SWOT Analysis and Its Benefits
SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
Strengths and Weaknesses are actually considered to be internal factors analysis in which you can have some measure of internal controls.
Also, Opportunities and Threats that are considered to be the external factors in which the companies have no controls.
SWOT Analysis is the most important and tool for analyzing of the overall strategic position of any business. Its the key purpose of identifying the strategies that creates a firm’s business model. It will best align a company’s resources and capabilities for achieving its goals and objectives.
In other words, it is the main foundation point for evaluating the company’s potentials and limitations.
It also identifies the probable opportunities and threats from the external environment where the business exists. It finds and considers all of the positive and negative aspects inside and outside of the business that affect the success of the company.
The Strategy Watch has explained SWOT analysis and has a collection of analysis of real companies and their competitors.
This is a consistent study of the internal and external environment in which the firm operates and helps in predicting the changing business trends
An overview of the four factors
Internal Strategic Analysis
Strengths — Strengths are the best qualities that enable the company to achieve the organization’s goals and objectives. These strengths help the company to look forward and find out the opportunities as well.
Strengths can be anything the company does well. This can be the strategic management, resource planning, investment capabilities, or marketing strategies. Strengths are beneficial for the organization which includes products and services, human competencies, financial resources, process capabilities, customer goodwill and brand loyalty. Examples of organizational strengths are a large chunk of financial resources.
Weaknesses — Weaknesses are considered as the qualities that prevent us from achieving our mission and achieving our full potential. These weaknesses harms the organizational success and growth. Weaknesses are the things that do not meet the standards we think those should meet. Weaknesses in an organization may be old machinery, insufficient investment in research and weak development facilities, very narrow product range, poor decision-making policy, etc.
External Strategic Analysis
Opportunities — Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organizations can gain competitive advantage by making use of opportunities.
Organization should carefully recognize the opportunities and grab them whenever they become visible. Opportunities may arise from competition, market, industry, government, environment and technology. For example, the increasing demand for telecommunications is a great opportunity for new firms to enter telecom sector.
Threats — Threats are those when the conditions in external environment harms the profitability of the organization. They are responsible for the vulnerability of the company. Threats are not controllable. When a threats arise, the survival and stability can be at risk.
Some examples of threats are political instability, low trust in employees; frequently changing technology; increasing competition in the industry, price wars etc.
Advantages of SWOT Analysis
SWOT Analysis is can be used with strategy formulation. It is one of the strong tools that help a business to create strong strategies, but it includes a great subjective element. The best use if used as a guide. It cannot be used as a prescription. Successful businesses improve their strengths, lessen their weakness and protect against the external threats.
