What is SWOT ?


History

History of SWOT has been controversial as there are many claims for its first user, introducer or founder. But the most commonly accepted concept is that SWOT was originally SOFT having satisfactory and Fault in place of strengths and weaknesses of SWOT.  Beside all the controversial statements, the most widely accepted initiator of the process is Albert Humphrey, who utilized SWOT for the data of Fortune 500 companies. King however introduced SWOT matrix in 2004.

Definition

SWOT analysis is a key of any business venture involving methods of strategic planning employed to estimate the Strengths, Weaknesses, Opportunities, and Threats involved in that particular project, the basic purpose being identifying the suitable and unsuitable external and internal factors affecting directly or indirectly, the performance of the company.

Explanation

SWOT Analysis is the most frequently used device for audit and evaluation of strategic position of the company. It gives an overall view of the company’s operating environment including its capabilities and resources to align the specific business model. It actually forms a firm ground to plot and evaluate the potentials and limitations in the external and internal setting of the company. The big optimism seen in such reports is that, the factual data about the company regarding its negativities is exposed including weaknesses and threats. The overall picture of the company aligns the policies and strategies in a right direction and helps a great deal towards stable future of the company.

SWOT Analysis basically includes two categories which are further subdivided into two each.

1. Internal Factors

• Strengths

• Weaknesses

2. External Factors

• Opportunities

• Threats

Strengths

The consistent qualities of the company that enables it to accomplish the mission statement provided by it are commonly stated in strengths. Strengths may include your expertise, assets, technological advancements, research and development, revenue, high budget and profits, confidence of the customers, brand name, employees’ commitment and other related traits.

Weaknesses

Weaknesses are the negative attributes haltering the progress of the company. If weaknesses dominate the company’s strengths it poses negative image of the brand as well as the company and the brand image may be shadowed. The weaknesses may include incompetence, unsuccessful in achieving the target, unattended mission statement, negative trends for profit attainment, less diverse products being offered, debts and liabilities turnover, raw material not properly stored and other such things.

Opportunities

If the company is following its mission statement and marketing strategies than it is likely to create other opportunities out of its established existence or a network. A smooth running company can pay attention to its extension or may include other programs and products in its package, this is important to gain competitive strengths. Opportunity may be an outcome of any governmental policy, technological advancement or market competition.

Threats

The external environment may not be suitable enough for the company to generate desired products and may harm the reliability of the compound and profitability of the company. Threats are not expected activities and the company can be at stake if it is not stable enough to absorb that challenge. Threats may include strong competition, price wars, technology advancements and sudden profit declines etc.

Steps to Perform SWOT

While formulation of SWOT a step wise effort has to be made for each category that is strengths, weaknesses, opportunities and threats. Before carrying out SWOT a team is constructed this would finalize the methodology and after wards carry out the sessions for amendments.

Sequence of Steps in Strengths

1. Competitive advantage is mentioned while explaining the services being offered only by that company which is helping them move over their partner.

2. Marketing may include the strategies as well as promotional activities that are giving boost to the company.

3. Processes can be technological, research oriented or development.

4. Resources may include advanced technology, human resource and other such factors that can be considered assets for the company.

5. Experience elaborates the employees experience as well as the duration for the existence of the company and the emperies it has gained through the long way.

6. Financial reserves should take along the profitability ratios, annual revenue, budget and profitability out of it.

7. Capabilities may include strengths of the workers communities as well as the capability of huge production and range of products etc.

8. Accreditations

9. Unique selling points is considered one of the major strengths and all the data related to demographic locations of such selling points, target customers and the product being sold is included in this perspective.

Sequence of steps in Weaknesses

1. Vulnerabilities are those areas that are viable to damage the company internally. This is a result of unsuitable marketing strategy or undesired mission statement, and may also include less productivity or tripping machinery that may lead to less production.

2. Data, if not properly stored or ill managed is considered the weakness of the company.

3. Financial conditions of the company if not meeting the requirement of the company provides negative trends to its image.

4. Reputation if not established or is lost by low quality of products and serves is considered a weak point of the marketing strategy.

5. Core activities when replaced by side activities are unsuitable to gain market existence

6. Gaps in activities is explained if the process in the company is not properly running and experience abandoning after some time successively.

7. Lack of competitive strengths may be quoted if the products and services are not suitable and liable enough to invite any competition.

Sequence of steps in Opportunities

1. Geography of the company is the best opportunity for its growth, if the company location is exactly what market is expecting, it would excel to the peak point.

2. Partnership, joint ventures and subsidiaries add a major role as it is a step for the induction of big budgets and maximum outputs can be generated.

3. Economics especially the increasing budget and revenue is owned by the company is mentioned in opportunities as it helps mark new grounds for expansion of services provide.

4. Influences should include those strategies and policies in the surrounding either by the company or government that is positively upgrading the company.

5. New and Developing Markets that specifies either the new outlets location or introduction of the entirely new product in the market.

6. Competitor’s weaknesses are a major strength of the company, and should preferably be presented in contrast with the products offered by both the company and its competitor, and it is also worth mentioning that which areas of partners are weak with respect to you.

7. Developments including that of research, technological, productive development as well as induction of new products are discussed in developmental opportunities.

Sequence of Steps in Threats

1. Government, if not supportive and is imposing price fixing policies or mass production of any of the product beyond capacity would prove to be a threat to independent running of the company.

2. Environment, specially the working environment for employees, if not suitable enough or in some cases gender biased it would be a negative externality for that company.

3. Market Demand of product may rise significantly beyond its manufacturing capacity, and its shortage in the market shift the customers to some other related product offered by some other company ultimately negating that producing negative impact on that product.

4. Obstacles like that of improper machinery, unavailability of raw materials, conspiracies by competitors especially when court session is organized are mentioned if any.

5. Competitive bond may some time be at lower edge by the company itself as competition is always a threat and ups and downs in this regard are sure short.

6. Technology development if the new technologies are not incorporated or the previous technologies are not maintained will be included in threats to the company.

It’s not always necessary to include all these steps but they are accordingly arranged with respect to those which are applicable. The best company is the one who maintains its strengths and opportunities and improve weaknesses and threats optimistically with an open room of criticism.

Advantages of SWOT

• SWOT analysis is not a costly activity rather a time consuming technique.

• SWOT is complete tool of analysis and strategic planning.

• Aware the company about its market position and integrate its strengths so that they could be maintained.

• Provides company in depth look for its weaknesses and prepare them to formulate policies to check them out.

• Opportunities are more emphasized and can grow tremendously.

• Threats faced by the company are timely detached.

• Company gets aware of its competencies.

• Goals and objectives could be reset according to the requirements of the market.

• Current situation of the company helps to access and plan the future well in advance.

Disadvantages of SWOT

• The major disadvantage of SWOT is that it is a subjective approach and needs marketing plan to be included in it, which would then be sufficient enough to be reliable.

• There is no proper balance to categories the company position in the market as if there are few opportunities; a greater number of strong threats may negate the opportunities present.

• Needs a modification and review time to time according to the progress of the company.

References

• Haughey, D. 2010. SWOT Analysis. Project management Institute. Project Smart.

• Rapidbi. (2008). “History of the SWOT analysis”. ZIMBIO.

• Hill, T. & R. Westbrook (1997), “SWOT Analysis: It’s Time for a Product Recall,” Long Range Planning, 30, No. 1, 46-52.

• King R.K. (2004). Enhancing SWOT analysis using TRIZ and the bipolar conflict graph: A Case Study on the Microsoft Corporation, Proceedings of TRIZCON2004, 6th Annual Altshuller Institute.