What is SWOT Analysis & Its Importance For Companies

Tue, 03/25/2014 - 03:18 -- Gulzar Ahmed

What is SWOT Analysis

The abbreviative business term SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Conducting a SWOT analysis enable a company to see where your company is in the marketplace and what strategies a particular company can develop to increase its market share. The top level management and marketer of the company must know SWOT analysis and its importance for the company.  SWOT analysis has been around for so many years now and companies started using this tool around 1960s. This model was developed by Albert Humphrey of Stanford University. SWOT analysis alternatively SWOT Matrix is considered one of the most effective and essential tools that almost all organizations use to carefully assess the industry.  Organizations also use this tool to come up with some strategies to keep up with the tight competition in the market.

SWOT analysis determines and evaluates the impact of different internal and external factors forces on a particular business. The internal factors belong to the strengths and weaknesses while the external factors belong to the opportunities and threats. Here in this article I would discuss the each in details.

swot analysis & swot matrix

Strengths

When considering the strengths of a particular company, these refer to the products or services offered by company, the reputation of the company, company’s location, the years of existence or experience and the expertise of the staff working in that particular company. The strengths of the company make it grow and succeed. We can summarize strengths as:

  1. Product attributes & features that make your company better than your competitors?
  2. Strong brand name
  3. Strong distributional network
  4. Your team is full of fighting spirit
  5. Good relationship & reputation among the customers
  6. Exclusive excess to required natural resources
  7. Strong R & D engineers

Weaknesses

The weaknesses are those things that have to be improved.  Weaknesses may include a weak brand name, poor reputation of particular company and more. In simple words weaknesses are the complete opposite of the strengths. Following are the weaknesses of a company:

  1. Lack of patent protection
  2. Poor reputation among public
  3. Higher cost structure
  4. Lack of distribution channels
  5. Lack of well educated or well trained staff

swot analysis a useful technique

Opportunities

The external environment analysis may show some opportunities for a company by which company can grow and generate more profit. A change in external environment is a potential opportunity for every company, companies need to understand and evaluate the change and then design product or service according to change. The emerging of new markets and technologies are also creates opportunities for existing companies. Opportunities include:

  1. An unfulfilled customer need
  2. Loosening of regulations
  3. Emergence of new technologies
  4. Removal of tariffs or other international trades barriers

Threats

Threats are also encounter with companies due to change in external environment. For example new competitors in the market, increasing cost and new regulations are among the things that may be threats for a particular company. The other major threats are:

  1. Changes in trends & consumers taste
  2. Different substitute products
  3. New regulations & international trade barriers

Pulling it all together, SWOT analysis plays a vital role for companies to know about how satisfy customer's needs and wants? What makes your company weaker than competitors? What are your competitor's weaknesses that you can use for your company advantages? And finally what are new trends and technologies and how to utilize them for your company benefits?