SWOT ANALYSIS – The tool we can use

We all know the term SWOT Analysis, the acronym for Strengths, Weaknesses, Opportunities and Threats. Many of us would have also made a SWOT Analysis at some point in time. What do these factors STRENGTHS, WEAKNESSES, OPPORTUNITIES and THREATS mean?

Let us first understand that any factor which influences a business can be classified under two broad characteristics. These characteristics are

1. Whether a factor is INTERNAL to the organization or EXTERNAL to the organization a
2. Whether a factor is advantageous to an organization or disadvantageous to an organization. If we put this in a 2X2 matrix, it looks something like this

Examples of Internal factors are Brand Name, Cost of Production, Financial Resources and other factors. Examples of External factors are Macroeconomic matters, technological changes, socio-cultural changes, government regulations and so on.

Internal factors which are favorable/advantageous / helpful to the organization are classified as STRENGTHS and those Internal Factors which are unfavorable/disadvantageous/harmful to the organization are classified as WEAKNESSES. Similarly, External factors which are favorable/advantageous/helpful to the organization are classified as OPPORTUNITIES and those External Factors which are unfavorable/disadvantageous/harmful to the organization are classified as THREATS.

Therefore, taking the above examples, a Reputed Brand Name, Low Cost of Production, Easy Access to Financial Resources etc. would be STRENGTHS of an organization. Similarly, a controversial or a weak Brand Name, High Cost of Production, Lack of Access to Financial Resources etc. would be WEAKNESSES of an organization.

Favorable Macroeconomic matters, Technological changes which are beneficial to the organization, socio-cultural changes favorable to the organization, Favorable Government Regulations etc. can be classified as OPPORTUNITIES. Unfavorable Macroeconomic matters, Technological changes which are not beneficial to the organization, socio-cultural changes unfavorable to the organization, Unfavorable Government Regulations etc. can be classified as THREATS.

You can learn more about SWOT analysis and other Strategic Tools and Models in the course titled, “Corporate Strategy” in your MBA program at Durgadevi Saraf Global Business School.