SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-
Strengths – Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which continued success can be made and continued/sustained. Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency. Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, etc.
Weaknesses – Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet. Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and eliminated. For instance – to overcome obsolete machinery, new machinery can be purchased. Other examples of organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc.
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
Threats – Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. They compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are – unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.
Characteristics of a SWOT analysis
A SWOT analysis focuses on the four elements of the acronym, allowing companies to identify the forces influencing a strategy, action or initiative. Knowing these positive and negative elements can help companies more effectively communicate what parts of a plan need to be recognized.
When drafting a SWOT analysis, individuals typically create a table split into four columns to list each impacting element side by side for comparison. Strengths and weaknesses won’t typically match listed opportunities and threats verbatim, although they should correlate, since they are ultimately tied together.
Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and experience readily available to you.
These are some commonly considered internal factors:
Financial resources (funding, sources of income and investment opportunities)
Physical resources (location, facilities and equipment)
Human resources (employees, volunteers and target audiences)
Access to natural resources, trademarks, patents and copyrights
Current processes (employee programs, department hierarchies and software systems)
External forces influence and affect every company, organization and individual. Whether these factors are connected directly or indirectly to an opportunity (O) or threat (T), it is important to note and document each one.
External factors are typically things you or your company do not control, such as the following:
Market trends (new products, technology advancements and shifts in audience needs)
Economic trends (local, national and international financial trends)
Funding (donations, legislature and other sources)
Relationships with suppliers and partners
Political, environmental and economic regulations
After you create your SWOT framework and fill out your SWOT analysis, you will need to come up with some recommendations and strategies based on the results.
How to Do a SWOT Analysis
Determine the objective.Decide on a key project or strategy to analyze and place it at the top of the page.
Create a grid.Draw a large square and then divide it into four smaller squares.
Label each box.Write the word “Strengths” inside the top left box, “Weaknesses” inside the top right box, “Opportunities” within the bottom left box, and “Threats” inside the bottom right box. These are titles, so they should be distinguished from the rest of the text using either color or font size. SmartDraw offers several SWOT diagram templates designed to make construction quick and easy.
Add strengths and weaknesses.Add factors that affect the project to the applicable boxes. Components of a SWOT analysis may be qualitative and anecdotal as well as quantitative and empirical in nature. Factors are typically listed in a bullet form.
Draw conclusions.Analyze the finished SWOT diagram. Be sure to note if the positive outcomes outweigh the negative. If they do, it may be a good decision to carry out the objective. If they do not, adjustments may need to be made, or else the plan should simply be abandoned.
Advantages of SWOT Analysis.
SWOT Analysis helps in strategic planning in following manner-
It is a source of information for strategic planning.
Builds organization’s strengths.
Reverse its weaknesses.
Maximize its response to opportunities.
Overcome organization’s threats.
It helps in identifying core competencies of the firm.
It helps in setting of objectives for strategic planning.
It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive environment in which the firm operates.
Limitations of SWOT Analysis
There are certain limitations of SWOT Analysis which are not in control of management. These include-
Searching a new market for the product which is not having overseas market due to import restrictions; etc.
Internal limitations may include-
Insufficient research and development facilities;
Faulty products due to poor quality control;
Poor industrial relations;
Lack of skilled and efficient labour; etc
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