Free SWOT Analysis Essay Sample
SWOT analysis (Strength, Weakness, Opportunity, Threats) is performed to study business environment, legal environment, the strengths and weaknesses of the company and business competitors, as well as the complex interaction of the considered factors. SWOT analysis methodology involves identifying the strengths and weaknesses, opportunities and threats of the company; and evaluating the connection among them, which could later be used in order to formulate the strategy of the organization.
The basis of this methodology is Porter`s theory of competitiveness of the organization in its own field. The process of SWOT analysis is based on the analysis of the organization followed by the block of questions. M. Porter has proposed a scheme that is useful in the resource analysis in the strategic plan. This scheme is called “the value chain”. The basic Porter's idea is that the degree of evaluation of products or services is determined by how satisfactory are the development actions and launch of the product in the market, as well as supply and support of the product or service (Bartram & Gibson, 2000). These activities must be carefully assessed. In his model, Porter distinguished primary and secondary activities of the company. According to M. Porter, the main activities are grouped into five areas: incoming supplies, operations (production), outbound delivery, marketing and sales, and service. All types of major activities are associated with support activities. Porter identifies four types of support activities: logistics, technical developments, human resource management, and infrastructure firms. In order to define advantages and disadvantages of the company, all nine aspects should be taken into consideration (Porter, 1998).
Thus in order to conduct SWOT analysis, a few steps should be done.
The first step is strategy development. In the strategy developing stage, the direction of further development and its target orientation should be defined. In order to find out an appropriate strategy, the following questions should be answered:
- the mission of the organization;
- definition of organizational goals (selection purposes, building hierarchy of objectives, forming "tree goals");
- determine the basic strategy of the organization (strategic assessment
of alternatives for the basic strategy, evaluation of the chosen basic strategy );
- implementation of strategy (developing a strategic plan, monitoring
the strategic plan).
In SWOT analysis, the main focus should be made on the marketing strategy: Marketing Management (general idea, concept, strategy, evaluation of staff), markets (market capacity, market structure, competition, the strengths and weaknesses); consumers (number, structure, study of the tastes of consumers); pricing (strategy and tactics); sales (sales organization, distribution channel assessment, characterization employed in this field personnel, availability of storage facilities, costs for implementation, after sales service, advertising and its influence on effectiveness of the organization) (Menon, 1999).
Secondly, the micro and macro environment of the company should be analysed. SWOT macro analysis can be made on the basis of the PEST analysis evaluation of political field (peculiarity of the current policy in the protection of the rights of entrepreneurs and future business development activity, the country’s position in the world economy, etc.); economic field (level of development, analysis of indicators such as GDP, inflation, unemployment, productivity, cost taxation, etc.); social field (level of society, structure, and characteristics of the existing labour market, unemployment, etc.); technical field (level of science and technology, communications, transport, telecommunications development, etc.) (Jyothi, Babu, & Krishna, 2008). SWOT micro analysis includes the evaluation of the financial position of the company: corporate liquidity, cash flows, influence income and depreciation of cash flows, balance assessment of the financial condition, financial planning (technical capacity, method of planning, evaluation prospects), auditing (methods, perspectives, and conclusions of auditors) (Armstrong, 2006).
Finally, the general evaluation of the company`s competitive position and prospects can be evaluated in general. Thus, the strengths can be manifested in various forms. They can be tangible (the product has been packed in a convenient package for the application) or intangible (the product has been used successfully for over 30 years). Weaknesses are something that makes it difficult to sell a product or service. Interestingly, some factors may be seen as strengths in one case and as weaknesses in another. Opportunities are formed by certain events in the market and these events make products sell more easily in the future. Threats are directly related to a particular product or company. Similar to opportunities, threats are provoked by the events that can happen in the future (Hill & Westbrook, 1997).
Strengths: the well-known name (customer buys the product because of the name or brand), durability (the product is in demand for several decades; it successfully meets certain requirements), efficiency (the product is better than the competitor’s, very convincing commercial information), price (if the product has a relatively low price, many people will buy it), quality (high quality has a high value in the eyes of the consumer), friendliness to the environment (more and more people are interested in the environment and weary of the negative health effects of using the products with artificial ingredients), and packing (good visual packaging makes the product more expensive).
Weaknesses: the name of the company provokes negative associations (this means that people have preconceived notions about the product), the ancient name (the product has been known for several decades and is perceived as old fashioned and out-dated), price (if the product has a low price, people may think that it is of poor quality and not worth trying; if the product has a high price, people may think that this product is not worth their money), usage (it is hard to sell the products that people rarely use, especially if they are high-tech), innovations (if the product is poorly known in the market, the company has to educate consumers to use it).
Opportunities: improvement of the enterprise, favourable regulatory policy, sensible tax policies, opportunities in the market, government orders, steady demand, the possibility of advertising.
Threats: retroactive changes in the law, inflation, competition, the worsening financial condition of customers, monopolistic competitors, rapid changes in market prices, availability of goods, substitutes, lack of stability in the market of raw materials, slowed growth, dishonest partners, difficulties in obtaining bank loans, scientific and technical potential, lack of support for the patent, and lack of quality management system.
To conclude, SWOT analysis can only evaluate the general picture of the development of the company. Therefore, the products, services, or companies can be analysed. SWOT analysis can evaluate the main strengths, weaknesses, possibilities, and threats. With the help of it, the risk can be minimized during the selection of the company. Additionally, SWOT analysis can shed light on the benefits and drawbacks of a product, service, or company. Finally, SWOT analysis can discover new ideas for connecting underserved groups of potential customers.