The SWOT analysis, which analyses an organisation's strengths, weaknesses, opportunities and threats, is an effective tool for many types of organisations. It is extremely effective for advertising agencies. The main purpose of the SWOT analysis is to determine whether and how much of a gap lies between your agency's current conditions and its desired conditions. The advertising agency can then form strategies to take advantage of its strengths and opportunities and combat its weaknesses and threats to develop and maintain a sustainable competitive advantage.
An advertising agency's strengths consist of internal factors that contribute to its ongoing success. This can include all tasks that the organisation does best as well as factors such as the strength of its relationships with customers or a strong organizational culture. Critical areas to analyse when examining the organisation's strengths in the SWOT analysis include marketing, finance and human resources. The possession of an especially talented creative team is an example of an advertising agency's potential strengths.
Weaknesses are internal factors that might hinder the advertising agency and create boundaries to success. A lack of marketing expertise is one example of a weakness that an advertising agency might possess. Another common weakness of advertising agencies includes the possession of clients who consist mainly of businesses with low-quality products and services or products that are difficult to differentiate from others in the market. An effective method of identifying the organisation's weaknesses is to examine the competition and determine where competing agencies excel.
Opportunities are external factors over which the advertising agency has no control. Although the agency has no control over the existence of opportunities, it might choose to exploit them as they arise. An evolving market, such as the Internet is one example of an opportunity for an advertising agency. An organisation might also choose to move into a new, international marketplace where effective competitors do not yet exist. Additionally, market fluctuations might provide either opportunities or threats to an advertising agency.
Threats are also external factors of which the advertising agency has no control. These factors include issues such as fluctuating market conditions or upcoming legislation that will affect how the organisation does business. The PEST analysis is an additional analytical tool that is helpful for identifying these external threats. The PEST analysis examines external political, economical, social and technological factors that might affect the organisation.