Business Environment 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-
- It is a
source of information for strategic planning.
- Builds
organization’s strengths.
- Reverse its
weaknesses.
- Maximize its
response to opportunities.
- Overcome
organization’s threats.
- It helps in
identifying core competencies of the firm.
- It helps in
setting of objectives for strategic planning.
- 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-
- Price
increase;
- Inputs/raw
materials;
- Government legislation;
- Economic
environment;
- Searching a
new market for the product which is not having overseas market due to
import restrictions; etc.
Internal
limitations may include-
- Insufficient research
and development facilities;
- Faulty
products due to poor quality control;
- Poor
industrial relations;
- Lack of
skilled and efficient labour; etc
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