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Discovering new opportunities and eliminate threats in business using SWOT analysis
What is SWOT analysis?
SWOT Analysis or Swot Matrix is a Business strategic planning technique used to help an individual or an organization to identify the main four key parameters such as:
- The Strength
- The Weakness
- The Opportunities
- The Treats
The four parameters are related to business competitions or project planning. This framework is very important and it is a useful tool in managing business applications and marketing management. It is a fundamental requirement for the entrepreneur, marketer and a business person. It is the cornerstone to understand SWOT analysis for business majors. In 1960s and 1970s Albert Humphrey let a research project at Stanford University using the technique of SWOT Analysis. This is used as a framework for organizing and using data or information gained from various situations of internal and external environment. In SWOT Matrix, strength and weakness are frequently related to internal environment, while opportunities and threat commonly focus on environmental placements or external environment.
Brief idea on four key parameters
1) Strength:
- It is the characteristics of the business or project that give it an advantage over others in the industry.
- It has the positive tangible and intangible attributes, internal to an organization.
- It has all the beneficial aspects that an organization requires, the capabilities of an organization, process capabilities, financial resources, products and services, customer goodwill and so on.
- Examples of Strengths: Better Marketing Skills, Well-known brand name, economies of scale, lower cost of raw materials, loyal and trusted employees.
Following are the questions related to Strength:
- What are the advantages that our companies have?
- What do you do better than our competitors?
- What do customers in your market see as our strengths?
- What unique resources can you draw upon that our competitors can't?
- What is the Unique Selling Position of our organization?
We must consider our strengths from both an internal perspective, and from the point of view of our valuable customers and people in our market or area of business scope.
2) Weakness:
- It is the characteristics of the business that place the company or project at a disadvantage relative to others.
- It restricts the company from its ability to attain the core goal and influence its growth.
- Weaknesses are the factors which do not meet the standards of an organization, which we feel that they should meet.
- This should be minimized and eliminated. These are controllable.
- Examples of Weaknesses are: Out-of-date products, Weak Market Image, Poor Marketing Skills, Limited management skills, Weak Spending on R and D.
Following are the questions related to Weakness:
- Could we improve our business?
- What should we avoid?
- What are the customers or people in market likely to see as weaknesses?
- What the factors that loses our sales?
It's best to be realistic now, and face any unpleasant truths as soon as possible.
3) Opportunities:
- These are the elements in the environment that the business could exploit to its advantage.
- Chances to make greater profits in the environment.
- These are the external factors that represent the reason for an organization to exist and develop.
- Organization should be careful and recognize the opportunities and grasp them whenever they arise.
- Arise when a company can take benefit of conditions in its environment to plan and execute strategies that helps it to become more profitable.
- Examples of opportunities are: New uses of product discovered, economic boom, government deregulations, changing customer demands, changes in social patterns, population profiles, lifestyle changes, and so on.
Following are the questions related to Weakness:
- What opportunities can an organization spot?
- What interesting trends are you aware of?
4) Threats:
- External elements in the environment that could cause trouble for the business or project.
- Arise when conditions in external environment fails the reliability and profitability of the business.
- Threats are uncontrollable. When they arise the stability and the survival can be at stake.
- Examples of Threats are: Introduction of new substitute products, changing customer’s demand, entry of foreign competitors, economic downturn.
Following are the questions related to Threat:
- Do you have bad debt problems?
- Is changing technology threatening our company’s position?
- Are quality standards or specifications for your job, products or services changing?
- Could any of our weaknesses seriously threaten our business?
Aim of SWOT Analysis:
- To help the decision makers share and compare ideas.
- To bring a clearer purpose and understanding of factors for success.
- To organize the key factors linked to success and failure in the business.
- To provide linearity to the decision making process allowing complex ideas to be presented systematically.
