Five external industry forces affecting an organization.
By definition, Strengths S and Weaknesses W are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities O and Threats T are considered to be external factors over which you have essentially no control. SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment.
It views all positive and negative factors inside and outside the firm that affect the success. Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess individually and as a team and the distinct features that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty.
Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, etc. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential.
These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet. Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc.
They must be minimized and eliminated.
For instance - to overcome obsolete machinery, new machinery can be purchased. Other examples of organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc.
Opportunities - Opportunities are presented by the environment within which our organization operates.
These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable.
Organizations can gain competitive advantage by making use of opportunities. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task.
Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter telecom sector and compete with existing firms for revenue.
They compound the vulnerability when they relate to the weaknesses. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.
It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription.
Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats. They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors.
SWOT Analysis helps in strategic planning in following manner- It is a source of information for strategic planning. Maximize its response to opportunities. It helps in identifying core competencies of the firm.
It helps in setting of objectives for strategic planning. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur.
Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very subjective as there is great degree of uncertainty in market.
SWOT Analysis does stress upon the significance of these four aspects, but it does not tell how an organization can identify these aspects for itself. These include- Price increase; Government legislation; Economic environment; Searching a new market for the product which is not having overseas market due to import restrictions; etc.Porters five forces and SWOT analysis A Porters five forces model can be enhanced by using SWOT analysis.
A SWOT analysis is an analysis of the strengths, weaknessesopportunities and threats affecting the company. Porter's Five Forces and SWOT analysis are both tools commonly used by companies to conduct analyses and make strategic decisions.
Each of the models seeks to . The Porter's Five Competitive Forces tool is a simple but powerful tool for understanding the power of the different competitive forces in the macro environment for any market or industry. Michael Porter’s Five Forces.
Michael Porter’s five forces is a model used to explore the environment in which a product or company (or business unit) operates.
SWOT Analysis Example For a department in a large business. This SWOT Analysis Example is just one of many that you will find on this site, to accelerate your learning brows all three of these examples.
Porter's Five Forces Framework is a tool for analyzing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability.
An "unattractive" industry is one in which the effect of these five forces reduces overall profitability.