SWOT Analysis Examples for Business Studies
SWOT analysis is a one kind of model of different strategic management models. It is strategic planning technique which used to support an individual or organization for detecting the Strengths, Weaknesses, Opportunities, and Threats related to commercial competition or planning development. However, there are described about the meaning of SWOT, importance of SWOT analysis and also sources of data for SWOT analysis.
Meaning of SWOT Analysis:
SWOT stands for strengths, weakness, opportunities and threats. Strengths and weaknesses are internal factors, and opportunities and threats are external factors of an organization. In SWOT analysis, the data framework structure looks like the following:
|Data Sources||Positive Factors||Negative Factors|
Internal data relate to information concerning the internal operations of the organization. These include financial structure, personal characteristics, organizational structure, production issues, and so on. External data are ‘external’ in their relationship to the organization. They include environmental characteristics such as legal requirements, political circumstances, economic scenario, competitor’s strategies and tactics, cultural and social patterns, demographic trends, technological progress, etc.
Within all the internal and external data relevant to the organization are four categories of information: internal strengths, internal weaknesses, external opportunities and external threats.
You will find that the strategists in an organization assess the organization’s internal strengths and weaknesses, and evaluate its environmental opportunities and threats. SWOT analysis facilitates a firm to formulate appropriate strategies in the context of the firm’s vision and mission. The strategies help in accomplishing the firm’s vision or mission by exploiting its strengths and opportunities as well as by overcoming its threats and correcting or avoiding the weakness.
Attached figure present a scenario that shows how SWOT analysis leads to strategy formulation. You can see in the figure that the vision of a company sets the ground for developing a mission statement. In order for the managers to understand the company situations, they undertake an analysis of the company’s strengths, weaknesses, opportunities and tha reats on the basis of internal and external data respectively. Then, based on the SWOT results, they formulate appropriate strategies to support the mission by exploiting opportunities and strengths, neutralizing the threats identified in the external environment, and overcoming weakness.
Before you embark on SWOT analysis, you are expected to have a broad idea about the meaning of strength, weakness, opportunity and threat.
The first indicator of SWOT analysis is strength. Strength is something that a company is good at doing. It is a distinctive competence of an organization that enables it to achieve a special advantage in the marketplace. Any resource, skill or another advantage relative to competitors can be called strength. Anything can be a strength if it gives the organization enhanced competitiveness.a A strength can take the produce of an expertise/skill, valuable human assets, valuable physical assets, fruitful alliances, valuable intangible assets, etc. adequate physical facilities such as land and building or machinery, sufficient financial resources, trained and qualified marketing people, well-managed information systems, able top leadership and good image of the organization are some examples of internal strengths.
The second indicator of SWOT analysis is weakness. Poor situation and lack of organization is called weakness. Weakness places the organization at a drawback. Weakness indicates a deficiency or limitation or constraint. Any weakness affects an organization’s performance adversely. An organization’s internal weakness can relate to
- Deficiencies in competitively important skills;
- A lack of competitively important physical, organizational or intangible assets
- Weak/missing competitive capabilities in key areas.
Examples of internal weaknesses include inadequate physical and financial resources, untrained executives, strained labor-management relations, poor leadership the top, use of old technology that hinders production and the like.
Opportunity is the third one of SWOT analysis. An opportunity is something that an organization may grab for growth and profitability. It is a favorable condition in an organization’s external environment. An opportunity is raised when a business can take benefit of circumstances in its exterior atmosphere to articulate and implement strategies that enable it to earn higher profits. Opportunities offer important avenues for profitable growth and indicate the potential for competitive advantage. Examples of opportunities include opening up of new markets in other countries, deregulation policy of a government, reduction of taxes on imported raw materials, higher tax rebates on firm’s income, government subsidy, increasing demand for products among customers, and so forth. As an instance, we can cite the case of deregulation of the airline industry in Bangladesh. Deregulation is a major opportunity for the private airlines such as GMG and United Airlines to serve those routes that Bangladesh Biman does not serve. However, this can be a threat to Biman. So, it is obvious that the opportunity for one organization can be a strategic threat to another organization.
More read: Porter’s 5 Forces Model
The final one of SWOT analysis is threat. A threat is something a firm may be exposed to in the external environment that may cause suffering in growth or profitability. It is the unfavorable trend in the external environment. A threat is raised when circumstances in the outside environment put in danger the reliability and viability of a firm’s business. Certain factors in a firm’s external environment may pose threats to its profitability and competitive well-being. Frequent advances in technology, entry of foreign competitors, smuggling of products through the border, cheap imported products, civil war, and unstable political situations in the country, frequent changes of government regulations and uncontrolled law and order situation are typical examples of threat.
Importance of SWOT Analysis in an Organization:
SWOT analysis is a useful tool for analyzing an organization’s overall situation. This approach attempts to balance the internal strengths and weaknesses of the organization with the external opportunities and threats. It delivers a decent outline of whether a firm’s circumstance is strong or insalubrious. It discloses the company’s actual situation regarding resources, capabilities external opportunities and external threats. It comforts to appeal a decision about how plan can be harmonized to both its capitals and marketplace opportunities, and how weakness can be corrected and threats can be guarded against.
More specifically, SWOT analysis is important for a company for the following reasons:-
- It evaluates strengths, weakness, opportunities, and threats of the company and helps in drawing conclusions about the attractiveness of its reasons.
- It points out the need for strategic action.
- The strengths identified through SWOT Analysis can be used as the cornerstones of strategy and the basis on which to build competitive advantages.
- It enables the company to build its strategy around what the company does best on the basis of the strengths and should avoid strategies whose success depends heavily on areas where the company is weak.
- The results of the SWOT analysis are helpful in correcting competitive weaknesses that make the company vulnerable.
- Based on the opportunities identified through SWOT analysis, managers can aim their strategies at pursuing opportunities well-suited to the company’s capabilities and provide a defense against external threats.
Read more: Value Chain Analysis Model
Sources of Data for SWOT Analysis:
As has already been said, SWOT is conducted for analyzing the external and internal environmental factors that affect a company’s business activities. Therefore, the sources of data analysis will diverge grounded on the ecological issues. The springs of data for exterior issues will never be the same for different industries. However, there are some common sources which a company may explore: the internal trade associations like chambers of commerce and industry, export promotion bureaus, trade fairs and exhibitions, foreign trade missions or consulates, broad of investment, concerned ministries, other business units in the same industry, research organizations, consulting firms, market survey firms, independent think tanks like the Center for Policy Dialogue (CPD). The internal sources of data include personal files of employees, production records, sales reports, inventory registers, marketing information, accounting information, management information systems, various financial statements, annual reports of the organization, own publications and reports, and any other kind of records the organization maintains.