A SWOT Analysis is one of the most commonly used tools to assess the internal and external environments of a company and its the most important part of a company’s strategic planning Process. A SWOT analysis can be done for a product, place, industry, and a person. A SWOT analysis helps with both strategic planning and decision-making of the company as it introduces more opportunities to the company as for the forward-looking bridge to generating strategical alternatives. In short, a SWOT analysis is a simple and effective framework for identifying strengths, weaknesses, opportunities, and threats that a company faces. It is important to leverage strengths, minimize threats, and to take advantage of available opportunities. Conducting a SWOT analysis is useful for strategicall planning and for determining the objectives of a company.
SWOT is an acronym stands for Strengths, Weaknesses, Opportunities, and Threats. They are as follows:
For example, a SWOT Analysis is for constructed McDonald’s stock is explained as follows:
This is the Characteristics of a business which give it advantages over its other competitors.
Considering the strengths for the internal and consumer perspective they are as follows:
- What are the advantages does your company have? – McDonald’s serves customers in more countries than any other competitor in the fast-food industry.
- What is your company’s Unique Selling Proposition? – Significant economies of scale.
- What is positive consumer perception does your company have? – Wide audience reach
- What are the low-cost resources do we have access to and that others do not? – McDonald’s exercises market power over suppliers and competitors.
- What are unique resources that we have and what resources that others do not have? When compared. – The most recognized brand in the fast-food industry
This is the Characteristics of a business which make it disadvantages relative to competitors.
- What does your company not do well? – Not much variation in seasonal products
- What are weaknesses do consumers see in your company? – Focus on fast food and not healthier options for consumers
- What are the factors that contribute to weaker brand image? – Negative publicity (The perception of McDonald’s as an unhealthy food choice)
These are some Elements in a company’s external environment that allow it to formulate and implement strategies to increase profitability.
- What are good opportunities available in the marketplace for your company? – Business expansion to new parts of the world
- What are some trends that your company can capitalize upon? – Corporate social responsibility
- Any changes in technology or markets that your company can take advantage of? – Allergen-free options and gluten-free food
- Any changes in lifestyle, social patterns that your company can take advantage of in the particular market scenario? – Being responsive to social changes to healthier options
These are Elements in the external environment that could endanger the integrity and profitability of your business.
- What are obstacles does your company have to face? – Threat from competitors in different countries
- What are your competitors doing better them over us? – Competitive price
- Does the changes in technology threatening the position of your company? – Threat of an economic downturn
- What threats do your company weaknesses put you at risk of? – brand image
- Does changes in lifestyle, social patterns pose a threat to your company? – Social change to a more balanced meal
SWOT Analysis – Internal and External Factors:
It’s important to point out the strengths and weaknesses are current or backward-looking and opportunities and threats are forward-looking. By performing a SWOT analysis, we will be able to build a bridge between what the company has accomplished to date and the strategical alternatives that are going to be generated.
Internal factors are the strengths and weaknesses of the company. Strengths are the characteristics that give the business its competitive advantage, while weaknesses are characteristics that a company needs to overcome in order to improve its performance.
Examples of internal factors include:
- Company culture
- Company image
- Operational efficiency
- Operational capacity
- Brand awareness
- Market share
- Financial resources
- Key staff
- Organizational structure
External factors are the opportunities and threats to the company. Opportunities are elements that the company sees in the external environment that it could pursue in the future to generate value. Threats are elements in the external environment that could prevent the company from achieving its goal or its mission or creating its value.
Changes in the external environment may be due to:
- Changes in society
- End Customers
- Economic environment
- Government regulations
- Associated partners
- Present Market trends