Strengths, Weaknesses, Opportunities, and Threats Analysis (SWOT)

The goal of every business is to make profits while at the same time working very hard to meet the needs of customers. Companies are required to conduct various analyses of their businesses in order to understand their current status before making informed decision. SWOT analysis is one of the strategic planning tools that companies use to acquire a detailed understanding of their businesses. All SWOT analyses have four elements in common. The four elements include strengths, weaknesses, opportunities, and threats (Contract Journal, 2004). Strengths as an element of SWOT analysis describe factors that make a company better than other similar companies in the industry. In addition, strengths element details the core competencies of a company that make it successful in the market. In a SWOT analysis, weaknesses describe factors that prevent a company from performing well in the industry. Specifically, this element details things that a company is lacking yet they are important requirements for success (Contract Journal, 2004).

Opportunities, as the other element of a SWOT analysis, describe business potentials that can help a company to increase profits (Couzins and Beagrie, 2004). For instance, a company may choose to integrate technology into its system considering the fact that many companies are now taking advantage of technological advancement in the contemporary world. Threats element describe factors that are likely to harm a company’s operations. Examples of threats to a company are competitors and strict government regulations. Although all SWOT analyses must contain a company’s strengths, weaknesses, opportunities, and threats, the contents of these four sections vary from company to company due to differences in the types of businesses operated and industries in which those companies operate (Contract Journal, 2004).

Although the SWOT conducted by the team includes all the four elements described above, the team feels that additional elements should be included in the analysis. For instance, the feels things that the strengths section should include factors that make the company more likely to succeed in the industry (Couzins and Beagrie, 2004).. This new element has been chosen because it informs the company of those areas that it needs to exploit to its advantage. Moreover, the team feels that the weakness section should also include the level of customer loyalty that the company has with its new brand. This element should be added to the SWOT analysis because it helps the company to identify the most appropriate actions that it should take to strengthen brand loyalty among customers. Furthermore, the team feels that the opportunities section should describe changes in government regulations that have the potential to help the company increase profit, and that the threats section should include variations in consumer tastes and preferences that are likely to harm the company’s operation. This information will assist the company to make appropriate strategic decisions to help limit the impacts of those strengths (Couzins and Beagrie, 2004)..

SWOT analysis plays a very important role in every company. The main purpose of a SWOT analysis is to get a company’s manager think about both internal and external factors that may affect the success of a business (New Straits Times, 2003). The main idea behind this purpose is that, a manager is likely to make wrong business decision if he or she fails to consider the key issues related to its strengths, weaknesses, opportunities, and threats. For instance, if a company that is launching a new product fails to recognize the threat that there are other organizations within the region that are developing similar products, it might set relatively high prices for the product that may negatively impact sales. Basically, a SWOT analysis can help prevent a manager from making costly mistakes that might prevent his or her business from succeeding (New Straits Times, 2003).

Alternatives to SWOT analysis are PESTEL analysis and Porter’s Five Forces analysis. PESTEL is an acronym for political, economic, social, technological, environmental, and legal factors that affect a company’s operations. These are factors in a company’s external environment that affect the way a company conducts business. Porter’s Five Forces analysis describes factors in company’s environment that are affecting its operations at both local and international level. The five factors used in Five Forces Analysis are threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products, and competitive rivalry. Like SWOT analysis, PESTEL analysis and Porter’s Five Forces are strategic tools that help managers to make informed decision on how they can better manage their businesses (Wallace, 1998).

SWOT analysis has numerous advantages and disadvantages to a company. According to Couzins and Beagrie (2004), SWOT analysis is a business planning tool that a company can use to assess its capabilities as well as business opportunities that it should take advantage of in order to increase profits. By carrying out a SWOT analysis, a manager is able to acquire an in-depth focus on areas that require quick changes to prevent a company from falling. Moreover, a SWOT analysis helps a company to identify its competencies that it can use to exploit business opportunities. However, SWOT analysis may be disadvantageous to a company because it may not provide a manager with adequate information regarding how his or her business is likely to perform in the global market.

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