SWOT Analysis

SWOT is a basic framework to analyse the strength and weakness of a firm considering the
opportunity and threat from the external environment on the business. It included both the
internal as well as the external factors. SWOT simply stands for strength, weakness,
opportunity and threat.

Strength: It is the internal core competency of the firm which differentiates it from its
competitors.

Weakness: It is that domain of the company where its competitors are performing better that
the company. It can be a product, marketing practices, human resource, etc. These are
specifically related to the internal shortcomings of the company.

Opportunity: These are the supportive market condition which helps the firm to differentiate
itself from the others. It can include better economic conditions, government policies, tax rates,
market size, demographics etc.

Threat: External market situation which have an adverse effect on the business. It recognises
the environment which can lower the market presence of a company.

Strategic
Analysis

Internal External

Strength Opportunity
enhance expand

Weakness Threat
resolve thwart

Limitations:

Though it helps in minimizing large factors into an easy to understand profile, it has few
limitations as well. They are:

1. It over reduces the analysis by categorising the factors into the framework in which it
may not fit.
 2. Sometimes the classification is arbitrary.
3. For instance, a structure and design of a company can be either a strength or a weakness.

We have analysed Airbnb using SWOT framework:

Strength Weakness
Word of mouth Lacks Exclusivity
Reconnects real human interaction Users from different cultural convention
Creates economic growth at local level Meating Saftey regulations

SWOT
Opportunity Threat
Upcoming trend of travelling Different government's tax policy
Technological advancements Emerging Competition
Increased willingness of people to
explore cultures.
PESTEL Analysis
It is a most common analytical frame work used to analyse the external factors, which can
influence the functioning of an organization.

It is an acronym which stands for:

P – Political

L – Legal E – Economic

PESTEL

E –
S – Social
Environmental

T –
Technological

1. Political factors refer to the ideology of the government in power at central, state and
local level. The stability of the government plays an important role for a company to
decide its course of action. The level of corruption and ease of doing business is also
important. These factors finally translate to the legal framework of the society.
2. Economic factor decides the top line and bottom line of the firm. They may include tax
rates, inflation, buying power, duties etc.
3. Social factors are concerned with the lifestyle, social classes, culture, buying trends of
the population.
4. Technological factors refer to the technological advancements in a region. How many
people are connected to the internet, how is the telecom service, how many people are
smart mobile users, etc. This analysis is useful to implement technological services in
a region.
5. Legal factors determine how a company will facilitate business in a country or state.
6. Environmental factors may include the natural resources, weather, climate etc.
All the above-mentioned factors are the basic external determinants of how a company should
formulate its strategy to maximise the profits and gain advantage out of it.

Limitations of PESTEL Analysis:

1. External factors are very dynamic and change at a very fast pace.
2. Problem arises when we have to collect data regarding the external factors from external
agencies.
3. It simply concludes the effect of external factors, which is not sufficient to design the
strategy of the company. Internal factors are equally crucial and plays an important role
in the design of strategy.
4. Its effectiveness depends upon the validity of the data and continues updates on the
information.

Because of the above-mentioned limitation, we did not apply this framework for Airbnb
to analyse the strategic positioning of the company.
Since it is present in more than 190 countries it would be difficult to examine all the six
factors in every geographical location.
BCG Matrix or Growth Share Matrix:
It is a tool/framework created by the Boston Consultancy Group to analyse the portfolio of the
brand in terms of market share and market growth. It categorises the different brands in terms
of the attractiveness of the industry and the position of the brand in the market.

It gives a general idea to invest or divest in which brand. The four categories are as follows:

1. Star: High growth industry, High market share

2. Cash Cow: The most profitable brand. Cash generated from such brands should be
invested in stars
3. Dog: Low growth and low market share. Divest from such brands.
4. Question Mark: It shows great market opportunity which is not fully utilised.

Since Airbnb does not have a broad portfolio it can not be analysed in this frame work.
In future if it includes other services such as travelling or vacation planning or trip
planning etc., it be then analysed using BCG to determine which brand/product is
creating maximum value and strategies can be formulated accordingly.