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SWOT

SWOT Analysis is a strategic tool used to evaluate an organization's internal strengths and weaknesses, as well as external opportunities and threats. It aids in strategic planning by helping organizations build on strengths, address weaknesses, and capitalize on opportunities while mitigating threats. However, it has limitations, including potential oversimplification of circumstances and subjective categorization of factors.

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3 views

SWOT

SWOT Analysis is a strategic tool used to evaluate an organization's internal strengths and weaknesses, as well as external opportunities and threats. It aids in strategic planning by helping organizations build on strengths, address weaknesses, and capitalize on opportunities while mitigating threats. However, it has limitations, including potential oversimplification of circumstances and subjective categorization of factors.

Uploaded by

vandankhandelwal816
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.

By
definition, Strengths (S) and Weaknesses (W) are considered to be internal factors
over which you have some measure of control. Also, by definition, Opportunities (O)
and Threats (T) are considered to be external factors over which you have essentially
no control.

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.

In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the firm
that affect the success.

A consistent study of the environment in which the firm operates helps in


forecasting/predicting the changing trends and also helps in including them in the
decision-making process of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats)


is given below-

1. 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.

2. 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.
3. 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 be careful and recognize the opportunities and grasp


them whenever they arise. Selecting the targets that will best serve the
clients while getting desired results is a difficult task.

Opportunities may arise from market, competition, industry/government and


technology. Increasing demand for telecommunications accompanied by
deregulation is a great opportunity for new firms to enter telecom sector and
compete with existing firms for revenue.

4. 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.

Advantages
SWOT Analysis is instrumental in strategy formulation and selection. It is a strong
tool, but it involves a great subjective element.

It is best when used as a guide, and not as a prescription. Successful businesses


build on their strengths, correct their weakness and protect against internal
weaknesses and external threats. They also keep a watch on their overall business
environment and recognize and exploit new opportunities faster than its
competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.


b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. 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.
SWOT ANALYSIS FRAMEWORK

Limitations
SWOT Analysis is not free from its limitations. It may cause organizations to view
circumstances as very simple because of which the organizations might overlook
certain key strategic contact which may occur. Moreover, categorizing aspects as
strengths, weaknesses, opportunities and threats might be very subjective as there
is great degree of uncertainty in market.

SWOT does stress upon the significance of these four aspects, but it does not tell
how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of
management. These include-

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market
due to import restrictions; etc.

Internal limitations may include-

a. Insufficient research and development facilities;


b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc

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