What is SWOT analysis? SWOT analysis is the study of internal strengths and weaknesses and external opportunities and threats of an organization. Here SWOT analysis defines internal and external factors. Strengths and weaknesses are the internal factors, whereas opportunities and threats represent the external factors. In short, it is a tool that is used to evaluate the competitive position of an organization.
How to do the SWOT analysis
It is a method of assessing the performance, risk, competition, and potential of a business organization. SWOT analysis helps business organizations to adopt techniques that make them more successful. Thus, keep them away from things that can lead to a loss for a business organization. The key elements of a SWOT analysis are strengths, weaknesses, opportunities, and threats. Although all the elements are not equally important still each has distinct importance. For some organizations, internal factors will be important while for others external will be of great importance. Here is a brief discussion about the different elements of SWOT analysis.
Strengths basically describe the competitive advantage or the quality which differentiates a business organization from others. The quality or packaging of a product can be a strength for a company over its competitor.
Weakness is an internal factor that stops an organization from performing to its potential. However, it is very important for an organization to be aware of its weakness as it can be used by the competitors as their strength. Mostly, organizations are unaware of their weaknesses. Competitors take full advantage to put themselves in a better position in the market. Low-quality products, poor packaging, poor advertisement, and high turnover rate of employees can be examples of a company’s weaknesses.
It is a favorable factor that a company can benefit from and take a competitive advantage. Therefore, business organizations should never miss a chance to take advantage from an opportunity that it finds favorable. Examples of opportunities are entering into a new market, introducing a product that a competitor is not producing, or buying an already established company and merging it with your existing one.
Threats are the alarming factors that can harm or cause loss to an organization. Therefore, the organization needs to be fully aware of these external factors and should be responsive to them. An increase in the cost of a product or an increase in competition are examples of threats.
In a nutshell, internal and external factors have their importance. Although, organization needs a thorough study to conduct a SWOT analysis. Without proper analysis, an organization cannot be successful and can result in losses.