Overview
of SWOT Analysis SWOT entails the objective analysis of a business’s Strengths
and Weaknesses and its Opportunities and Threats. In order to identify its
strengths, weaknesses, opportunities and threats, an organization has to carry
out internal and external evaluation and also opportunities/threats analysis
and strengths/weaknesses analysis.
The Internal Evaluation starts
The
identification of the profit contribution of each area, followed by allocation
of resource, determination of risks involved, variety reduction, realistic
allocation of costs and the assessment of company resources. External
evaluation starts with the determination of market stranding, determination of
competitors’ strengths and weaknesses, assessment of the vulnerability of the
business’ main products to substitutes, assessment of the effects of economic
changes on the business, inter firm comparisons and Stock Market Valuation in
terms of an assessment of the company’s vulnerability to takeover.
Strengths/Weaknesses Analysis
This
involves scanning the internal environment of the business in order to identify
its strengths and weaknesses. The entrepreneur needs to evaluate the strengths
and weaknesses of the business periodically.
Also,
the entrepreneur can assess the internal environment of the business by
critically looking at the internal factors in terms of the 5s, namely:
-
Skills
-
Strategy
-
Staff
-Structure
-
Systems
-
Shared Values
To
do this effectively the entrepreneur needs to ask him/herself and answer
questions pertaining to the 5s (five ‘s’) in terms of their strengths and
weaknesses by developing questionnaires to ask questions pertaining to major
internal environmental factors such as:
Skills:
What skills do the organizational members possess? What are the distinctive
competencies of the organization?
Strategy:
Does your business have a clear vision and mission? Are your business
objectives/goals derived from its mission? Does your business have plans? Do
you follow the laid down plans of the business as scheduled? Does your business
have clear strategies to operationalize its policies? What skills do the
organizational members possess? What are the distinctive competencies of the
organization?
Staff:
Does the business have qualified staff for the relevant positions? Are the
staffs rightly placed? Does the business have adequate number of personnel to
man the various positions?
Structure:
Does the business have an organizational structure or organogram? What type of
organization structure does your business adopt? Are there clear lines of
reporting and communication?
Systems:
Does your organization have a system? What kind of systems (e.g. MIS,
Accounting, Quality Control, and Inventory) does your business have in place?
(Business Plan, 2010).
If
the answers to these questions are positive/or the factors are present, then
you record them as strengths and if the answers are negative/ the factors are
absent, then you record them as weaknesses. After this, each factor is rated as
to whether it is a major strength, minor strength, neutral factor, minor
weakness, or major weakness (Business-Plan, 2010).
Opportunities and Threats Analysis
This
involves scanning the external environment of the business in order to identify
the Opportunities and Threats. The entrepreneur can assess the external
environment of the business by critically looking at the opportunities and
threats emanating from changes in the major external environmental factors. For
instance opportunities in the technological environment could be availability
of advanced technology, developments in Information Technology like the advent
of the GSM; opportunities in the Political/Legal environment could be
favourable government policies, tax holidays; opportunity in the Demographic
environment could be great market demand; opportunities in the Economic
environment could be growing export market increased consumer spending and
growing industry.
Positive
seasonal influences are an opportunity in the natural environment;
opportunities in the other environment could be change in consumers taste in favour
of your product and Intermediaries’ cooperation. Examples of threats in some
external environmental factors can come from direct competitors, indirect
competitors, consumers, substitute products or services and suppliers, customers
brand switching and innovations by competitors.
The
entrepreneur can classify the overall attractiveness of a business once he/she
has conducted a thorough opportunities and threats analysis.
To
this effect, threats could be classified according to their seriousness and probability
of occurrence.
To
evaluate its opportunities, the business needs to operate a reliable Management
Information System (MIS). The information obtained will enable the entrepreneur
know if the business is ideal (i.e. it is high in major opportunities and low
in major threats); is speculative (i.e. it is high in both major opportunities
and threats); mature business (i.e. it is low in major opportunities and
threats) and troubled (i.e. it is low in opportunities and high in threats).
An
effective opportunity and threat analysis is advantageous to the entrepreneur;
it will enable the entrepreneur make decisions on whether the business should
limit itself to those opportunities where it now possesses the required
strengths or should consider better opportunities where it might have to
acquire or develop certain strengths.
We looked
at how the entrepreneur can analyze and scan the environment for
entrepreneurial opportunities.
In
doing this, the reductionist approach has been adopted. To this effect, an
overview of the concept of business, environment, business environment,
business environmental factors was discussed. The study session also discusses
the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis and sees
how this could assist the entrepreneur evaluate the attractiveness of a
business. Apart from this the SWOT framework is beneficial for entrepreneurial
decision making because it enables the entrepreneur respond to the dynamic
business environment by enabling him consolidate on the strengths, overcome or
turn weaknesses around, grab opportunities and avoid threats or even convert
threats to opportunities.
Conclusion:
In
planning your business, apply the SWOT analysis. Look at your strength. This is
what will keep you in the business so you must always look for ways to protect
it. Do not neglect your weakness. This could kick you out of business. So you
must identify ways of improving the identified weakness. Identify the external
opportunities to strengthen your business and neglect treat. This is external.
Although, there are so many other models that can be used in planning a
business the SWOT is simple to use.
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