SWOT Analysis is a very useful method for understanding and evaluating your strengths and weaknesses while identifying the opportunities and threats that you have. This analysis is very useful for businesses which can help to understand its strengths and weaknesses and also help in locating opportunities and eradicating threats. Identifying and eradicating threats are especially important or else they may catch you unawares when you are least prepared. Keeping in mind your position and that of your competitors, your business can use the SWOT method to plan a strategy that can help your business to succeed after getting the better of the competition. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.
SWOT analysis is a structured and planned method that is used to evaluate the strengths, weaknesses, opportunities, and threats of any business or venture. This analysis can be carried out not just by any business – it can also be carried out by any industry, product, place, or person. The tool collects the information from an environmental analysis and divides it into two categories – 1) internal, comprising of strengths and weaknesses, and 2) external, comprising of opportunities and threats. Once, these factors are analysed, SWOT analysis determines what are the factors and components that are necessary for the fulfilment of the objectives, and the obstacles that have to be overcome, neutralized, or minimized. While strengths and weaknesses are internal factors, opportunities and threats are usually external factors.
SWOT analysis is a very renowned and dependable tool for audit and analysis of the overall position of the business and the environment. The main idea in conducting such a study is identify a plan of action that will help the business to determine its resources and capabilities vis-a-vis the requirements of the environment in which the business operates. It views and analyses all positive and negative factors inside and outside the business which affects its success. A thorough study of the environment of the business would help in predicting changes that would helpful for decision-making in the business.
Let us take a brief look at these four factors which are important for the business:
- Strengths: They could be defined as those qualities that help you fulfil the mission of the business. The experience and the expertise of the employees could be called strengths. Strengths could include all the beneficial or good aspects of the organisation and can include its capabilities, products and services, human competencies, financial resources and also goodwill and loyalty.
- Weaknesses: Weakness is that quality that prevents any person or business from achieving the aim or mission. These weaknesses play a detrimental role on the success and growth of the business. Weaknesses in an organisation could mean poor decision-making, poor growth and development, poor production, or bad management. Most of the weaknesses can be controlled and they should be eradicated to ensure success of the business.
- Opportunities: Opportunities are present everywhere in the business environment, but these opportunities have to be taken and utilised which help in improving the business, increasing productivity, and making the business more profitable. Businesses should look for opportunities and seize them whenever they appear.
- Threats: Threats are situations when external factors disturb or jeopardize the running of the business. Threats cannot be visualised and they can make their appearance suddenly. Threats are uncontrollable, but can be managed.
Let us look at the advantages of SWOT Analysis and see how it helps your business:
- It serves as a source of information for planning
- It ensures building organisational strengths
- It teaches you how to make use of the available opportunities
- You can overcome threats
- Your business can make long-term plans and objectives
SWOT Analysis is a very easy and helpful method for getting to know about and evaluating your strengths and weaknesses while trying to understand the opportunities and threats that you face. This analysis is very useful for individual entrepreneurs and businesses to know and understand their strengths and weaknesses while trying to take cognizance of opportunities and threats. You will also learn how to eradicate those threats and utilise the opportunities to your benefit.