Tuesday, March 9, 2010

SWOT Analysis

 A scan of internal and external environment is an important part of strategic management process.
 Environmental factors internal to the firm can be classified as strengths (S) and weaknesses (W).
 And those external to the firm can be classified as opportunities (O) and threats (T).
 Such an analysis of the environment is referred to as SWOT Analysis
1. Strengths
 A firm’s strengths are its resources and capabilities that can be used as basis for developing a competitive advantage.
 Examples:
 Patents
 Strong brand names
 Good reputation among customers
 Low Cost Structure
2. Weaknesses
 The absence of certain strengths may be viewed as a weakness.
 Examples
 Lack of patent protection
 Weak brand name
 Poor reputation among competitors
 High cost structure
3. Opportunities
 The external environmental analysis may reveal certain new opportunities for profit and growth
 Examples:
 An unfulfilled customer needs
 Arrival of new technology
 Loosening of regulations
 Removal of international trade barriers
4. Threats
 Changes in the external environment also may present threats to the firm.
 Examples:
 Shifts in tastes away from the firm’s products.
 Emergence of substitute products
 New regulations

 S-O Strategies Pursue opportunities that are a good fit to the company’s strengths.
 W-O Strategies Overcome weaknesses to pursue opportunities.
 S-T Strategies identify the ways that the firm uses its strengths to reduce its vulnerability to external threats.
 W-T Strategies establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats.


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