SWOT Analysis

SWOT Analysis A strategic planning process involves a scan of the internal and external environments. The internal environment can be scanned by analysing the strengths and weaknesses of an organization, while an external environment scanning could be done by analysing opportunities and threats to an organization. This method of strategic planning is called SWOT analysis where SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths An organization’s competitive advantage may be built based on its capabilities and its resources. These resources are the strengths of an organization.  These could include: Strong brand name Good reputation New product or service Patents Location of business Specialist marketing expertise Exclusive access to natural resources Quality process and procedures Weaknesses The weaknesses of an organization maybe some attribute it lacks at. Some of which could be A weak brand name Lack of marketing expertise Lack of patent protection Poor quality goods or products Location of business Weaknesses must be faced head on, as it’s best to be realistic and face the truth as soon as possible. Opportunities An external environment scan can reveal opportunities that can be used for growth and profit. Some such opportunities are Changes in technology Developing market Changes in government policy related to the company’s field A market lead by an ineffective competitor Threats Certain changes in the environment can also pose as threats to an organization. These can be Introduction of a new and better product by a competitor New regulations New competitors Increased trade barriers Price war SWOT analysis can have different results when done by different people. It must not be relied upon heavily. It can be used simply as a guide for performance improvement. SWOT (or TOWS) matrix A good opportunity may not necessarily be the best course of action. Sometimes it’s better to analyse how a company’s strengths can be used with an opportunity to develop a competitive advantage. A SWOT matrix may be constructed using the SWOT profile created. SWOT matrix is sometimes called a TOWS Matrix. SWOT Matrix The interaction of the different quadrants of a swot matrix is very important, while developing a strategy. Strengths must be leveraged to pursue opportunities and to avoid threats. Weaknesses must be kept in mind in order to be able to pursue opportunities.