All You Need To Know about SWOT Analysis
Written by Sonu Kumar and Sakshi Kumari Dt. May 10th, 2022
A SWOT analysis is a strategic planning technique that you can use to identify your company’s strengths, weaknesses, opportunities & threats.It was developed in the 60s by Albert Humphrey. This business tool can provide new insights, such as where you can improve compared to your competitors. As a result, your profitability can increase, which may lead to more success over time. Companies should perform this analysis frequently throughout the year. It can be especially useful when preparing to make a big decision. It can help you examine your company’s processes and determine what your next steps should be, so it is a worthwhile endeavor. It was first used to analyze business, but now it is often used by government, non-profit organizations and individuals including investors & entrepreneurs.
- Strengths: It is an Inherent Capability of the business which gives it advantage over its competitors. Ex: Strong Brand, Customer Loyalty,etc.
- Weaknesses: It is an Inherent limitation or constraint where the business needs to improve to remain competitive. Ex: Low Brand, lack of capital, etc.
- Opportunities: It refers to the favorable external conditions that allow it to formulate and implement strategies to increase profitability. Ex: Increasing sales, Increasing Marketshare, etc.
- Threats: It refers to an unfavorable external condition that has the potential to harm an organization. Ex: Increasing Competition, Increasing Cost, etc.
The major purpose of SWOT analysis is to enable the management to create a firm specific business model that will best align, fit, or match an organization’s resources and capabilities to the demands of the environment in which it operates. It is the study of the internal and external environments of a company, through the identification and analysis of the strengths and weaknesses of the organization, and the threats and opportunities to which it is exposed. Strategic managers compare and contrast the various alternative possible strategies against each other with respect to their ability to achieve major goals and superior profitability. Part of the purpose of SWOT analysis is to also assertively identify factors that influence the functioning of the organization providing very useful information in the strategic planning process.
Importance of SWOT Analysis
- It presents the information about both external and internal environment in a structured form where it is possible to compare external opportunities and threats with internal strengths and weaknesses. It helps in matching external and internal environments so that a strategist can come out with suitable strategy by developing certain patterns of relationship.
- It provides us with a logical framework for systematic and sound thrashing of issues having bearing on the business situation, generation of alternative strategies and the choice of a strategy. Variation in managerial perceptions about organizational strengths and weaknesses and the environmental opportunities and threats lead to the approaches to specific strategies and finally the choice of strategy that takes place through an interactive process in dynamic backdrop
- It helps the strategist in strategy identification. It is natural that a strategist faces a problem when his organization cannot be matched in the four patterns. It is possible that the organization may have several opportunities and some serious threats. It is equally, true that the organization may have powerful strengths couples with major weaknesses in the light of critical success factors. In such situation, SWOT analysis guides the strategist to think of overall position of the organization that helps to identify the major purpose of the strategy under focus.
- By leveraging its SWOT analysis, a business can create a strategic plan to meet desired objectives and adapt to changing market conditions.
In conclusion, SWOT is an important tool to understand the health of an organization. It allows decision-makers to identify not only where an organization stands, but also where it needs to improve. This gives it the ability to be a proactive player in the market while helping it remain competitive.
Sonu Kumar and Sakshi Kumari