SWOT Analysis

Project by: Swapnil Ghadi Roll No 12. Shamim Dicholkar Roll No10

SWOT (Strengths, Weaknesses, Opportunities and Threats)

Contents
1 2 Definition and Concept Overview of the four factors 2.1 2.2 2.3 2.4 3 4 Strengths Weaknesses Opportunities Threats 1 2 2 2 2 2 3 3 4 5 5 5 6

Process Cycle Four Strategies 4.1 4.2 4.3 4.4 Strength Opportunity (SO) Strategies Strength Threat (ST) Strategies Weakness Opportunities (WO) Strategies Weakness Threat (WT) Strategies

Illustration

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

Definition and Concept

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control. SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organisations resources and capabilities to the requirements of the environment in which the firm operates. In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organisation.
Diagram 1.

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

Overview of the four factors

2.1 Strengths
Strengths- Strengths are the qualities that enable us to accomplish the organisations mission. These are the basis on which continued success can be made and continued/sustained. Strengths can be either tangible or intangible. Strengths are the beneficial aspects of the organisation or the capabilities of an organisation, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples of organisational strengths are huge financial resources, broad product line, no debt, committed employees, etc.

2.2

Weaknesses
Weaknesses- Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organisational success and growth. Weaknesses in an organisation may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and eliminated. For instance - to overcome obsolete machinery, new machinery can be purchased. Other examples of organisational weaknesses are huge debts, high employee turnover, complex decision making process, etc.

2.3

Opportunities
Opportunities- Opportunities are presented by the environment within which our organisation operates. These arise when an organisation can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organisations can gain competitive advantage by making use of opportunities. Organisation should be careful and recognize the opportunities and grasp them whenever they arise. Opportunities may arise from market, competition, industry/government and technology. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter telecom sector

2.4

Threats
Threats- Threats arise when conditions in external environment jeopardize the reliability and profitability of the organisations business. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

Process Cycle
In simple terms, SWOT implies reducing your weaknesses and threats and increasing your strengths and opportunities.
Diagram 2.

Diagram 2 above shows that the size of the red ball (weakness and threats) has reduced and that of the green ball has increased (strength and opportunities) during a given tenure. This means that you have been able to overcome your weakness and avoided possible threats to build your opportunities-base as well as grow your strengths. The description above may indicate that SWOT is a simple exercise. But closer scrutiny reveals that SWOT has its own process cycle. An organisation has to first prepare a SWOT. SWOT can be built by an individual or through cumulative team effort. Once the SWOT is in place, identify a focus item under each of the SWOT factors defined in Section 2 of this document. This prioritising of your items is a key factor, but it needs to be supplemented by Action that should be taken against each priority. This activity needs lot of planning as we have to consider internal and external factors which prevails around the organisation / individuals. Once the actions are in place, the next step is to implement them live. Execution of action need to be as per plan and needs regular monitoring to avoid any slippages. A successful execution will have result against each priority which can be as per the plan or otherwise. This result needs to go through a review mechanism before conclusion, following which preparation of a new SWOT can begin.
SWOT Process Cycle
SWOT Process Cycle

Swot Review Priorities

SWOT Process Cycle

Result Execution Action

Diagram 3

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

Four Strategies
When an organisation runs this tool, they come up with Four Strategies which help to build and plan a roadmap for the future. There is no best or worst strategy and this depends on organisational priorities as well as internal and external factors affecting the organisation.

Fig :-4

4.1

Strength Opportunity (SO) Strategies

SO Strategies use a firms internal strength to take advantage of external opportunities. All managers would like their organisations to be in a position in which internal strength can be used to take advantage of external trends and events. Example: Lenovo took over IBM laptop and desktop business. Being a low margin product, this had been a weak link for IBM as compared to its competitors (Dell and HP). But Lenovo had the low-cost advantage which helped them compete with Dell and HP and by association with IBM, they also got a global customer base. Besides, they also got to use the IBM brand name which helped in their business growth in India and the global markets.

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

4.2

Strength Threat (ST) Strategies

ST Strategies use a firms strengths to avoid or reduce the impact of external threats. This does not mean that a strong organisation should always meet threats in the external environment head on. Example: HSBC wanted to increase the banking licenses in India but government was very tight on issuing the licenses. To overcome this threat, HSBC used their global presence and took over RBS which helped increase the number of their banking licenses.

4.3

Weakness Opportunities (WO) Strategies

WO Strategies aim at improving internal weaknesses by taking advantage of external opportunities. Sometimes key external opportunities exist but a firm has internal weakness that prevents it from exploiting those opportunities. Example: When Reliance initially started their textile business they use import nylon, rayon and polyester which was taking away their cost advantage and made that much more difficult for them to compete with China and other global market players because of their cost factor. To overcome this, they established their own plant which helped them reduce costs and today they are the King in polyester manufacturing.

4.4

Weakness Threat (WT) Strategies

WT strategies are defensive tactics directed at reducing internal weaknesses and avoiding external threats. Example: When IBM established their office in Joint Venture with Tata, they bought their own property. But due to government regulations, all MNCs were moved out of India and IBM found it difficult to wind-up due to owned property. Ever since they came back to India, they have not owned a single property in the country till date so that it easy to wind-up whenever needed. This shows how they have overcome their weaknesses and avoided the threat impact.

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

Illustration
Below is the illustration of the leading pharmaceutical company in India. This initial SWOT is prepared 2 years back and features the actions and measures the company took at that time to grow their strengths and increase their opportunities by reducing weaknesses and avoiding threats.
Table : 1

Initial SWOT
Strengths Unique or market leading products Pricing Reputation of company Weaknesses Old plants and equipments Narrow product line Poor customer relationship Unrecognized brands Opportunities Expand Product Range Threats Low cost imports of product in the market Competitors new products and Market decline Exchange rate.

Global market Presence. Getting up tender business

Table : 2

Priorities, Action and Implementation.

Strengths Market Leading Products Action - Introduction of new product and up-gradation of existing product. Weaknesses Narrow Product landscape. Action - Developed Formulization Opportunities Expand Product Range Action - Development of Multi Brands & different Packs Size of Products Threats Low Cost Imports Action - Producing Inhouse product and selling on less cost Competitors new products and innovation

Pricing.

Poor Customer Relationship

Increase Geographic Coverage

Action - Different products selling schemes.

Action - Consumer feedback forms

Action - Increase the Manpower & Covering Interior Area

Action - Lunching New Products in existing segments with value added services as well introducing new product in different segment

Old Plant and Equipment. Action - Imported New Automatic Machines.

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SWOT (Strengths, Weaknesses, Opportunities and Threats)

Table : 3

Result and Review.

Strengths Developed formulation Weakness coverted into Strength with the help of RND plants Weaknesses Narrow Product landscape. Minimize the Weakness because of developed formulation Opportunities Expand Product Range Threats Low Cost Imports

Opportunite coverted into Strength because of Minimize the Threat Innovation of new products

Table : 4

Revised SWOT
Strengths Up-gradation Weaknesses Opportunities Threats

of

Import &

export

Government

Products
Build

license
Lack

Orders

Hospital Multi-national company presence

Competitors

Presence. Less schemes for Getting up tender Interior area coverage retailers business Market Leading Developed formulation Unrecognized brands Brands

up RND plants

of Market Study

Global market

innovation Ayurvedic segments

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