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SWOT Analysis: Weaknesses, Opportunities, Threats

SWOT Business

What is SWOT Analysis?

The term “SWOT analysis” relates to the framework for evaluating a company’s competitive position and drawing upon the strengths, weakness, and threats of a strategic plan.

SWOT analysis is a useful technique for internal and external scanning where strengths and weaknesses are derived from an internal environment, while external environmental opportunities and threats arise.

It helps to match the company’s resources and capabilities to the competitive environment in which it operates.

SWOT Business

Components of SWOT Analysis in Business

1. Strengths

Strengths in SWOT analysis are the attributes in an organization which is considered necessary for a project’s ultimate success. For the competitive advantage, strengths are resources and capabilities. For example, Apple has a high brand value and an extremely loyal client base whereas Samsung has a broad variety of products which cater to high-end and low-budget mobile phones. Examples of strengths frequently mentioned include:

  • Brands with strong names
  • Good reputation
  • Cost benefits of own know-how

2. Weaknesses

Weaknesses are the factors in the SWOT analysis formula which can stop effective project outcomes. Weaknesses include factors such as abundant rivalries between different departments, weak internal communication systems, insufficient funding, and insufficient materials. For example, a lack of capital is a significant weakness for most small company owners. In the inner view and from a business point of view the weaknesses of an organization can also be seen. Additional weaknesses are:

  • Weak brand name
  • Poor reputation
  • Inefficient and costly structure

3. Opportunities

Opportunities are categorized as external components that can help achieve the project objectives. Those factors can affect vendors wanting to work together to assist the business to succeed, the general public’s positive perception of the business and the market conditions to make the project suitable for one market segment. Other opportunities include:

  • New technology arrival
  • Customer demands not met
  • Training

4. Threats

This SWOT analysis category refers to the factors that could hurt an organization’s reputation or performance. They are external factors that are not under the control of an organization, but they can consider implementing a contingency plan to a certain extent in order to reduce its impact. For example, drought presents a major threat to any agricultural industry, which could decrease or harm crop yield entirely. There are also other threats:

  • Trend changes
  • New substitute products
  • New regulations

Advantages of SWOT Analysis in Business

  • It includes multi-level analysis which gives useful data on an organization, taking into consideration each of the four SWOT analysis elements.
  • It may be used to establish strategic planning objectives for an organization, an individual or a team.
  • It does not require technical skills or training but can be carried out by everyone who is familiar with the company.
  • It is also a low-cost technique because an external highly paid consultant is not required.
  • It can assist to identify an organization’s core competences.
  • It can assist to understand the past, present, and future by means of past and current data.

Disadvantages of SWOT Analysis in Business

  • It makes every factor one-dimensional, classifying it as strength, weakness, opportunity or threat. Therefore, every attribute or factor obviously only affects the issue being analyzed in one dimension.
  • Since the factors have no weight, no mechanism can provide for the importance of one factor over others. As such, the true impact of any factor on the overall objective is very hard to ascertain.

See Also

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