SWOT Analysis

The SWOT analysis is a business planning tool for appraisal and analysis of the condition in which a company finds itself. It comprises four elements, namely strengths, weaknesses, opportunities and threats. The strengths describe the areas where an enterprise has advantages over other similar businesses. Weaknesses refer to the factors which may make a project of the firm less likely to succeed. Opportunities are those aspects that may help to improve the productivity or profitability of a company. Threats refer to the factors with the potential of harming or undermining the business in its operations. The corporate strengths and weaknesses may be identified by the functional areas of a firm such as marketing or key issues such as knowledge base. When change is inevitable, an analysis shows that SWOT provides the formula that identifies the factors that may influence this change when achieving an enterprises strategic plan.

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The elements of strength, weaknesses, opportunities and threats are common for all SWOT analyses. Some enterprises may employ additional techniques such as performance gap analysis to check for any gap within the firm or management by wandering around (MBWA) method (Bohm, 2009). The latter approach involves the management walking around, talking to workers enquiring on different issues from them. This is done in order to help the management to exploit, build up or develop resource strengths properly. This is also meant to address and minimize the potential impact of corporate weaknesses which could place the enterprise at a disadvantage in its environment (Hollensen, 2014). The business will be able to match its strengths and opportunities and thereby convert the opportunities into strengths in order to eliminate threats. It is also possible to employ techniques such as political assessments as well as environmental evaluation to identify other factors affecting business operations.

Some important elements to be included in the SWOT analysis comprise study of legal and ethical factors and the assessment of the environmental issues. Legal aspects involve those that enforce legal requirements and legal compliances such as health and safety of employees. The ethical factors describe the social values which govern the behaviors of a business (Bohm, 2009). Environmental aspects assess the environmental impact of the enterprise such as pollution and degradation. Other important elements include technological factors that can reduce minimum efficient production levels such as automation and technological incentives. Economic aspects affect the customers ability to buy products as well as firms cost of capital (Hollensen, 2014). They comprise exchange rates, inflation rate, interest rates and economic growth. Political factors such as tax policy and political stability determine the rules and regulations that govern enterprises. These elements should be included in order to capture all areas that affect the operations of the firm externally and are beyond its control.

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The main purpose of SWOT is to enable organizations to be wholly aware of the factors affecting their operations and their decision making process. It allows them to identify both their internal influences as well as external ones making them define possible areas of change (Hollensen, 2014). In the business context, firms are able to explore and venture into new initiatives as a result of good decisions and proper strategizing arising from the SWOT analysis. This tool also enables the enterprises management to identify businesss core relative, comparative and competitive advantages (Bohm, 2009). There are other alternatives to SWOT such as SCOPE planning (situation, core competencies, obstacles, prospects and expectations), SOAR (strengths, opportunities, aspirations and results), defensive and offensive evaluation, the CORE assessment and PEST analysis, which involves an analysis of political, economic, social and technologic factors.

One of the advantages of the SWOT analysis is that it has very minimal costs, especially in terms of time. It, therefore, helps small businesses to save money that would be used rather on consultations. It also aids the management to concentrate on the small but most important factors affecting the enterprise (Bohm, 2009). By this, it becomes able to take advantage of the strengths, develop immunity to threats as well as address the weakness. However, the SWOT analysis does not prioritize the issues since it is general. It also enables the management to identify the problems but does not offer alternatives or solutions (Hollensen, 2014). At times, there are too many ideas generated out of the SWOT analysis which is therefore confusing as one has to choose the best of them. Often, only a small portion of information derived from the analysis is used turning the process into a waste of time.

In conclusion, any strategic planning must have a connection between the objectives and the strategies as well as the actions to be taken by the employees to achieve the former. The SWOT analysis forms this bridge enabling a company to determine where it stands thereby identifying the necessary change to make. Its overall objective is to identify those internal and external factors influencing an organizations operations. This analysis enables the enterprise to determine its capacity and capability to succeed in its market of operations. It also enables a firm to apply its strengths, exploit its financial resources and capability as well as use the relative weakness of its competitors. This analysis has also helped non-business organizations as well as individuals to make vital changes in their day-to-day life. This means therefore that it is very difficult for a company to make alterations in its operations without conducting the SWOT analysis.

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