SWOT ANALYSIS

CONCEPT:

A SWOT Analysis is an acronym used for Strength, Weakness, opportunity and threats. A SWOT analysis
is an instrumental framework in value based management and strategy formulation to identify the
strength, weakness, opportunity and threats for a particular company.

STRENGTH and WEAKNESS 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 measure using internal
assessment or external benchmarking.

Opportunity and Threats are external value creating (or destroying) factors a company cannot control,
but emerge from either the competitive dynamics of industry/market or from Demographic, Economic,
Political, Technical, Social or Cultural factors. Any organization must try to create fit with its external
environment. Hence, SWOT diagram is a very good tool for analyzing the internal strength and weakness
of a corporation and the external opportunity and threats.

Objectives/Importance of SWOT Analysis:

1: To provide a framework so as to reflect organizational capabilities to avail opportunities or to

overcome threats presented in the environment.

2: To formulate strategies and policies for the organization so as to achieve its objectives.

3: To explore the relationship between the environmental influences and the strategic capability of an
organization to gain strategic advantage.

4: To conduct brainstorming meetings for effective strategies.

5: To provide a good framework for reviewing strategy, position and direction of a company.

Advantages of SWOT Analysis:

1: It distinguishes between wher5e your organization is today and where would it be in the future.

2: It helps to understand the strategic position of the firm in relation to the competitive environment.

3: It helps to prepare TOWS matrix for developing effective strategies and policies.

4: It helps to understand the market scenario and accordingly utilize its resources and competencies to
grab such opportunities.

5: It helps to prevent the weakness and threat which lies in the organization and accordingly counter
face with it in time.

Disadvantage of SWOT Analysis:

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1: It generates lengthy list of S, W, O and T which becomes quite difficult to analyze.

2: It does not indicate priorities.

3: It does not link to strategy implementation.

4: The information may not be accurate and reliable.

5: It is descriptive in nature rather than perspective.

Steps for preparing SWOT Analysis:

1: Determining organizations vision, mission and objectives.

2: Situation analysis (Internal analysis and external analysis).

3: Conduct SWOT profile.

4: Prepare TWOS Matrix for strategy formulation.

Specimen of SWOT Profile:

Strength: Weakness:
-specialist marketing expertise -Lack of marketing expertise
-Exclusive access to natural resources -Undifferentiated product and services
-New, innovative product or service -Improper business location
-Location of business -competitors have superior access to distribution
-cost advantage through proprietary know how channel
-Quality process and procedures -Poor quality good or services
-Strong brand or reputation -Damaged reputation
Opportunities: Threats:
-Developing market(e-commerce) -A new competitor in your home market
-Merger, joint ventures or strategic alliances - price war
-moving into new attractive market segment -competitor has a new innovative substitute
-A new international market product or services
-loosening of rules and regulation -New regulations and rule
-Removal of international trade barriers -Increased trade barriers
-A market led by a weak competitors -Tax introduced on product or service

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TOWS Matrix for strategy formulation:

1: SO (supports aggressive, growth oriented strategies)

It is the most favorable and growth oriented strategy formulation base .E.g. - Hindustan Lever has
superb marketing network especially, chain of distribution channel has helped the business to sell any
type of consumer products.

2: ST (Supports diversification strategies)

Strategist would use current internal strength which is high to build long term opportunities in other
product/market segments.

3: WO (Supports turnaround strategies)

Strategist faces impressive marketing opportunities but is constraint by several internal weaknesses. The
focus will be to eliminate internal weakness as far as possible and capture the opportunities.eg-Small
scale auto dealers in Nepal has receive opportunities as they can dispose 15 year old any vehicle and get
1/3 free custom duties to improve new one. Their weaknesses might be due to inadequate finance.

4: WT (Support defensive strategies)

It is the least favorable situation arising out of internal as well as external environment. So, the
strategies would be to stay at minimum overhead cost and breakeven level which would be considering
a great achievement for an organization.