SWOT analysis is one of the most widely used analytical tools used by management students, to assess the internal and external conditions of a business venture. It acts as a business appraisal tool, which helps in development of new strategies that can help the organization to meet its core objectives, while overcoming its issues and challenges. y the end of this PenMyPaper article you will have extensive knowledge on SWOT analysis and you will be able to write it on your own.
SWOT is an acronym for Strength, Weakness, Opportunity and Threats.
The internal conditions are represented by the strengths and weaknesses, whereas the external conditions by the opportunity and threats. The internal strengths and weaknesses can be controlled by the organization, where the firm can choose to maintain its areas of strengths, while working on improving on its areas of weakness. However, it does not have any control over the external threats and opportunities. These factors determine the external influence of the business environment on the organization.
The purpose of conducting a SWOT analysis is to identify the strong and weak areas of a business or any organization, along with the external environment, which can disrupt or support the business venture. Therefore, if wondering how to conduct a market analysis on your decided company, then SWOT analysis is an excellent tool to start with. It provides all the necessary information about the company and about the environment in which the company is currently operating in.
The SWOT analysis is most commonly conducted in the form of a 2 by 2 matrix, with each quadrant filling one of the four SWOT parameters.
The most appropriate way to start preparing a SWOT analysis, it is to start thinking from the point of view of the company, rather than an external stakeholder. It should help to easily identify where the company currently stands and what are the external forces that it is exposed to. Let's us look at each of the parameters in details.
Strength: The strength of a company is what it is best known for, in the industry. It is what helps the firm to maintain its business and secure its cash flow. While identifying the strengths of a company, the best place to start is by looking at its brand image and its financials. You need ask questions like: is the company making enough profits? Or it is one of the top recognized brands that people aspire to possess? Having a strong brand image and a stable financial position can be one of the key strengths for a company. Now let's look in to the product and service offering of the company. Is the product popular among the customers? What is the market share of the company? Having a high market share can be significant strength for a company to attract its shareholders and investors. These aspects cover the resources and what the company does best. Finally, we can cover what sets apart the company from its rivals. It is important to understand that you need to identify its core competitive advantage, which acts as a differentiating factor for the company. Look for the most prominent source of competitive advantage, which can be product differentiation, cost leadership or catering a niche market. Always keep in mind that the strengths of a company are the ones which are responsible for its growth and sustenance.
Weakness: The weaknesses are the areas which the company needs to improve in order to strengthen its position in the industry. Try to identify the areas which need immediate changes for the company to be more successful. These can be lack of product differentiation, narrow customer base, limited resources to match the market demand and lack of brand appeal. Any one of these factors can restrict the growth of a company. If we take the SWOT analysis of Walmart it is seen that their weaknesses lies in the internal strategic factors including high turnover rate, poor working conditions, minimum differentiation, etc. Now you can look at the product and services of the company, and identify where they are lacking in generating value for the customers. You may highlight if a product is unable to meet the current trends and preferences of the customers. Secondly, look at the functional areas of the firm. The best way to start looking is to identify the shortcoming of its supply chain. You may highlight if the company is too dependent on its suppliers and lacks vertical integration. For a company, it can be a potential weakness, as it limits the control over its supply chain, thereby restricting its ability to immediately reacting to market changes. You can also identify any human resource oriented issues, which is bottlenecking the performance of the company, such as high turnover or poor work culture.
As discussed previously, the strengths and the weaknesses are the internal aspects of an organization, which provides a brief overview of the status-quo of the firm. As a part of SWOT analysis, it plays a crucial role in strategy formulation, as the proposed strategy should be aligned to the existing conditions of the company. It should utilize the existing strengths and improve on the identified weaknesses. Now, let us look at the external factors, the opportunities and threats
Opportunities: The opportunities of a company are the external factors which can prove to be beneficial for the growth and sustenance of the company. These are the factors which can be leveraged in favor of organizational success. In order to identify the key opportunities, you need to look at the business environment in which the company is operating, which includes the target market and the industry. First of all, identify the market trends or the consumption patterns. The increasing popularity of a particular product category that the company sells can be a potential opportunity for it to generate more revenue. It also presents the opportunity to diversify the product lineup in order take advantage of the current consumption pattern of the customer. Secondly, you need look at the industry trends. Any advent of new technology can be leveraged in favor of the company. Moreover, you can also highlight the growth of the industry in which the company operates and any potential chance of geographic diversification. You can also mention the political intervention in the industry which supports business development. Such activities are often advantageous to business ventures. Finally, you can discuss about how the current strengths can be used to leverage the available opportunities. It is important to understand, not all opportunities can be utilized by the concerned organization. You need indentify the ones, which are aligned to its current strengths and can be easily leveraged. A company may choose to diversify its product range in order to expand its customer base, only if the diversification is aligned to its existing product line up and matches with the market preference.
Threats: The threats are the adverse external conditions which can disrupt the business venture of the company. It should be noted that while identifying the key areas of threats, you may begin with the industrial competition that is the competition from the rivals. Rivalry is often considered to be the most pertinent threat for an organization. Try indentifying all the key players in the industry that offers almost identical products and poses a serious threat to the company. Typically the large number of competitors in the industry can be a clear sign of high competitive threats. Secondly, you can talk about the disruptive changes in consumption behavior. Due to specific market conditions the customers may choose to alter their consumption behavior which can lead to poor sales for the company. Moreover, sudden changes in the political and economic conditions can also lead to disruption of the business and can pose as potential threats. Thirdly, you can highlight the external environment which poses as threat due to the weaknesses of the company. A company can face threat from changes in purchase behavior, if it lacks diversification of its product or service portfolio. You should keep in mind that a threat can be any external factor which can harm the business venture, and the company does not have a direct control over it.
Identifying the strength, weakness, opportunity and threats, in a SWOT analysis can help you to devise strategies which can help in achieving its core objectives of your business plan. You must keep in mind that the SWOT framework itself cannot provide any strategies or action plan; rather it provides all the necessary information required to develop the required strategies. A SWOT analysis can help you to:
The SWOT framework is an excellent tool which is used by managers to explore their strategic choices and to take the most informed decision for the organization. It allows them to make the most out the organizational strengths, navigate around its weaknesses, capitalize the key opportunities presented by the external environment, and pacify the imminent threats. For a management student, learning about SWOT analysis can play a crucial role in improving your marketing essay, says the expert essay writers. Check on our example of SWOT analysis of Coca Cola, to learn how you can effectively implement SWOT while auditing any company.
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