SWOT Analysis is a simplified process used in most of the organizations, for the perfect determination of the strengths, weaknesses, opportunities as well as the threats. SWOT Analysis helps in identifying these important factors which can either make or break an organization. SWOT is a very basic and analytical framework which is used to assess the company’s potentials and threats which can downgrade the company’s goodwill. SWOT Analysis can also be used for a specific place, product or even an industry. It helps in identifying what the organization can or cannot do, which includes both the internal factors as well as external factors. It uses the extensive environmental data for the evaluation of the position of the organization. The SWOT analysis identifies which factors assists the company in accomplishing its goals and what are the major obstacles which block the company from reaching its goal. The obstacles can be minimized as well as overcome with the help of the SWOT analysis. SWOT Analysis is a planned method which helps in making appropriate strategies for making the best use of resources and stock of the organization. SWOT Analysis is also used to compare the organization with its competitors and how to be better in comparison to the competitors in the industry.
The four elements of SWOT:
These are the special characteristics which are an advantage to a firm. Strengths are a strong hold of any firm in a particular field or industry, which differentiates and gives it an advantage over its competitors. Strengths describe what the company excels at. Some of the examples of the strength of any firm are strong balance sheet, unique work power, latest technology, loyal customer base and strong goodwill. The company’s USP, which is the Unique Selling Proposition, can also be listed as its strength.
These are those characteristics of a company which places the firm on a level of disadvantage. Weaknesses are a backlog which doesn’t allow a company to work on its optimum level. Due to weaknesses, a company may lose out to its competitors in the industry. This is an important area which needs to be evaluated from time to time to overcome it. Some example for a weakness of a company can be high levels of debt, higher than average industry turnover, inadequate supply chain and also lack of capital investment. By knowing weaknesses, we can evaluate what could be improved in the organization, how can it be avoided, what factors are resulting in the establishment of those weaknesses? What is the position of the company with these weaknesses in the industry?
Opportunities are basically elements, which are present in the environment or surrounding which the business or the organization could exploit to its use and advantage. Opportunities are basically external factors which the organizations can use to its favor. It can help an organization to gain the market upper hand over its competitors. The organization needs to spot the new opportunities arising in the market or share market. What are all the interesting trends which are going in the market? What are the important changes in the technology and market ethics? Some of the important opportunities can be gathered and modified as per the company’s needs. Changes in government policies which are related to the industry of the respective company can be used as an opportunity. Changes in population profiles, lifestyle changes and social patterns can also be used in favor.
These are the elements present in the environment or surrounding which can affect the growth of the company or organization in a negative way. It can cause trouble for the company. Threats are basically those factors which have the major potential of harming an organization’s reputation as well as resources. Some of the common threats are increasing competition in the market, tight labor supply, high market cost, etc. While identifying threats, the organization has to identify the obstacles, which they are going to face, they have to identify the competitor’s status and growth report, check if the changing technology is creating problems for the company? Is the company having any cash flow problems or bad debts?
What are the internal and external factors?
The main aim of the SWOT Analysis is to identify the factors which are relevant to the internal as well as external factors of the company. Identifying these key internal and external factors is important for achieving any given object of the company. The strengths and weaknesses of the company are directly related to the internal factors of the organization. On the other hand, the opportunities and threats are directly related to the external factors of the company. The internal factors may include Price, product, place, promotion, finance, manufacturing, and personnel. The external factors majorly include the macroeconomic matters, legislation, technological change, sociocultural changes and also the marketplace changes.
What are the advantages of SWOT Analysis?
SWOT Analysis is a very efficient and time-saving procedure of identifying different key elements regarding the company, which can be helped in making the company better than ever. It is the best way to guide the business strategy meetings which will help in expanding the business stature. The core strengths and weaknesses can be used to alter the performances of the organization and its internal factors. The identification of opportunities and threats can help in making the company’s market potential stronger. SWOT Analysis is a useful technique for understanding your strengths and weaknesses, and for identifying both the opportunities open to you and the threats you face. Besides a common overall company’s SWOT Analysis, there can also be a different sector based SWOT Analysis inside the company like marketing, production and sales department’s SWOT Analysis. By this way, the company can use its resources to its optimum level without wasting any man power and technological power. The entire department’s work force can be united with this and can be directed toward one main goal which the company is planning to achieve.