Good Essay About SWOT Analysis
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What is SWOT Analysis
Strategies of the organization are the most important means by which the companies achieve their goals and objectives. Thriving strategies deals with four essentials which covers the company’s operations: the strengths of the company, weaknesses, opportunities in competitive surroundings, and fourth is threats in competitive surroundings. The set of these four elements i.e. strengths, the weaknesses, opportunities and the threats, is referred to SWOT analysis when it is used by the firm in order to gain the competitive advantage. In early 1970s, Ken Andrews developed the SWOT. An evaluation of the strengths and the weaknesses takes place as an element of the organizational analysis i.e. it can be considered to be the audit of the internal working of the company, that are comparatively easier to manage than the outside aspects. On the other hand, investigating the opportunities and the threats is a component of the environmental analysis that is, company should look for the external factors of the company to determine the opportunities and the threats, upon which the company has less control (Barney, 1995).
Original formation of strategy model of Andrews lead the SWOT to ask four fundamental questions about the company and the company’s surrounding. These are as follows: What we can do? What we desire to do? What may we be able to do? And what others expect us from to do? The responses to the questions give the contribution for a successful process of strategic management. Although the original conception of Andrews of the analysis been developed and altered to further rationalized SWOT analysis that we are acquainted with today, his effort is just the groundwork of this work (Dyson, 2004).
METHOD OF SWOT
This analysis can be done for product, a place, a person or an industry. It engages stating the objective of business or a project and then recognizing internal and the external factors which are constructive and hostile in a way to achieve the stated objective. Recognition of the SWOTs of the firm or a business is significant for the reason that, they can notify later steps during the planning to attain the stated objective. Firstly decision makers must think about whether the stated objective is achievable and realistic one. However if stated objective cannot be attained, some other objective should be preferred and then process repeated. SWOT analysis users must inquire and answer the questions which produce significant information for each of the category i.e. the strengths, weaknesses, opportunities and the threats in order to make analysis practical and could uncover the competitive advantage (Chermack, Kasshanna, 2007).
USEFULNESS OF SWOT NALYSIS
The SWOT analysis usefulness not merely limited to the profit-seeking businesses. It could be used in situation of any kind of decision making when desired objective is stated. Examples consist of the following: non-profit firms, governmental divisions and the individuals. SWOT analysis can moreover, used in planning of pre-crisis situations and precautionary crisis management. SWOT analysis can furthermore be useful in generating a suggestion at some point in viability study or the survey. SWOT analysis is been used in society work like a tool to recognize the positive and also the negative factors inside the organizations, societies and broader society which encourage or restrain the thriving execution of the social services and the social modify efforts (Dyson, 2004).
SWOT analysis can assist in identification and understanding the key concerns that are affecting the business, however it do not inevitably offers the solutions. Hence we should be conscious of limitations along with benefits of this SWOT analysis, prior the decision to carry out it. With the Knowledge of what we can rationally suppose to accomplish, will make this analysis more helpful for the business and will also save the time. Eventually, one should be ready to spend time in order to assess the SWOT analysis and use this to decide superlative way ahead in the bossiness.
BENEFITS OF SWOT ANALYSIS
There are number of benefits that could be drawn from the SWOT analysis. However, the most important benefits of conducting it is that, this analysis has very little or absolutely no cost i.e. anybody who is aware of the business can carry out SWOT analysis. This can also be used when time is not available to tackle a multifaceted situation i.e. can be used in taking steps in order to improve business with no expense of the external consultant or any business advisor. Another benefit of SWOT analysis is it focuses on the most significant factors that are affecting the business. By use of the SWOT, we could be aware of the business better, could address the weaknesses, could deter the threats, could take advantage of the opportunities and finally could take benefit of the strengths and develop the goals and strategies to achieve them (Lee, Walsh, 2011).
EXAMPLES OF SWOT ANALYSIS
Many companies conduct the SWOT analysis. One of the examples includes the Nestle a leading brand of health, nourishment and wellness base organization. In terms of revenue generation it is to be the biggest food company. The company has identified its strength, weakness threats and opportunities. The strengths that are identified are it is a multinational company been profitably operating in above100 countries, having an unmatchable channel of distribution all around the globe. Its biggest weakness includes incapability to provide uniformity in quality of food products offered by it, Nestle frequently has entitle in number of products because of meager supplies or the contagion, thus hurting image of company. It’s mounting demand for the products of healthy food open up huge marketplace for it. The biggest threat that Nestle been facing is the increasing trends of eating more healthy food may results to decrease demand of its food products i.e. Chocolate as well as cocoa products. This helps the organization to identify the potential internal and external factors that can help them to formulate strategies in order to minimize the harms from weaknesses and threats and to capitalize on its opportunities and strengths.
The SWOT analysis of Pepsi reveals that the product diversity is its biggest strength, low profit margins and low prices to be its biggest weakness, growth in the use of bottled water is its biggest opportunity and the change in the taste of its consumers are its biggest threats. Subway, Coca-Cola, MacDonald’s, Apple and numerous multinational brands also conduct its SWOT analysis in order to get benefits out of this tool (Lee, Walsh, 2011).
LIMITATIONS OF SWOT ANALYSIS
Apart from all the benefits and advantages that the SWOT analysis poses to its users for Example Company or any business association, it also has certain limitations. When this tool used in a wrong way, yes it could poses risk to the firm’s future. When SWOT is conducted, it should be kept in mind that, this is merely a one step planning process of the business. For intricate issues, it is usually needed to carry out more in detail examination and analysis in order to carry out decisions. SWOT analysis merely covers the issues which can certainly be well thought-out as strength, weakness, the opportunity or threat. For this reason, it's hard to tackle vague or two-sided issues, such as issues that might either are strength or weakness or are both i.e. one might have a well-known location, however the lease of that location may be costly). SWOT analysis also do not prioritize the issues, do not give solutions or offer substitute decisions, it can create a lot of ideas but cannot assist in choosing which the one that is best and also it can generate too much information however all of it that is generated is constructive/useful.
The most important dilemma of SWOT analysis: though it highlights importance of four elements that is related to organizational and the environmental analysis i.e. strengths, weakness, threats and opportunities, but does not tackle with how company can be able to identify its own elements. Many executives of the organizations might not be capable to found these elements, and here the SWOT framework does not provides any guidance. For example, what happen if the strength that is identified by company, not actually its strength? Whereas company might consider it has strong customer service, may be oblivious of the troubles with its workers or the potentials of other firms that can offer better customer service. Weaknesses are comparatively must easier to find out but typically subsequent to it, it’s too delayed to form a new strategy to counterbalance them. It may be difficult for the company to identifying the opportunities. It depends on the organization the thing that seems to be an opportunity to one, may emerge to be danger to the other. It may be easy to overlook the opportunities or they may be recognized long after these are able to be subjugated. Likewise it may be difficult for a company to anticipate the potential threats to successfully evade them (Dyson, 2004).
Some of the experts have dispute on that, making the strategic option for firm is having the fewer significance than asking for correct questions in selecting the strategy. A company possibly by mistake solves a difficulty through providing that right answer to an incorrect question.
CRITICISM ON SWOT ANALYSIS
Critiques embrace misuse of SWOT analysis like a system that can swiftly designed with no decisive thought that leads to falsification of strengths, weaknesses, threats and Opportunities inside firm’s internal and firm’s external surroundings. A further limitation consists of the use of SWOT analysis merely to defend formerly determined firm’s goals and its objectives. This wrongly use directs to the limitations on the brainstorming potentials and genuine recognition of barriers. This misuse may also put the firm’s interest over the community’s well being. Hence this may leads to damage the image of the firm, that’s really important for any business success, consequently posses’ potential risks to the firm’s existence in future (Lee, Walsh, 2011).
The manner SWOT analysis often carried out does not let suitable communication, debate, and authentication of all the external and the internal factors projected by all that are involved. In such circumstances, results of SWOT demonstrate less trustworthy input to process of strategy generation, than its competency of being. More badly sometimes the SWOT analysis results in no way destined to use as input in process of strategy generation. If this is recognized or projected by the people involved in the SWOT analysis, their inputs quality will probable suffer and will lower than or else achievable and wanted (Chermack, Kasshanna, 2007).
It is obvious that indefinite or vague indication in the analysis of the factors that are external and are internal to the business will constantly destructively affect the communication and authentication of the projected factors and hence lead to the substandard results of the strategic analysis. It shows that, the mentioned general defect in SWOT is mainly caused by misconceived deployment of SWOT, inadequate skill levels and conscientiousness, and gaps in strategic information (Hill and Westbrook, 1997). Broadly, this type of misconduct may be relatively damaging to performance as well as deliberate position of the companies that are affected. SWOT analysis which demonstrates such critical flaws must be considered poor.
Mintzberg in 1994 criticism advocates that the SWOT is the major reason of what that is considered to be too much formalization of process of strategy making. Whereas it’s factual that many of the organizations do develop extremely formalized philosophy to the strategic management, concerning SWOT to be the reason of such over-formalization, even symptom of it, would be evidently a mistake.
There are number of organizations that conduct the SWOT analysis and considered it essential for the company. But while conducting it, the company must be pragmatic and rigorous. Furthermore the company must pertain it at the correct level, and complement this with further option-generation techniques where it considered being appropriate (Barney, 1995).
This point of misusage of SWOT analysis may harm all the organizations that employ it. As Nestle and other multinational corporations mentioned above who uses this tool, apart from all benefits it poses, they may be greatly harmed by its wrong use. If the nestles right threats are not been identified i.e. the decrease in its products demand due to increasing trends of eating healthy food, the firm will not going to able to formulate the right strategy to cater it i.e. either to diversify its portfolio with more nutritious food products or making consumers believe that their products are not less notorious. In my opinion all companies should conduct the SWOT analysis in a very precise and in a right manner, so to get more benefits out of its right usage rather than risking its future by its wrong implementation and usage. SWOT analysis is a very useful tool, but may cause potential harms if not conducted properly.
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