Swot analysis is a simple and widely used analysis tool to assess business environment. It helps to understand strengths, weaknesses, opportunities and threat of a business, product and projects. It can be used for nonprofit organizations and even for individual’s personal assessment.
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What is SWOT Analysis
Swot is an acronym of strengths, weaknesses, opportunities and threats. There are internal and external categories in swot matrix. Strengths and weaknesses are internal factors that are controllable. While opportunities and threats are external factors that are uncontrollable
Internal and External Factors
The basic approach of swot analysis is to identify internal and external factors that are important to achieve individual and organizational goals.
Organizations can get a large amount of data from the overall marketing environment that consists internal and external analysis. This information includes both relevant and irrelevant data. The swot analysis matrix extracts the relevant and meaningful data of key issues facing by the business.
Internal Factors of a company include strengths and weaknesses. Both strengths and weaknesses can be categorized with respect to company objectives. These include marketing 4Ps, organizational capabilities, human resources, finances, company culture, patents rights and many more.
External Factors of a company include opportunities and threats. These external environmental factors are outside the organization and are uncontrollable. These include customer, competitors, suppliers, political and legislative changes, economic factors, social and technological changes, legal and ethical issues.
When and Why Do A SWOT Analysis of Your Business
A swot technique is used as a part of overall business strategic planning. This tool helps the business manager and marketers in the decision-making process. The management identifies internal and external factors that affect business performance.
This tool empowers business to identify opportunities and use these for success. Opportunities include new product development, product distribution, new potential customer base and exploring new markets.
It also highlights threats that cannot be controlled by a business. Any changes in the business regulatory environment can have a negative impact on business success. It helps an organization to prepare for the consequences of the external environment.
Suppose using swot framework can identify any market niche where it has a competitive advantage over its competitors. Individuals can also take advantage and boost careers by identifying their strengths and altering the threats if any.
How to Do A SWOT Analysis
While doing swot analysis of a business, managers are required to set targets and objectives in the first place. After that, in the initial stage the managers are required to jot down strengths, weaknesses, opportunities and threats.
There are different types of business analysis tools that provide guidelines. Series of questions are asked under each category of Swot. For example, these are the question to ask when to do a swot analysis.
- What are the areas you perform better than your competitor?
- What advantages you have over your rival firms?
- What internal resources do you have?
- What are the things make your company unique?
- What are your strong areas i.e. knowledge, skills and employees?
- Do you have a strong customer base?
- What are the areas you need improvement?
- What are the areas your competitors have an advantage?
- What are the areas you are lacking i.e. knowledge, skills, employees?
- What are those things we should avoid?
- Do you have a low customer base?
- what are the opportunities in the external environment you can avail
- what are the changing trends in the market which can create opportunities?
- What is your customer base in the market?
- How can you use technological advancement as an opportunity?
- What the ecological and environmental factors give you an advantage?
- What is your brand image?
- What obstacle you are facing to attain your objective?
- Who are the current and potential competitor?
- What technological development and product makes your products inferior?
- What you did unlawful that leads to a lawsuit
- Is there any political instability, what areas can be affected?
- What are the government laws and regulations that affect you?
Using a SWOT Analysis Matrix
When using a Swot analysis, internal and external factors should prioritize so the time spent concentrating on the most significant factors. This should include a risk assessment to ensure the high risk and high impact threats and opportunities are clearly identified and are dealt with the priority order.
This business analysis tool is useful for the individual, project and business activity level rather than a total company level. In this way, it will give you a detailed insight into existing and future position of your business activity and goals.
Organizations can assess the environment for competitive advantages and opportunities. It can also find out existing and potential threats in the environment. By doing this the manager can develop plans to capitalize on opportunities and address threats.
SWOT analysis is helpful in your decision-making process by identifying those internal and external factors affect your initiative, project, product or individual towards achieving your goals and objectives.