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Q. Explain the concept of SWOT analysis. Mention its significance and Techniques.

Ans:  SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans.

SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis consists of the following two activities: 

a.     An assessment of the organization’s internal Strengths and Weaknesses and

b.       An assessment of the Opportunities and Threats posed by its external environment


Assessing the Internal Environment

Internal scan or assessment of the internal environment of the organization involves identification of its strengths and weaknesses i.e., those aspects that help or hinder accomplishment of the organization’s mission and fulfillment of its mandate with respect to the following Four Ps:

a.     People (Human Resources)

b.      Properties (Buildings, Equipments and other facilities)

c.       Processes (Such as student placement services, M.I.S etc.)

d.      Products (Students, Publications etc.)


Assessing the External Environment

External scan refers to exploring the environment outside the organisation in order to identify the opportunities and threats it faces. This involves considering the following:

a.       Events, trends and forces in the Social, Technological, Economical, Environmental and Political areas (STEEP).

b.       Identifying the shifts in the needs of customers and potential clients and

c.        Identification of competitors and collaborators.


Technique of SWOT analysis: After assessing these internal and external factors of an organization a SWOT Analysis is sketched.  Strengths could be as following…

STRENGTHS under SWOT Analysis

a.          Specialist marketing expertise

b.         Exclusive access to natural resources

c.          New, innovative product or service

d.         Location of your business

e.         Strong brand or reputation

f.           Quality processes and procedures


It is important to make sure that we consider only internal factors that show our core competencies. In a similar way weaknesses could be as under and they are also very internal like strengths.

WEAKNESS under SWOT Analysis

a.           Lack of marketing expertise

b.          Undifferentiated products and service (i.e. in relation to your competitors)

c.           Competitors have superior access to distribution channels

d.          Poor quality goods or services

e.          Damaged reputation

f.            Lost brand value

 

Opportunities could be the Areas left out by the competitor and could provide us an opportunity to explore and grow our business rapidly. Opportunities should be grabbed and should be worked on so as to get a competitive edge. Opportunities could be as following …
OPPORTUNITIES under SWOT Analysis

a.        Developing market (China, the Internet)

b.       Loosening of regulations

c.        Removal of international trade barriers

d.       A market led by a weak competitor


Some thing that bothers the most are threats, they are signals that some thing should be done so as to stay in the business. Threats are factors that need to be worked as soon as possible. Apart from some threats like, change in government Policies which don’t leave much to tinkle with other threats could be converted into opportunities.

THREATS under SWOT Analysis

a.        A new competitor in your home market

b.       Competitor has a new, innovative substitute product or service

c.        New regulations

d.       Increased trade barriers

e.       Taxation may be introduced on your product or service

 

Advantages of SWOT Analysis: SWOT Analysis helps in strategic planning in following manner-

  1. It is a source of information for strategic planning.
  2. Builds organization’s strengths.
  3. Reverse its weaknesses.
  4. Maximize its response to opportunities.
  5. Overcome organization’s threats.
  6. It helps in identifying core competencies of the firm.
  7. It helps in setting of objectives for strategic planning.
  8. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.

 

Limitations of SWOT Analysis: There are certain limitations of SWOT Analysis which are not in control of management. These include-

  1. Price increase;
  2. Inputs/raw materials;
  3. Government legislation;
  4. Economic environment;
  5. Searching a new market for the product which is not having overseas market due to import restrictions; etc.

Internal limitations may include-

  1. Insufficient research and development facilities;
  2. Faulty products due to poor quality control;
  3. Poor industrial relations;
  4. Lack of skilled and efficient labour; etc
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