The history of the SWOT analysis can be traced to Albert Humphrey during the 1960’s. This technique is essentially a model used for methodical planning to assess the strengths, weaknesses, opportunities, and threats concerned with a business or project. It includes the determination of the organization's objectives, and recognition of the external and internal features that may be beneficial, or adverse for the achievement of those objectives. SWOT analysis should be initiated by initially specifying the objectives. Subsequently, the SWOT analysis is integrated in the organization's planning model, which is used for strategic planning. Strengths and weaknesses consist of the organization's internal factors, while opportunities and threats are the external features that may influence the objectives of an organization.
The factors that may contribute to strengths include the availability of resources, and their performance ability. The resources are analyzed according to the capacity to acquire required resources, and the efficient deployment of resources. Ability is evaluated by the capability to adjust according to environment, maintenance of persistent market growth, and the ability to produce or enter new markets.
The following could be included in strengths:
- Your professional marketing capability.
- A novel service or product.
- Business location.
- Quality procedures.
- Any other business feature that improves the service or product.
- Distinctive or low cost organizational resources.
The organization's weaknesses are established through failures, losses, and the incapability to respond to market changes. Causes of weaknesses could be weak managerial proficiency, poor quality, obsolete technology, inefficient systems, or inadequate resources. Other reasons are unfavorable business location, inefficient market strategy, and bad reputation. Analysis of weaknesses will determine the management strategy to develop and implement the remedial measures.
The following could be included in weaknesses:
- Deficiency in marketing proficiency.
- Unfavorable business location.
- Inferior quality service or product.
- Bad reputation.
Opportunities are normally ample. However, a plan needs to be developed to use these opportunities efficiently, and at the appropriate time. The plan should include proper definition of the service or product, target markets, resources required, returns anticipated, and the risk tolerance. Weaknesses of the competitors are opportunities that can be availed by a proper focus on such areas, and employing a suitable strategy to obtain maximum advantage. Alternatively, the organization's strengths may be used to create a joint venture with the opponents.
The following could be included in opportunities:
- An emergent market like the internet.
- Unification, joint ventures, or strategic coalition.
- Introducing new segments that may propose enhanced profits.
- A modern global market.
- A market abandoned by an unsuccessful opponent.
Threats occur from economic, social, political, or technological reasons. Technological advancements may render the organization technology as obsolete. Change in market conditions due to changed customer requirements, or political environment may be potential threats for an organization
The following could be included in threats:
- Another participant in the local market.
- Price confrontation with opponents.
- A competitor who possesses a novel service or product.
- Opponents who have better contacts with distribution channels.
Taxation initiated on your service or product.
Page 2: Strategy for SWOT Analysis, Portfolio Analysis, and how is it conducted, and a summary to compare and contrast SWOT Analysis with Portfolio Analysis
Image Credit: Xhienne/wikimedia commons