To compare and contrast SWOT analysis and portfolio analysis means looking at what is important for the development of a management strategy to improve the business, and market returns on assets. Bias of SWOT is towards the improvement of an organization in general, while portfolio analysis is focused towards an increase in profits.
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
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Strategy For SWOT Analysis
- Be pragmatic regarding the organization’s strengths and weaknesses when performing SWOT analysis.
- SWOT analysis must identify the organization today, and what is expected in the forthcoming period.
- SWOT must be precise so take time when preparing the SWOT matrix.
- Conduct SWOT analysis in contrast to the competitor.
- Keep SWOT analysis brief and uncomplicated.
- SWOT analysis may be used in combination with additional tools, like PEST analysis.
Corporate portfolio analysis is basically a project strategy maturity instrument, based on the business market segment, and the market growth in the business. It analyzes the elements of the products of a firm to establish the optimal distribution of resources. The basis of portfolio analysis is the proposal that corporations should acquire approach as they manage investment portfolios. Positive management measures should be stressed, and erroneous strategies must be discarded. Portfolio analysis is crucial for functional evaluation of the investments, and effective timing of the returns. The portfolio analysis is applicable to all types of investments like bonds, commodities, equities, funds, indexes, and securities. Portfolio analysis is important since all assets have different associated risk features and profits. Therefore, the portfolio composition influences the returns on the total investment.
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How Portfolio Analysis Is Conducted?
Portfolio analysis is generally conducted for all assets by initially examining the risk concept of the investor. This process evaluates the portfolio while bearing in mind the investor risk attitude. Several investors may favor to be safe and allow lower gains, rather than buy uncertain assets that may generate higher returns. While executing portfolio analysis, potential returns are estimated by the mean and multiple returns technique. The average return is basically the mathematical average of the assets. However, compound returns consist of the mean that allows for the collective outcome on total returns. Subsequently, the spreading of returns is determined. This is the amount of volatility, or standard deviation of returns from the assets. Dispersion is the variation between the actual rate of interest and the designed return. Software is available for portfolio analysis, to facilitate decision making by the investors. These tools examine and forecast forthcoming movement for the assets. They offer vital information for taking decisions on the assets, risk calculations, and accomplishment of investor objectives. However, professional experts may be necessary for complex portfolio structure.
Comparison SWOT Analysis and Portfolio Analysis
SWOT analysis is basically a conditional analysis that examines the inner organization’s strengths and weaknesses, and peripheral opportunities and threats that may be encountered by it, so as to formulate the organization’s strategy. Basis of portfolio analysis is to examine the organization’s assets to establish the optimal share of the resources. The measure used for portfolio analysis is the growth rate of the market, and the corresponding market share of the organization. Knowing how to compare and contrast SWOT analysis with portfolio analysis is crucial for the organization’s success.
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NetMBA Business Knowledge Center. (n.d.). NetMBA Business Knowledge Center. Retrieved December 26, 2010, from https://www.netmba.com/
SWOT Analysis. (n.d.). QuickMBA: Accounting, Business Law, Economics, Entrepreneurship, Finance, Management, Marketing, Operations, Statistics, Strategy. Retrieved December 26, 2010, from https://www.quickmba.com/strategy/swot/