Role and Components of SWOT Analysis

Contemporary organizations implement SWOT examination to scrutinize their competitive position and strategy. By examining a firm's policies and goals and choosing competitive strategy, SWOT examination is a tactical tool to capitalize on competitive advantages and improve weaknesses.

SWOT evaluation is a platform based on the analysis of your firm's Strengths (S), Weaknesses (W), Opportunities (O) and Dangers (T). Talents and Weaknesses make reference to the internal factors that contribute to firm's progress or impede organizational performance. Key interior forces are the firm's distinctive competencies that can change the firm's weaknesses into advantages. Opportunities and Threats refer to the exterior factors which have an impact on the firm's performance and business businesses. Key external forces include (1) economic forces; (2) sociable, cultural, demographic, and environmental makes; (3) political, governmental, and legal makes; (4) technological pushes; and (5) competitive causes.

Any organization has strengths that can be its distinctive competencies (competitive advantages that competitors cannot match), and weaknesses that needs to improve. Internal strengths and weaknesses coupled with exterior opportunities and risks are being used in the framework of SWOT research as tactical tools to ensure effective strategic management.

Evaluating SWOT Effectiveness

Using SWOT evaluation for effective decision making requires the evaluation of each SWOT component separately. Managers evaluate the quality of information they receive by analyzing both internal and external factors that impact their decisions.

Strengths

A firm's talents build distinctive competencies by focusing on strong brand name, high quality products and/or services, superior customer service, competitive prices, competitive market placement, innovative R&D and so on. Strengths are assessed realistically and from the idea of view of the market to ensure effective strategic decision making.

Questions that identify a firm's talents are:

What will be the firm's distinctive competencies?

Does the company have competitive costing?

Is the organization strategically placed?

What unique or lowest-cost resource does the company have available?

What are the firm's perceived talents?

Weaknesses

A firm's weaknesses range from weak brand, poor products and/or services, poor customer support, lack of marketing knowledge, high cost framework, poor reputation, poor or no usage of key distribution stations and so on. Once weaknesses are determined, managers realistically create suitable strategies to improve or lessen them. With proper evaluation, weaknesses are converted into strengths.

Questions that identify a firm's weaknesses are:

What must be better / prevented in the firm's competitive strategy?

What factors cause the organization to lose market share?

What will be the firm's perceived weaknesses?

Opportunities

A firm's opportunities are beneficial environmental factors that impact a firm's businesses. Such factors range from the introduction of new technology, unmet customer needs, recognition of niche market segments, proper alliances and joint endeavors, loosening or abolition of governmental rules, eradication of trade limitations etc.

Questions that identify a firm's opportunities are:

Can the firm exploit beneficial industry developments?

Can the organization meet unfulfilled customer needs?

Can the firm capitalize on technical advancements related to its operations?

Can the firm capitalize on changes in authorities insurance policies related to its businesses?

Threats

A firm's dangers are unfavorable environmental factors that can impede a firm's performance. Such factors range from entry of new competition, shifts in consumer tastes, substitute products, lifted trade barriers, new distribution channels from challengers, price wars, high taxation, and so on.

Questions that identify a firm's dangers are:

Where are the firm's competitors position?

Is changing technology threatening the firm's placement?

Do alternative products impact the firm's sales?

The Importance of SWOT Analysis

Strengths, Weaknesses, Opportunities and Hazards are an opportune way for a firm to identify its comparative position on the market and evaluate how customers understand its products and services in relation to competition. SWOT analysis plays a part in the analysis of the functional regions of the company by regarding employees of most organizational levels but also by attracting the process people from outside of the firm. This allows decision-makers to grow tactical thinking and take full advantage of the value of SWOT examination by taking into account the views of customers and suppliers but also of the organizational people on the firm's Advantages, Weaknesses, Opportunities and Hazards. In this context, SWOT analysis as a tactical planning tool provides management the opportunity to gain new point of view on the comparative effectiveness of the firm.

Conclusively, SWOT evaluation should realistically and distinctively portray a firm's Strengths and Weaknesses to help management evaluate where the company stands today and where it aspires to be in the future. Furthermore, SWOT analysis should always look at the competition to provide a comparative research of a company and identify possible distinctive competencies. Through SWOT analysis, decision-makers evaluate their strategic goals and decide on the proper competitive strategy because of customer segments, trends and opponents.

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