SWOT analysis is a vital strategy applied in an effort to realize Strengths, Opportunities, Weaknesses and Threats of either an organization or individual. In the business context, this strategy enables a business to discover its strong and weak points, thus enabling it to survive both the internal and external forces. Therefore, this research examines the meaning and further, elaborates its basic components as applied in the analysis of enterprise.
Strength is considered as a positive internal characteristic of an organization, whether intangible or tangible. It is that attribute that is within the control of the business organization. A business that uses an effective SWOT analysis must know its strengths. Such knowledge is obtained through the business determining what it does exceptionally well and the resources the business owns. For instance, strength can be skills and reputation of workers, assets of the firm, the advantages that the firm enjoys over its competitors, and the general attributes that extend competitive advantage to the firm.
According to Stanley, weaknesses are described as a firm’s internal attributes which are negative in nature and are responsible for denying an enterprise a competitive advantage over the other firms. In order to favorably compete in the market, a business must improve these negative aspects. Stanley argues that a firm might require identifying the factors that deter it from gaining competitive advantage. Further, it may require understanding the vital elements that would be lacking in comparison to its competitors and determining whether the business is located in a strategic place in the market.
Böhm suggests that external and attractive elements which give hints on expected prosperity of a business enterprise are its opportunities. These positive elements can be detected by way of identifying the attractive factors that a business can benefit from in the market. In addition, external factors for any form of growth in the market are part of opportunities.
In Böhm’s, threats are external factors that an enterprise has no control over, which have the negative ability of putting the business or its strategic plans at risk of failure. The only benefit that threats offer businesses is the fact that success can be realized by responding to threats with effective problem-solving and planning. Threats are seen as the strong competitors in the market and are factors that reduce the profits of a business. Further, the introduction of new goods or services that tend to make the products of a business less popular in the market can be treated as a threat.
An effective SWOT analysis helps a business give emphasis to its strengths, improve on weaknesses take advantage of the opportunities present and avoid threats. This analysis is vital in the formulation of business strategies that majorly work towards achieving competitive advantage in the market through understanding of the internal and external factors within the structure of competitors.
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