SWOT ANALYSIS

The business environment keeps changing. Government policies and regulations, economic conditions, social conditions, technological factors, competitive situation etc. Undergo changes. The environmental changes may open up new opportunities or pose new threats.

Constant monitoring of the environment is therefore, necessary to identify the emerging opportunities and threats. In order to understand to what extent a firm will be able to exploit the opportunities and fight the threats, it is necessary to evaluate the strengths and weaknesses of the firm. Thus, an analysis of the strengths and weaknesses of the firm and the opportunities and threats in the environment that is the ‘SWOT’ analysis is essential for framing the business strategies.

S- Strengths.

W- Weaknesses.

O- Opportunities.

T- Threats.

STRENGTHS AND WEAKNESSES:

Strengths and weakness analysis is a real test for management. The strength and weaknesses would decide whether a company should continue in a business, take up new lines of business, as well as the strategy to be employed in doing so.

For e.g. in case of some products, small scale units have definite advantage over large- scale units in costs. If a large scale unit were not able to compete with the small- scale units, in such a case, it would be wise on the part of the large unit to give up the business of such products.

The strengths and weakness analysis is done by functional audit of different areas like marketing, finance, design/ engineering, operations etc. The audit is to be done on the basis of the quantity and quality of skills and the infrastructures support 3 available facilities in terms of physical facilities, resource available, speed and flexibility in arranging them.

OPPORTUNITIES AND THREATS:

Monitoring of the environmental changes is necessary to reshape the company’s business and products, if needed, to ensure survival and growth. Certain changes in the environment may bring about new opportunities for some companies while they pose new threats for some others. For e.g. the new industrial policy of India has brought about enormous new business opportunities but at the same time it poses new threats or challenges to many existing firms because of the increase in competition. The existing firms should therefore, frame strategies to effectively fight the increasing competition.

The primary reason of the environmental analysis is to identify the threats as well as the opportunities developing in the business environment. The search for opportunities may start on account of increased aspiration for performance of the organization. While the analysis of threat is to examine the development in the environment that may affect the current strategies ineffective and irrelevant and thus, affect the survival of the organization. The threats or opportunities for any business developed because the needs of the customer keep on changing. For e.g. a customer who was happy with the product now wants another because of change in his needs. In view of the above, many companies have to reframe their objectives and strategies in order to survive in the changing business environment.