SWOT ANALYSIS
A comprehensive study of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
STRENGTH
A firm‘s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include: - Brand name - Good reputation among customers - Cost advantage - Competitive quality - Accessibility to distribution networks.
Weakness
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
- Unpopular brand
- Poor reputation among customers.
- High cost
- Lack of access to distribution network.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:
- An unfulfilled customer need
- Arrival of new technologies
- Loosening of regulations
- Removal of international trade barriers.
Threats
Changes in the external environmental also may present threats to the firm. Some examples of such threats include:
- Shifts in customer tastes away from the firm‘s products - Emergence of substitute products
- New regulations
- Increased trade barriers
A comprehensive study of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
STRENGTH
A firm‘s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include: - Brand name - Good reputation among customers - Cost advantage - Competitive quality - Accessibility to distribution networks.
Weakness
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
- Unpopular brand
- Poor reputation among customers.
- High cost
- Lack of access to distribution network.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:
- An unfulfilled customer need
- Arrival of new technologies
- Loosening of regulations
- Removal of international trade barriers.
Threats
Changes in the external environmental also may present threats to the firm. Some examples of such threats include:
- Shifts in customer tastes away from the firm‘s products - Emergence of substitute products
- New regulations
- Increased trade barriers
