort to
notice problems and identify needs, can improve their ability to come up with new ideas.
A brief bit of science before we dive into how to come up with ideas:

Good ideas are networks

If you’ve taken even the most rudimentary psychology course before, you will know that the
brain is largely composed of a cell we refer to as “the neuron.” In a human brain, there are
approximately 100 billion of these cells. Connected together, they form a nervous system that
is capable of making decisions, sensing surroundings, and issuing commands to our body.
How we think, what we think, and what we’re capable of, are largely a consequence of the
connections these neurons have made with one another.

fs

In fact, something particularly interesting about the human brain is its ability to rewire these
connections and to make new connections, regardless of age. Neuroscientists refer to this

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property as “plasticity.” And, the more experiences we have and the more changes in behavior
or environment that we experience, the more plastic the brain becomes, or, the more capable
of making new connections and rewiring old connections.
This is why, in our older years, when most of us do less and use our brains less, we have a
harder time remembering information and controlling bodily actions. Our brain has not
stopped being plastic but has simply fallen out of the habit of making new connections.
A similar difference exists for those in the habit of generating new ideas and those who aren’t.
The more practice you get doing it, the better your brain will become at creating new
connections. Simply put, the more active you keep your brain, the easier you will find it to
come up with new ideas and good ideas!

The perfect state of mind for idea creation

Steve Johnson, author of “Where Good Ideas Come From,” has spent years researching and
writing about this subject.
He believes that you are more likely to develop great ideas when:
 You explore and experiment in different areas
 You are a part of a “liquid” network
 You allow your idea to develop slowly, over time
 You are exploring and open to the idea of serendipitous connections
 You make mistakes
 You look for new uses for old inventions
 You build on platforms that have come before
If you read his book, it will become obvious fairly quickly that the environments you spend
time in contribute to or detract from your ability to ideate.

“In order to create new connections, you need to place yourself in environments that actually

mimic the neural networks of a mind exploring the boundaries of the adjacent possible.” –

Steve Johnson
When humans first organized themselves into dense settlements, innovation soared.
With the invention of agriculture, for the first time, humans began forming settled groups that
numbered in the thousands. This meant that more connections with more people were possible
and that a good idea could quickly spill over and take root in others’ minds.
If you keep this in mind as you work, live, and experiment, you’ll quickly realize that it’s a lot
easier to come up with new ideas, when you’ve got an influx of ideas coming your way in the
first place. This doesn’t have to happen in a city or a university or an environment full of
people, it can just as easily happen, if you’re interacting with ideas from many people online,
in books and across other modes of communication. The key is “connectedness.”
With this in mind, let’s move on to how you can actually go about coming up with business
ideas.

1. Solve problems

The easiest way to come up with business ideas is to solve problems you have. The second
easiest is to solve problems others have. These don’t have to be big solutions like Google
search or Amazon, they could be much smaller.
One company that solves a big problem I have, thanks to owning cats that use the litter box a
lot, is Fresh Step. Fresh Step has created a line of “scoopable” cat litter, which means that

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when the cat does its business, the litter clumps together and I can scoop it out no problem.
Ultimately it means I have to change the sand less often and that cleaning up is a lot easier.
Another of my favorite products that solves a problem for me are my Bose headphones (mind
I don’t have this fancy version). That’s because they’re fitted with noise-cancelling
technology. This means a lot when you’re working in a busy office, or when you’re taking
public transport. Hello world, goodbye world. You literally have to be tapped on the shoulder
to hear people coming. When I first tried these headphones on, I felt like I was underwater.
Today, they’re a necessity.
Many of the products you have become used to using were actually invented to solve a
problem, including Thermoflasks to keep coffee/food warm, sunglasses to protect from the
glare, security alarms to alert you that someone has broken in, fire hydrants to put out a fire
before the whole place goes up, toothbrushes to keep your teeth clean, and dental floss to fish
out unwanted food. The list is literally endless.
All you have to do is get good at identifying problems. Once you’ve realized that each of your
own frustrations is actually an idea in the making, you’re actually going to start having fun!
One of my frustrations that I wish there was a product for is something you probably think is
too obvious—a jewelry stand. Because I have so much jewelry, I have to stick thumb tacks in
the wall to hold it all up. There is no stand that I have seen on the market to solve my
problem—only small stands for a time long past when people bought fewer but more
expensive items. Today, I’d almost describe fashion as “disposable.” You buy something, you
wear it a few times and set it aside, partly because things like costume jewelry have become
so cheap. Because this is true, people that enjoy jewelry accrue a lot of it and, as you can see
in the picture below, don’t have a place to put it.

My problem? Too much jewelry and no stand to fit it all.

Another good example of a company that has come with a business idea by solving a problem
is UK car insurance company, ingenie. For many young drivers, the price of buying insurance
is just something they can’t afford. Ingenie has taken a rather clever approach to solving this
problem. They’ve created a small black box that you fit into your car. As you drive, the box
monitors your driving style, including things like braking, speed, acceleration, turns, etc.
Every 10 days the box assigns you a score out of 100. The higher your score, the bigger the
discount you’ll receive on your insurance policy come the three month review period. Ingenie
claims to help customers (often students) save up to 50 percent of what they would otherwise
be paying. And, there’s the added bonus of encouraging people to drive better. Very clever.

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I’ll leave you with one last example. Ever heard of GoPro? They’re a camera company that
got started in 2002. Founder Nick Woodman had recently been on a surfing trip to Indonesia.
Nick was unable to find amateur photographers who could get close enough to get good
action-shot pictures of him surfing, or who could obtain quality equipment at an affordable
price.
The solution to the problem? The GoPro camera—a wide-angle lens HD camera capable of
taking excellent video and good action shots, and which could go where other affordable
cameras couldn’t. Snap one into a case and you can literally do anything with it, from scuba
diving and extreme mountain biking to flying (and crashing) a model airplane.

Footage shot by a GoPro camera attached to a model airplane – Derbyshire, England

As you go about your daily tasks, be they at home or work, try to get in the mindset of
noticing the things that frustrate you. If you’ve been in a particular industry for a while, you
may have good insight into this as there may be things that have been a problem for a long
time. This is why venture capitalists like Boris Wertz see value in investing in those that have
a lot of experience in the market they’re pitching their idea for. He calls it “the secret of the
market.” It’s this secret or those problems that you have to identify.
For me, sitting at work, it’s having to stay at my desk—because that’s the only place I have
two monitors—that irks me. A lot of the time, I need to leave my desk to do writing in a
quieter area. But, without a second screen, writing and research don’t go hand in hand. I like
to have my research up on the one screen and do my writing on the other. Moving away from
my desk is always a sacrifice. The solution to this problem would of course be a laptop with
two screens—now, who is willing to help me start the company?
Even if you work for someone else, try to get into the habit of finding the pain points. It
baffles me when companies have products that their own employees don’t use. At Palo Alto
Software, we use our own product—LivePlan—to manage and keep track of key business
metrics. If we didn’t do this, we wouldn’t fully understand a user’s pain points and we
wouldn’t know what the problems that needed fixing were.
Once you get into the habit of finding problems, you’ll probably start to enjoy it. Remember,
every problem is an opportunity for a new product, service, or company, especially if it’s a
problem many others have too.

2. Solve things that may become problems

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Solving problems that you currently have is not the only way to come up with new ideas.
Why not think of solving problems that will exist, but don’t yet?
In this very futuristic sense, no one stands out quite so well here as Elon Musk. The ventures
he undertakes, including Solar City and Tesla Motors, may make some scoff, but lack of
fossil fuels will become a problem in the near future and Elon is taking steps to fix that before
it happens. This gives him the time to innovate as he’s first in and it gives him marketshare.
Good luck to others catching up!
If you think there’s not yet a market for your idea, you may just be able to create one by
appealing to those that, like you, believe it will be a problem in the future.
At present, there are numerous potential problems with obvious solutions, including
desalination plants for California, a state that is quickly drying up and running out of water,
preventative medication for diseases that could become problems (like Ebola), makeup and
accessories to protect privacy when face recognition software really takes off, and breeding
programs/nature reserves for animals that without help, will become extinct.
If you have a problem and you’re not sure how to solve it, send me a tweet or leave a
comment below. We’ll be happy to do some brainstorming with you!

3. Adapt to evolving needs

Physiological needs stay the same—the need for food, shelter, and water. Emotional needs
tend to stand the same—envy, greed, pride, etc. What doesn’t stay the same are the products
and services it takes to fulfill these needs.
I’ve got a crazy example for you, if just to show you how far you can take things. My partner,
James Shields, is an avid unicyclist. More than that, he’s an avid unicycle hockey player.
You might never have heard of the sport but it exists and, in the UK and Germany, is
becoming increasingly popular.
When you play unicycle hockey, you typically use a unicycle, an ice-hockey stick, and a
tennis ball.
To cater to a unicycle hockey player’s needs, Unicycle.com, headquartered in the UK, has
decided to stock ice-hockey sticks. It’s them coming up with products that will suit a need that
has just come into existence and, as ice hockey isn’t nearly as popular in England as it is
Stateside, it also solves the problem of getting hold of this accessory.
I’m betting they’re not making a killing now, but if the number of unicycle hockey teams
grows, they’ve got their bases covered.

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James Shields uses an ice hockey stick during a serious unicycle hockey competition.

The easiest products to market are also products that fulfill a real or contemporary need.
An example of a service that has quickly become popular is “cloud storage.” It’s a result of
our very contemporary need to have access to our data, information, photos, music, and so on,
no matter what device we’re on. Google sells cloud storage, as does Dropbox, Amazon,
Apple, Microsoft, and a host of private companies that do as well.

4. Save people money

Yet another great way to come up with ideas is to think about saving people money. I buy 23
watt energy-saving lightbulbs because they’re affordable, not because they last for years and
are actually the equivalent of a 100 watt lightbulb, though that’s an obvious bonus too.
I also continue filling my car with ARCO gas because it’s cheaper than Chevron and Shell,
even though they’re owned by BP who was responsible for the horrible Gulf spill.
And, even though I am desperate for real-life bookstores not to vanish as a consequence of
sites like Amazon, I still prefer to buy my books on Amazon because it saves me a lot of
money.
The truth is, unless you’re earning hundreds of thousands of dollars, pounds, or euros, it’s still
a luxury to be able to make more “moral decisions” to buy from and support better companies
and people.
Were it up to me I’d own a Tesla, I’d only buy books from independent bookstores, and I’d
buy all my food at local farmers markets.
This is why, if you can figure out how to save people money, you’ll have a good business
idea, new or not. Have a look at some of our money saving tips for further information on this
topic.

5. Make people’s lives easier

A coffee machine with a timer that ensures there’s hot coffee when you wake; a central
vacuum cleaning system that means only carrying a hose and brush around the house rather
than the full unit; a smart thermostat like Nest that can figure out how to save you energy;
shopping baskets placed at convenient intervals in the store in case you decide you want to
purchase more than what your arms can hold—the list goes on and on.
Remember, coming up with business ideas doesn’t mean you have to focus on inventing new
products or services. In fact, you could just as easily adapt an existing service or introduce a
new benefit that makes peoples’ lives easier.
Kohls is one company that I return to time and time again because they’ve got a lifetime
return policy. Even if you’ve lost your box and your receipt they will take back a product and
replace or refund it—your choice. Not only does this make me feel good about the company,
but it keeps me coming back, despite the fact that their prices have obviously been marked up
to account for this benefit. In short, it makes my life easy.
When I moved to Eugene I bought my microwave, kettle, toaster and vacuum cleaner from
Kohls, knowing that when they packed in, as electronics always do, I can take them back even
if that’s in four years time when I’m guaranteed to have lost or thrown out my receipt.
There are always small ways you could be making things easier for yourself or for others. In
fact, if you think about doing this, on an ongoing basis, you may find you’re also able to
release new products that are simply a version of the old product that makes someone’s life
easier in some small way. The Garmin Nuvi is a step up on GPS predecessors that did not

21
include live traffic updates. This small addition makes the product so much more useful and
helpful.
Can you think of something—an action, product, service, or chore that could be adapted to
make your life easier?
My Salamon trail running shoes do exactly this. Instead of normal laces, they have pull laces,
which means they don’t come undone when I’m running. They don’t fit as well as my Asics
do but they mean I stop a lot less because for some reason tying laces has never been my
strong point.
Start looking at the things around you and asking, how could this be easier? How could it be
more intuitive, less stressful, and in general more pleasant to use? You may find that even the
tiniest change will create something incredibly popular.

6. Make chores or things that feel like tasks less unpleasant

In the online world, marketers and developers often look to “gamifying” software in order to
make using it feel less onerous. That is, they come up with small ways to reward you for
taking an action. When I go running, I use the Strava app on my phone to track my distance
and my average speed. Each time I beat a previous record, Strava gives me a trophy or some
other small acknowledgment that makes me feel I’ve achieved something. Occasionally, this
will push me to go a little bit further as once I’ve got into the habit of receiving trophy icons,
it’s very difficult to do a run and not get one! The point is, it makes my run a little more fun.
Not too long ago, I stumbled upon a Kickstarter campaign called Run an Empire. This app
promises to make running even more fun (or less painful) than even the likes of Strava. It
allows you, the runner, to capture territories. You’ll have to watch the full video if you want
to understand how it works, but it’s clever. It stands to make the exhausting task of running
feel like a game.
And then there’s the possibility of making real chores—like going to the toilet—fun. Ever
heard about Japan’s high-tech toilets? Well, they play music, have heated seats, blast warm
air, and clean with jets of water. We haven’t taken it to that extreme here yet but that’s a great
example of how to make an unpleasant task pleasant. Or so I imagine.
What do you hate doing? How could you make it more enjoyable? Personally, I need
someone to make hanging my clothes less of a pain, to make drinking water feel less like a “to
do,” and to take all my bills and pay them for me. Know of any solutions?

7. Turn a hobby or something you’re passionate about into a business

For those of you already actively making or doing something, this may be an obvious next
step. Or, if you’ve been doing something on a regular basis and find yourself good at it but
don’t think of it as a hobby, perhaps you should think about how it could be a business.
Things that I do on a regular basis that could potentially be turned into business ideas include
glass painting, writing, researching, jewelry making, fixing jewelry, illuminated lettering,
social media training, and so on. Everyone has things they do on a regular or semi-regular
basis. If you’re good at any of these things and are looking for business ideas, you just might
want to think about turning your hobby into a business.
My sister’s boyfriend, Alex Alotte, is doing just this. When he worked as a bartender in the
San Francisco Bay area, he wanted to be able to use the best tools possible, not just because a
craftsman’s tools are his pride, but also because they’re an important part of your image. Alex
catered for a number of reputable clients and companies, so this last part was especially
important. Unfortunately, there weren’t a whole lot of quality muddlers on the market that he
could choose from. Most were plastic, or they were made using boring wood, or they were
22
poorly shaped, poorly finished, you name it. So, when a relative who was enrolled in a high
school woodshop course heard about Alex’s hunt for the “perfect muddler,” he suggested
Alex make one himself.
Given that he enjoyed using his hands and already felt he needed a hobby, Alex decided to
make his own muddlers or to make, in his words, “high quality, beautiful, wooden muddlers
that verge on art!”
He purchased a lathe and all manner of other tools and set to work. The result is a product that
resembles a small bat or large pestle and which, when used by a bartender, serves a similar
purpose to a pestle, grinding, mashing, or crushing herbs, sugars, fruits, and ice. Mojitos are
made using muddlers, but hardly ever using ones like Alex has created, out of beautiful
figured wood.
While Alex is still refining his product, he’s already sold one of his “art” muddlers for 50
dollars. The next step will be setting up an online store and figuring out how to make this a
full time business.

Alex Alotte—handmade muddlers for professionals.

If you find the idea of starting a business intimidating, start with something you know. This
way, it might not feel like a business and you’ll enjoy the process as you go. Be sure to think
carefully about how you’ll feel if things do work out. You may find things suddenly become
less enjoyable as you’ve got to start making them to meet customer demands or to pay the
bills. Or, you might just need a new hobby!

8. Fulfill a need

Take any of the human needs on Maslow’s Hierarchy of Needs and think of the products and
services created to meet these needs. Then, build on those.

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Consider: As humans, we have a constant need to hydrate ourselves. If we did not drink
water, we’d die. As such, we’ve had plumbing built into our houses and into all of the
buildings we work in and visit. But, despite being able to pop in almost anywhere to drink
water for free, companies have come up with additional ways to meet this need. They’ve
provided solutions for water on the go. They’ve provided solutions for clean water on the go.
They’ve provided solutions for flavored water on the go, for “vitamin” water, for water in
bottles that won’t increase your risk of developing cancer.
Move up to the love/belonging level on Maslow’s pyramid, and you get companies like
Facebook that allow a user to feel a sense of connection to friends and family.
Move up another level to esteem and you get the likes of Tony Robbins with books and tapes
on how to achieve your dreams, improve your self-confidence, and become the best.
It might feel a little manipulative looking at things this way, but many of the products you use
already bear reference to these needs, including the toilet paper you buy (physiological), the
locks you have on your door and the pepper spray you carry (safety), the birthday card you
buy for your friend (love/belonging), the feedback you seek via recommendations on
LinkedIn (esteem) and the tools and situations (like the Peace Corps) that allow you to
practice your creativity, morality, or problem solving skills (self-actualization).

9. Appeal to a base emotion

What makes you angry, what makes you happy, what makes you jealous? What does this to
others? There’s a new social media site on the block that has capitalized on anger. It’s called
Ello and even though it’s still only invite by request, already it’s got a lot of press, mainly
because its appealed to those people that hate Facebook for essentially being a gigantic ad
platform that sells their personal details on to other companies looking to make money.
Author and renowned copywriter, Andy Maslen, phrases appealing to base emotions a little
differently. He says, exploit a base emotion!
Think of it as you will, positive or negative, but fundamentally, Andy is right. According to
him, humans often make decisions based on one of seven emotions. These emotions are more
popularly known as the seven deadly sins:
 Pride
 Envy
 Lust

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  Greed
 Gluttony
 Sloth
 Anger (wrath)
When you consider some of the services and products available to us today, you’ll quickly
realize how many of them were invented to appeal to or take advantage of these emotions.
Take beauty salons as an obvious example. How many people really need their nails buffed or
their legs waxed to survive?
The fact is, that as a society, we have taken evolutionary reactions a step further. Where
cleaning hair may previously have been an action we took in order to attract a mate and look
better than the competition, today we’ve taken it to the extreme.
Now, rather than simply having products that get the job done, we have products that build on
and create new needs like salt spray to add volume to hair, hair spray to hold a style, dry
shampoo for when you don’t have time to shower. Companies are able to sell these products
because they’re still able to exploit our base needs.
I have very fine hair so salt spray and volumizing shampoo is an easy sell. Oil, not so much,
however for friends I have with really thick, bushy hair, oils are the easy sell. All of this is
exploiting our pride. After all, none of these products are really necessary.
Take a look at those seven deadly sins and see if you can think of how products and services
you use on a regular basis are exploiting those needs. Perhaps you’ll even start picking up on
how advertisers do the same!

10. Experience more

It’s true that the more you do and the more you experience, the more material you will have at
your disposal to be able to create new ideas, or stitch together seemingly disparate ideas.
In fact, Bill Gates believes so strongly in the power of serendipity in order to come up with
new ideas, that he frequently allots time to read books on a number of different subjects in a
short amount of time.
Nirmalya Kumar, Professor of Marketing at the London Business School, knows how
important it is to be curious and to look outside of your your own business or industry in order
to come up with new ideas.
In a video interview, he says that if he did not read broadly and then try to find connections,
he would always feel he was going to write or say the same thing as everyone else. Primarily
reading outside of business helps him come up with new ideas and draw new correlations
between topics.
According to Nirmalya, “Intelligence and raw knowledge are overrated. It’s more important
to have diverse interests.”
His discussion with interviewer Matt Symonds is in fact so interesting, I’ve included it here
and I encourage you to watch it if you have the time.
The other simple things you can do to make coming up with ideas easier is to simply do more.
This is how I come up with new topics to write about, new case studies or people to mention,
and new things to say. If I didn’t do this, I’d be limited to those things I know. Doing things
and reading things that differ from my “usual” activities, hopefully gives me more interesting
stories to share!

11. Steal others’ ideas

There is no shame in this. In fact most good ideas are built upon someone else’s idea. The
dissertation that I ended up submitting for my MA program actually grew out of the seed of a
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story that my sister had written while in high school. I liked her idea so much that during my
undergraduate degree I wrote about a man that spent his days going through Johannesburg’s
bins. From this, I adapted it.
Take J. K. Rowling and “Harry Potter.” Don’t tell me the Death Eaters weren’t modeled off
the Ku Klux Klan, and that the spiders in the Forbidden Forest didn’t bear reference to Lord
of the Rings, or that J. K. Rowling didn’t use myths as a basis from which to create the
strange and fascinating creatures in her books. In fact, even the original and entirely fictional
game of Quidditch has its origins in the idea that witches ride broomsticks. She simply built
on this idea.
One of my favorite holiday destinations growing up in South Africa was the Palace of the
Lost City. It’s a gigantic resort modeled off the ruins of a real lost city. Like something you
might stumble across in Cambodia, perhaps? There was probably a little bit of creative theft
here.

The Bridge of Time at the Palace of the Lost City, South Africa

I’ll leave you with this final thought from Albert Einstein: “Creativity is knowing how to hide
your sources.”

Red Ocean vs. Blue Ocean

Don’t you just hate when people make up terminology to suit their purpose? You may think
that Chan Kim and Renee Mauborgne may fall into the category of trying to coin new words
to set their concepts apart, but there is method to the madness.
The concept is quite simple to understand. The Red Ocean is where every industry is today.
There is a defined market, defined competitors and a typical way to run a business in any
specific industry. The researchers called this the Red Ocean, analogous to a shark infested
ocean where the sharks are fighting each other for the same prey.
A couple of years ago, my husband and I vacationed in Tahiti and went on a shark feeding
dive. It was amazing to see how the sharks tore apart the chum and beat each other up over
every morsel. Isn’t this much the same behavior we see in our industries? Thus the term, Red
Ocean.
The Blue Ocean, on the other hand, is calm, smooth, with lots of food and little or no
competition. This is where everyone would like to be and it is possible for you to have a Blue
Ocean.
Consider some of the well known Blue Oceans created by the New York Police Department,
Southwest Airlines, Cirque du Soleil, Casella Wine [yellowtail], Nintendo (Wii), Cemex
Cement, and The Body Shop. These organizations created their blue ocean and so can you.
Here are the differences between the Blue and Red Oceans.

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So just what does this mean? Let’s take the differences one at a time.
Focus on current customers vs. focus on noncustomers. In most industries there is little
effort to attract new buyers to the industry, thus the focus on the customers currently
purchasing in that industry. In the Blue Ocean, there is a focus on trying to increase the size of
the industry by attracting people who have never purchased in that industry.
Compete in existing markets vs. Create uncontested markets to serve. Sounds good,
right? But how do you do that? Existing markets are all the customers doing business in the
industry right now, whether they are doing business with you or your competitors. If someone
wins a customer, then it is assumed, someone will lose a customer. For someone to win,
someone must lose.
In uncontested markets, there is only a winner, you. No one else is fighting for the business
because either they don’t know about it, or they don’t know how. They will try, of course, but
if you have done things the Blue Ocean Strategy way, they will not be successful for a very
long time. Take Cirque du Soleil, for example. I read where there have been about 150
companies trying to compete with them, everyone went out of business. And after [yellowtail]
wine came out, many wineries tried putting an animal on their label. None of them had the
same success.
Beat the competition vs. Make the competition irrelevant. The competition becomes
irrelevant because they cannot duplicate the ideas in a way that is a commercial success.
Remember, the whole idea of Blue Ocean Strategy is to have high value at low cost. If you
are doing that, how can anyone compete with you? All the would-be competitors fall by the
wayside.
Exploit existing demand vs. create and capture new demand. You will be creating value
so high that you will be attracting customers that never before would have considered entering
the market. Nintendo’s Wii appeals to families and seniors. [yellowtail] attracted beer
drinkers, Southwest Airlines appealed to auto travelers.
Make the value-cost tradeoff vs. break the value cost tradeoff. If you cut your strategy
teeth on Michael Porter’s Competitive Strategy concepts, as I did, you understand that there
were only two strategies to chose from, value or low cost. It was understood that you could
not have both value and low cost. Kim and Mauborgne have broken that concept and said that
you can have high value and low cost and developed the tools to do it. In fact, if you don’t

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break the value cost tradeoff, competitors will easily duplicate what you are doing and the
ocean will once again be very red.
Align the organization with differentiation OR low cost vs. aligning the organization
with differentiation AND low cost. You can’t just say you are going to have differentiation
and low cost. You must search every nook and cranny of your processes and organization to
strip away unnecessary cost. The entire organization must be aligned this way…anything that
doesn’t create or contribute to value, gets eliminated or reduced. It is just the most efficient
way to run an organization whether in a blue or red ocean.
Dr. Sarah Layton, CMC, CEO and Managing Partner of Corporate Strategy Institute, is a
certified management consultant and motivational speaker. Blue Ocean Strategy, outlines the
processes of removing the fight for competitive advantage and the battle for differentiation
typical of many corporate strategies.

Offensive and defensive competitive strategies

If a market cannot be expanded through new users, new uses and increased frequency
of purchase, a ‘build market share’ strategy may be a relevant alternative. This implies
gaining marketing success at the expense of the competition. A successful strategy amounts to
combining attacking and defensive moves to build a stronger position in the chosen
marketplace. In past years several authors, most notably Kotler and Singh (1981) and Ries
and Trout (1986), have drawn an analogy between military warfare and competitive battles in
the marketplace. Their basic contention is that lessons for the conduct of business strategy can
be learnt by a study of warfare and the principles developed by military strategies.

Offensive strategies
As indicated, when a build objective is pursued in a market that cannot, for one reason
or another, be expanded, success must, by definition, be at the expense of competitors.

In the battle with competitors, organisations must decide on what dimensions to attack
or defend. This decision is based, in part, on the size of the firm relative to its competitors. It
will also depend on the strategies that are viable in a particular industry. Kotler and Singh
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have identified five competitor confrontation strategies (see Figure 8.9) designed to win sales
and market share.
Frontal attack
A frontal attack means taking on a competitor head-on. This is one of the most
difficult and dangerous of all marketing strategies. To be successful, the firm must have a
substantial marketing advantage or considerable resources. For instance, the firm might have
a simila product, but be able to sell it at a lower price. The requirement of a similar 3:1
advantage to ensure success in a commercial frontal attac has been suggested (Kotler and
Singh, 1981). Some question this 3:1 force, but all agree, however, that to defeat a well-
entrenched competitor, who has built a solid market position, requires substantial superiority
in at least one key area of the marketing programme. IBM’s attack on the PC market in the
early 1980s is a classic example of the frontal attack. The market pioneer (Apple) was
attacked partly as a defensive move by IBM, as the company saw the likelihood that Apple’s
desktop machines would become executive workstations and hence threaten IBM’s traditional
dominance of the mainframe business market. There were several aspects to IBM’s attack on
the market. It was spearheaded by a technological improvement (16-bit processors gave
increased power and speed over the competing 8-bit machines). At the same time IBM made
the technical specification of its machines widely available to software houses and other
peripheral equipment manufacturers so that software became readily available and soon
established an industry standard (‘IBM-compatible’). The creation of this standard was made
possible by the use of that prime marketing asset – the IBM name and reputation. Finally, a
massive promotional campaign was launched in the small business market. The results were
not only a dominant share of the markets for IBM, but they also managed to encourage the
further growth of the market as a whole.
Flanking attack
In contrast to the frontal attack, the flanking attack seeks to concentrate the aggressor’s
strengths against the competitor’s weaknesses. In warfare, a flanking attack would seek to
shift the battleground away from the enemy’s strength to the unguarded or less well-defended
flanks. A flanking attack is appropriate for segments of the market where customer needs are
not being fully met. This may simply mean fighting in geographical regions where the
competition is weak. More likely, it means bringing out new products for emerging segments
of the market. Flanking addresses gaps in existing market coverage of the competition. This
strategy has been used very effectively by Japanese corporations.
The entry of Japanese cars into Western car markets is a classic example of a flanking
strategy. In cars especially, the Japanese took advantage of the OPEC-induced oil crisis of the
early 1970s to cater to customer needs in the small car segment. The Japanese cars were
cheap, reliable and offered good fuel consumption to the hard-hit motorist. Having established
a toehold in the market, the Japanese car manufacturers have subsequently moved into other
segments. Timing can be crucial to a successful flanking strategy. The Japanese entry into the
US small car market was timed to take advantage of the recession and its power. The strategy
requires the identification of competitor weaknesses, inability or unwillingness to serve
particular sectors of the market. Another example of a flanking attack is Mercedes-Benz’s
introduction of the Smart car in 1997. With less space and lower gas mileage than many of its
competitors, the primary marketing message of the Smart car is its ability to offer consumers
an alternative fashion statement. By 2009, the Smart was available in 25 countries all over the
world and had notched up over 800,000 sales.
Encirclement
This involves attacking the defender from all sides to spread its resources thinly by
probing on many fronts at once. Again, superior resources are required. For this strategy to
succeed, the attacker must possess not only a 3:1 power advantage, as with the in-your-face

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portion of the attack, but additional resources to achieve victory in the multiple change-the-
field strategies. The encirclement strategy, therefore, is a viable alternative only for
companies possessing resources vastly superior to those of the individual being attacked. In
business there are two approaches to the encirclement attack. The first is to attempt to isolate
the competitor from the supply of raw materials on which it depends and/or the customers it
seeks to sell to. The second approach is to seek to offer an all-round better product or service
than the competitor. After their original flanking attack on the small car market, the Japanese
used an encirclement attack aimed at many segments simultaneously with many different
brands.
Bypass attack
A bypass attack (or ‘leapfrogging’) is one of non-confrontation and instead focuses on
another weaker competitor (Burns and Warren, 2008). When one’s primary competitor
possesses a significant resource base to defend against the frontal attack and possesses few
weak points that can be used as a focus of a change-the-field attack, a leapfrogging strategy
may be appropriate. The leapfrogging strategy involves changing the company’s targets to
other, weaker companies where the chance of success may be higher. With this strategy the
firm may also diversify into unrelated products, or it diversifies into new markets for existing
products – as Marks & Spencer has done with its move into financial services. Bypass attacks
are most prevalent in high-technology markets, where a challenger puts its efforts into
bypassing existing technology and winning the battle for the next generation of technology to
be brought to the market. Such a move needs significant funding, but it can put the winner in
an almost impregnable position. Such a technological leapfrogging happened when Casio
bypassed the Swiss analogue watches with digital technology.
Guerrilla attack
Guerrilla warfare entails small, intermittent attacks on a competitor. One goal might be
to gain small amounts of market share while provoking minimal competitive reaction.
Guerrilla tactics may be the only feasible option for a small company facing a larger
competitor. Such tactics allow the small company to make its presence felt without the
dangers of a full frontal attack. By being unpredictable, guerrilla activity is difficult to defend.
One of the most long-lasting guerrilla actions is Virgin Atlantic’s campaign against British
Airways (BA). Despite being in an alliance that carries more people across the Atlantic than
BA, Virgin Atlantic still successfully positions itself as the little victim of BA’s alliance with
American Airlines. Guerrilla attacks can be a lucrative, though fickle, market strategy.
Businesses can appeal to this market by depicting their products as decidedly different from
popular products. Newly introduced products and those that are relatively unknown are best
suited for this appeal. Although it is unlikely that products targeted towards this market will
have the potential to become top sellers, it can be a great market for ‘niche’ products, which
differ materially from top-selling products. Examples of products that have successfully
employed this strategy include Dr Pepper and Apple.

Defensive strategies

Defensive strategies exist to counter each offensive strategy. In defending market

share, the firm also has several alternatives: Kotler and Singh (1981) suggest six basic holding
strategies.
Position defence
This involves erecting barriers around the company and its markets to shut out
competition. The military analogy is the opposite side of the wall from the siege. The
defender creates the largest walls and moats possible and sits tight until the aggressor gets

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weary, or finds other more pressing priorities, and withdraws. The main risk in this strategy is
marketing myopia. Redesigning or reformulating your product can keep you one step ahead of
the competition.
Flanking defence
This is the defending parallel to flanking attack. The aggressor seeks to concentrate
strength against the weaknesses of the defender, often (especially in military warfare) using
the element of surprise to gain the upper hand. A flanking defence requires the company to
strengthen the flanks, without providing a weaker and more vulnerable target elsewhere.
Pre-emptive defence
This follows the philosophy that the best form of defence is to attack first. The
objective is to strike a physical or demoralising blow that will prevent the aggressor attacking
in the first place.
Counter-offensive
Where deterrence of a potential attack before it occurs may be the ideal defence, a
rapid counterattack to ‘stifle’ the aggression can be equally effective. The essence of a
counter-offensive is to identify the aggressor’s vulnerable spots and to strike hard. The
counter-offensive defence is most effective where the aggressor has become vulnerable
through overstretching resources. One example is where the defender attacks the competitor’s
home territory so that it has to divert its efforts into protecting its existing products. For
example, some US firms have entered the Japanese market mainly to force Japanese firms
that had entered the US market to reconcentrate their efforts back in their home market.
Mobile defence
This involves creating a flexible response capability to enable the defender to shift the
ground that is being defended in response to environmental or competitive threats and
opportunities. When a company’s major market is under threat, a mobile defence may make
strategic sense. The two options are diversification and market broadening. A classic example
of a company using diversification as a form of mobile defence was Philip Morris
diversifying into the confectionery and food business when its cigarette market was
threatened. The mobile defence is an essential strategic weapon in markets where technology
and/or customer wants and needs are changing rapidly. Failure to move with these changes
can result in making the company vulnerable to a flanking or bypass attack.
Strategic withdrawal
A strategic withdrawal requires giving up untenable ground to reduce overstretching
and allow concentration on the core business that can be defended against attack. The
company has to define its strengths and weaknesses, and then to hold on to its strengths while
divesting (or outsourcing) its weaknesses. This results in the company concentrating on its
core business. By the end of January 2001 the Swedish mobile telephone manufacturer
Ericsson outsourced production of mobile telephones to a US partner, while keeping the
value-adding R&D function within the Ericsson company. Strategic withdrawal is usually
necessary where the company has diversified too far away from its core skills and distinctive
competences that gave it a competitive edge.

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