A scan 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. The following diagram shows how a SWOT analysis fits into an environmental scan:
SWOT Analysis Framework
| ||||||||||||||
Strengths
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:
- patents
- strong brand names
- good reputation among customers
- cost advantages from proprietary know-how
- exclusive access to high grade natural resources
- favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
- lack of patent protection
- a weak brand name
- poor reputation among customers
- high cost structure
- lack of access to the best natural resources
- lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.
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 consumer tastes away from the firm's products
- emergence of substitute products
- new regulations
- increased trade barriers
3 comments:
The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. it is the basic element of the marketing evaluation.
A SWOT analysis is an instrumental framework in Value Based Management and Strategy Formulation to identify the Strengths, Weaknesses, Opportunities and Threats for a particular company.
Strengths and Weaknesses are internal value creating or destroying factors such as assets, skills or resources a company has at its disposal relatively to its competitors. They can be measured using internal assessments or external benchmarking.
Opportunities and Threats are external value creating or destroying factors a company cannot control, but emerge from either the competitive dynamics of the industry or from demographic, economic, political, technical, social, legal or cultural factors.
Post a Comment