Strength Weakness Opportunity & Threat – SWOT analysis

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S)
and Weaknesses (W) are considered to be internal factors over which you have some measure of
control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over
which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the
business and its environment. Its key purpose is to identify the strategies that will create a firm specific
business model that will best align an organization’s resources and capabilities to the requirements of
the environment in which the firm operates. In other words, it is the foundation for evaluating the
internal potential and limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the firm that affect the success.
A consistent study of the environment in which the firm operates helps in forecasting/predicting the
changing trends and also helps in including them in the decision-making process of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission.
These are the basis on which continued success can be made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-versed in or what
you have expertise in, the traits and qualities your employees possess (individually and as a
team) and the distinct features that give your organization its consistency. Strengths are the
beneficial aspects of the organization or the capabilities of an organization, which includes
human competencies, process capabilities, financial resources, products and services, customer
goodwill and brand loyalty. Examples of organizational strengths are huge financial resources,
broad product line, no debt, committed employees, etc.
2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. These weaknesses deteriorate influences on the organizational
success and growth. Weaknesses are the factors which do not meet the standards we feel they
should meet. Weaknesses in an organization may be depreciating machinery, insufficient
research and development facilities, narrow product range, poor decision-making, etc.
Weaknesses are controllable. They must be minimized and eliminated. For instance - to
overcome obsolete machinery, new machinery can be purchased. Other examples of
organizational weaknesses are huge debts, high employee turnover, complex decision making
process, narrow product range, large wastage of raw materials, etc.
3. Opportunities - Opportunities are presented by the environment within which our organization
operates. These arise when an organization can take benefit of conditions in its environment to
plan and execute strategies that enable it to become more profitable. Organizations can gain
competitive advantage by making use of opportunities. Organization should be careful and
recognize the opportunities and grasp them whenever they arise. Selecting the targets that will
best serve the clients while getting desired results is a difficult task. Opportunities may arise
from market, competition, industry/government and technology. Increasing demand for
telecommunications accompanied by deregulation is a great opportunity for new firms to enter
telecom sector and compete with existing firms for revenue.
4. Threats - Threats arise when conditions in external environment jeopardize the reliability and
profitability of the organization’s business. They compound the vulnerability when they relate to
the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can
be at stake. Examples of threats are - unrest among employees; ever changing technology;
increasing competition leading to excess capacity, price wars and reducing industry profits; etc.
Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a
great subjective element. It is best when used as a guide, and not as a prescription. Successful
businesses build on their strengths, correct their weakness and protect against internal weaknesses and
external threats. They also keep a watch on their overall business environment and recognize and
exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans
can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with
the competitive environment in which the firm operates.

SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very
simple because of which the organizations might overlook certain key strategic contact which may occur.
Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market. SWOT Analysis does stress upon the
significance of these four aspects, but it does not tell how an organization can identify these aspects for
itself.

There are certain limitations of SWOT Analysis which are not in control of management. These include-
 a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import
restrictions; etc.

Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labor; etc

SWOT analysis is a method for analyzing a business, its resources, and its environment.

SWOT is commonly used as part of strategic planning and looks at:

• Internal strengths
• Internal weaknesses
• Opportunities in the external environment
• Threats in the external environment

SWOT can help management in a business discover:

• What the business does better than the competition

• What competitors do better than the business
• Whether the business is making the most of the opportunities available
• How a business should respond to changes in its external environment

The result of the analysis is a matrix of positive and negative factors for management to address:

Positive factors Negative factors

Internal factors Strengths Weaknesses
External factors Opportunities Threats

The key point to remember about SWOT is that:

Strengths and weaknesses

• Are internal to the business

• Relate to the present situation

Opportunities and threats

• Are external to the business

• Relate to changes in the environment which will impact the business