Know-How Exchange : Student Questions

High profit is only an advantage in that it provides resources for the company to use (lack of money is often a weakness for companies, especially smaller companies).

In truth, the strengths of the company are likely other things than the profits. They are the things that helps that company make the profit. For example, Apple has a lot of money and makes a lot of profit, but their strengths are things like excellent design and customers who will come back to buy to buy more products. Or if the company you were looking at is Saudi Aramco (another company with a lot of money), the strength is that they have a Government authorized monopoly and access to lots of oil.

Peter, as usual has hit the nail on the head. I would like to take it a step further and broaden his argument a little.

If I happen to be discussing marketing with someone and the question is about money (which in this case is characterized by the word 'profit') - I say clearly that if the question is about money, it's the wrong question.

Money - profit or whatever part you call it, is a result. Someone somewhere has done something and someone has profited from that. Knowing who it was, where they were and what they did will tell you more about that money than the money will itself. This is the core of marketing*, and it is the least understood. Because everyone's interested in the money - not where their profits come from. (*and business too of course ... )

The essence of the SWOT analysis is to form this into some kind of cohesive, intelligible structure. Discovering that a company has a strength in profits means very little: because strength in the bottom line is no strength at all. Knowing where those profits emanate from will tell you if they are sustainable or not. From Peter's analysis - Apple is in a better position than Aramco. Apple has a solid customer base. Aramco's profits rely on things over which they have little (or no) control - their government and a supply of oil. A good quality customer base is a far better proposition than a government - even if it is one that you claim you can control. Customer revolutions are rare when they dote on your products.

An ability to generate enough revenue to cover costs and generate profit is a good thing because the profit gives the company greater long term stability to invest in new product lines, to invest in longer term marketing, and to give back to the community, to its employees, and to its share holders.

High profit itself is not really a strength. It's the result of other things that are strengths -- things like a unique product, high awareness among the target audience, etc.