The Usefulness Of Swot Analysis To Organisations Business Essay
|✅ Paper Type: Free Essay||✅ Subject: Commerce|
|✅ Wordcount: 2637 words||✅ Published: 1st Jan 2015|
Change is a very significant word in business. Modern business is defined as the most competitive and active. To survive in the modern competitive business environment, the organizations have to adopt their strategies to meet the changing demands and needs of the customers. SWOT analysis is one the most significant business strategies which helps the organizations to assess their current situation both internally and externally and to implement a new strategy where necessary.
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Moreover, modern high technology, communication system and online shopping are highly influencing the customers and thus their demands and needs are becoming volatile. They have more choices, alternative products and services to get. Also, the changing life style of human beings is also another important reason why the business organizations need to modify their strategies. To balance these changes, both technological and social, the managers should plan a SWOT analysis and implement a new business strategy.
However, change in business enables an organization to compete with its rivals and win the business position. Business organizations, particularly fashion, clothing, perfumed, mobile companies, technological instruments consider change as the most vital part of business strategy. For manufacturing companies, change is important in the sense that it gives variety to the existing customers and satisfies their unexposed desires.
However, to bring change in business environment, the first thing is to identify the need of change, which will be followed by a specific plan for these changes. Various business tools, process, technology and performance meters are used to incorporate these changes.
There is no alternative for continuous improvement in business environment. To survive in a competitive business environment, continuous improvement is mandatory to meet the business objectives.
So, SWOT analysis is very important for business organizations to implement a new business strategy in order to cope with the modern competitive business market and to meet business objectives.
Modern Business Environment: Volatile
Change is one of the most significant and vital elements in business market. There are lots of reasons whey business market is changing and getting affected by it. The word ‘change’ has now become the part of corporate business. Change management is a modern business philosophy which is adopted almost by every renowned business organization to meet the challenges of volatile business environment. The reasons of rapid change in business can be economic instability, inflation, changing life style, extensive use of modern technology, etc. Rapid rise and death of new companies also affect business environment.
What is SWOT Analysis?
An internationally recognized and extensive used business tool, SWOT analysis is a powerful technique to assess the current situation of a business organization and to predict the future business life. It is the primary level for marketers to plan and focus on key issues. However, SWOT is an abbreviated term for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal factors, while opportunities and threats are external.
History of SWOT analysis:
Albert Humphrey developed the SWOT analysis technique. Team Action Model was the research project that Humphrey led a Stanford University in the 1960s and 1970s from where the term was derived. He collected the data for this research from many top companies. However, SWOT analysis is an extended form of TAM, which helps to manage change in business organization. Moreover, since 1960s organizations have been using SWOT analysis as a business concept. It has been also used in management structure and corporate marketing. Indeed, with the passage of time the concepts of SWOT have been modified to suit the needs of business setting.
Significance of SWOT analysis:
SWOT analysis is one of the most significant business tools, which aims to assess the current situation of an organization in order to develop business strategies to encounter competition. It is a key element of strategic development. It helps a company to predict its future prospects and the financial environment. Again, it helps an organization to develop its critical and specific decisions to plan strategic objectives. It helps organizations to predict future difficulties or problems. Notably, SWOT analysis can also be used in human life. It helps individuals to get an instant view of personality or career. In fact, SWOT analysis is a magnificent tool for appraisal both in business and individual life.
Apart from these, there are numbers of other reasons whey an organization uses SWOT analysis. It can be used as a tool of problem solving, decision making, planning, brainstorm meetings, workshop sessions, product evaluation and also personal development planning.
Discussion and Analysis: SWOT
A tool for auditing an organization and its environment, SWOT analysis is the primary stage of planning which helps marketers to focus on key issues of business strategies. However, SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.
SWOT ANALYSIS: INTERNAL FACTORS
Strengths are the first elements of SWOT analysis which assesses the positive tangible and intangible attributes of an organization internally. These attributes are controllable and within the organizations. These strengths of a person or a company help to achieve the objectives. Strengths can also be defined as the elements which enable an organization to do well, comparing to the competitors. It focuses on the advantages of the organization over the business.
For example, the strengths of an organization can be good quality of the products, brand image, attention of electronic media, customer loyalty, best location, strong communication, etc.
Weaknesses include the elements which are harmful and stand in the way of achieving the business objectives. These are the internal factors within an organization’s control that prevent to gain the desired objectives. It helps the organizations to identify the specific areas where improvements are necessary.
The weaknesses of an organization, for instance, can be poor quality standards, broken reputation, past loss project, rejected by customers, old fashioned products, poor communication system, negligence of media, etc.
SWOT ANALYSIS: EXERNAL FACTORS
Opportunities are the external factors over which the organization does have control. But, these factors affect the company’s profitability and business processes both directly and indirectly. These are the factors why an organization exists and develops. These factors help an organization to foresee the future possibilities and opportunities that the organization may encounter. They help the organization to plan and identify the time line to achieve the objectives. Indeed, opportunities are the objectives of organization in a broad sense.
For example, the opportunities of an organization can be a new business market, extending business overseas or to other outlets, launching a new product, adding new value (such as, online marketing), moving to global market, etc.
Threats are the external factors which cause dangers and risks for an organization to achieve the goals and objectives. As external factors, organizations do not have control over them, but are highly affected by them. These factors help an organization to have safeguard from risks and dangers. These factors also guide the organization to drive on the right road.
Threats of an organization, for example, can be:
Rising popularity of the competitors in local or global market
Changing habits of customers
Pricing competition with competitors
Arrival of new alternative product in the market
New taxation policy
Difference between external and internal factors of SWOT:
The difference between external factors and internal factors of SWOT analysis is very obvious. The basic difference between the two is that internal factors are controllable, while external factors cannot be controlled by the organization. Usually, the external factors (strengths and weaknesses) of an organization are mainly based on organization itself, corporate market or customer needs and demands. The strength of an organization can be defined as the way of meeting customer needs and satisfaction, while weaknesses are the problems or shortcomings that the company faces to fulfill the market or customer demands. However, the internal factors of an organization usually affect the following factors, such as sale and profitability, product quality and brand image, product cost and customer needs, employee potentiality and the financial ability of management, etc.
On the other hand, the external factors of an organization are the issues that affect not only organization but the total business system. The common issues that affect the company externally can be business segments, customer motivations and unmet needs, business strategies, overall business structures, environmental issues (such as governmental, technological, economic, cultural, demographic, etc.), etc.
How to implement SWOT Analysis?
Though appeared as a simple and easy business tool, SWOT analysis is very powerful and meaningful technique. To implement SWOT analysis, the first thing an organization needs to have is time and adequate information and resources. It is not possible to implement a SWOT analysis in an organization by one person, because it requires team work and efforts. The positive traits of this technique are that it is quick, flexible and comprehensive managing tool, which make the process easy to implement.
However, the process of SWOT analysis follows a sequential order. Obviously, there are four steps to follow in this analysis. Whether analyzing a product or a service, the SWOT analysis is done in the same way.
First Step: Collection of information
In this stage, an organization collects all the information regarding the first two internal factors, strengths and weaknesses. However, this information collection can be done through a number of different ways. One-to-one interview or a group discussion can be carried to gather information. There will be number of different views, questions and issues that related to these elements.
Second Step: Listing possible Opportunities and Threats
Here, the organization can make a list of all the opportunities that it may encounter in the future. It can make another list of all the future possible threats within the organization.
Third Step: Planning action
In this stage, the plan of action will carried out to meet these opportunities and to secure the company from the threats. In this stage, the organization makes sure that they can maintain the strengths, change or stop the weaknesses, prioritize opportunies and minimize threats.
Again, there are other ways to implement SWOT analysis. The following chart shows another different technique of SWOT analysis.
SWOT Analysis Framework
According to the SWOT matrix formula, there must be a balance between these elements. The formula follows the following chart:
SWOT / TOWS Matrix
S-O strategies: strengthening positive traits or opportunities
W-O strategies: stopping or conquering weaknesses to meet opportunities.
S-T strategies: strengthening ways to win external threats
W-T strategies: having a strong plan to avoid weaknesses and threats
CASE STUDY: SWOT ANALYSIS OF TESCO
There are numbers of organizations which are using SWOT analysis almost every day in this modern business environment. This analysis can be carried on a small area of the organization or on overall company. TESCO is one of the major global business installations which can be analyzed by applying SWOT analysis as a whole.
Strengths in Tesco
The first strength of Tesco can be found in their popularity and business achievement of ‘World Retail Award’. Again, the constant increase of overall sales is another significant strength of Tesco. Likewise, Tesco has another strength in their reserve funds for business expansion and meeting economic crisis.
Weaknesses in Tesco
The primary weakness of Tesco can be found in their bad debt, house insurance claims and credit card arrears. Being a price leader in the market, Tesco is losing profit. Again, Tesco business and its profitability is mainly based on the UK market.
Opportunities in Tesco
Being the 3rd largest global trader, Tesco has strong buying power. Tesco is a global business organization which has number of different products and services. It is still extending to the global market and gaiting global trust. Extensive use of modern technology is enabling Tesco to meet the modern challenge of marketing. Constant increase of Tesco mobile customers can also be considered as a business opportunity.
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Threats in Tesco
Economic inflation is one of the major business threats that Tesco had encounter in the recent past. The rising cost of food and non-food raw materials is another threat for Tesco. Changing buying habits of customers also affect Tesco’s business strategies and thus it requires reassessment of the current market. Competition with rivals, particularly with Wal-Mart which can takeover Tesco business position anytime is another noteworthy threat that Tesco is encountering nowadays.
To sum up, SWOT analysis is one of the powerful business tools which can be used in almost every business situation and also in individual affairs. It helps organizations to assess their current position and to plan their future plans. It is decision making tool that provides the framework for an organization to generate business strategy, mark its position and direct its objectives. Though very simple, SWOT analysis requires close attention and experienced application.
In the modern changing business market, SWOT analysis has been proved to be a very important tool to the marketers. SWOT analysis is often said to be paralleled and alternative to the PESTEL analysis. Often, organizations use both these business tools together to plan their strategies.
Once again, the SWOT analysis helps organizations to get an overall picture of the company and the starting point of strategic planning. It is the primary tool of business analysis.
To conclude, experienced marketers when utilizing SWOT analysis make sure that the company is based on its strengths and opportunities, able to stop and correct its weakness, and can protect itself from external threats. They consider the business environment extremely unpredictable and thus use this tool that may help organizations to predict their future through this process.
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