TOOLS I N

EVALUATI NG
A BUSINESS
TOOLS IN EVALUATING
A BUSINESS
1. THE GEOGRAPH I C ARE A WHI CH Y O UR
BUS I N ESS WI L L C ATE R TO .
2. THE S I ZE AN D OUTL OO K O F THE
I NDUSTRY.
3. DES CRI PTI ON OF TH E P RO DUCT
4. THE BUYERS H AVE TO BE I DENTI FI ED.
5. THE R EGULATORY E N VI RONM ENT.
6. THE N EED T O I DE N TI FY THE LEA DI NG
BUS I N ESSES I N TH E I N DUS TRY .
7. FACTORS TH AT WI L L AFFECTS THE
GR OWTH OF TH E BUS I NES S
 SWOT
CREATED IN THE 1960S

S.W.O.T (STRENGTHS, WEAKNESS, OPPORTUNITIES, AND

THREATS)

S.W.O.T ANALYSIS OR S.W.O.T MATRIX

- IS A STRUCTURED PLANNING METHOD USED TO EVALUATE THE
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
INVOLVED IN A PROJECT OR IN A BUSINESS VENTURE.
S.W.O.T. ANALYSIS
I DENTI FYI NG TH E I NTERNA L
AND EXTERN AL FORC E S
 STRENGTHS & WEAKNESSES
USUALLY INCLUDED AS INTERNAL FACTORS ARE:
1. FINANCIAL RESOURCES
2. PHYSICAL RESOURCES
3. HUMAN RESOURCES
4. ACCESS TO NATURAL RESOURCES, TRADEMARKS,
PATENTS, AND COPYRIGHTS;AND
5. CURRENT PROCESS, SUCH AS EMPLOYEE PROGRAMS,
DEPARTMENT HIERARCHIES AND
6. SOFTWARE SYSTEMS, SALES AND DISTRIBUTION
CAPABILITIES, MARKETING PROGRAMS, ETC.
 OPPORTUNITIES & THREATS
EXTERNAL FORCES:
ECONOMIC TRENDS

MARKET TRENDS

NATIONAL AND LOCAL LAWS AND STATUTES AS WELL AS

POLITICAL, ENVIRONMENTAL, AND ECONOMIC REGULATION.

DEMOGRAPHIC CHARACTERISTICS OF THE TARGET MARKET

RELATIONSHIPS WITH SUPPLIERS AND CO-OWNERS; AND

COMPETITIVE THREATS.
EXAMPLE
 PORTER’S FIVE FORCES OF
COMPETITIVE POSITION ANALYSIS

1 a framework or a guide for assessing and

evaluating the competitive strength and
position of a business organization

2 these five forces help identifying

if new products or services are
potentially profitable
PORTER'S FIVE FORCES
PORTER'S FIVE FORCES
 1
SUPPLIER
POWER
I S I NFLUENC ED B Y
UNI QUENESS O F THE P RO DU CT
R EL ATI VE SI Z E AND S TREN GT H O F
SUP PL I ER I N THE M ARK E T
THE MAGNI TUDE OF THE COS T
SWI TCHI NG F R OM ONE SUPPL I ER TO
ANO THER
 2
BUYER POWER
I S I NFLUENC ED B Y

NUMBER OF BUYERS I N T HE MARK ET

I MP ORTANTANC E O F AN I N DI VI DU AL
BUY ER I S TO THE O RG ANI Z AT I O N
BUY ERS COST O F S WI TC H I N G F R O M O N E
SUP PL I ER TO ANO THER
 3
RIVALRY AMONG
COMPETITORS
I S I NFLUENC ED B Y

NUMBER AN D C APABI L I TY O F
COMPETI TORS I N THEM AR KE T

IF COMPETITORS ARE
NUMEROUS AND OFFER BASICALLY SIMILAR
PRODUCTS AND SERVICES, THE MARKETS
CURRENT NEEDS WILL SERVE AS AN
ATTRACTIVE OPPORTUNITY FOR THE FIRM
 4
POSSIBILITY OF
SUBSTITUTION
I S I NFLUENC ED B Y

THE EASE OF S UBS TI TUTI N G PR O DU CT S

I N A MARKET

IT
IS EXPECTED THAT BUYERS WILL SWITCH TO
ALTERNATIVES IN CASE OF PRICE INCREASES
 5
POSSIBILITY OF
NEW ENTRANTS
I S I NFLUENC ED B Y
NEW I NVESTO RS AND C OM PE T I T O R S
ENT ERI NG A MARK ET

THE SHARE OF THE PARTICIPANTS IN THE

MARKET WILL BE DIVIDED AMONG MORE
PEOPLE AND WILL THEREFORE DECLINE, THUS,
ERODING PROFITS
ONC E THE FO RC ES ARE I DE N T I F I E D

areas of strength can be

pinpointed
solutions to weakness may be
proposed
possible mistakes avoided
 IMPORTANCE
The Porter’s Five Forces of Analysis is a significant tool for organizations
to understand the factors affecting profitability in a specific industry and can
help to form decisions on whether or not to enter a specific industry, whether or not
to increase capacity in a specific industry and also for developing competitive
strategies.

Under this theory, a business becomes more attractive, the greater the
supplier’s power to drive prices up, the less the buyer’s power to drive prices down,
the less the number of competitors in the market, the more differentiated the product
or service is, the less the substitutability of the products for similar goods, and the
more difficult it is for new entrants to participate in the market.