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Description For any organization which needs to compete effectively in an industry needs to assess it’s current and future standing in the environment. There are lots of tools to evaluate the situation of an organization within an industry. One of the most famous tools deployed by almost all of the organization is called as SWOT analysis. It helps in strategic planning of an organization by evaluating its internal and external environment. The internal environmental factors included in SWOT analysis are Strength (S) and Weakness (W), whereas the external environmental factors are Opportunities (O) and Threats (T). The strategic analysis combining all these factors is called as SWOT analysis. The SWOT analyses help an organization in recognizing its capabilities and good resources, and use them in gaining competitive advantage in the environment in which the organization is operating. SWOT analysis is a tool that is very crucial in formulating an organization’s strategy. The factors embodied in SWOT analysis can be seen by following figure.
Strength: The strength of an organization is its resources and capabilities which can be effectively used for getting a competitive advantage. For instance: • Prominent brand names • Reputed product among customers • High cost advantages • Greater natural resources • Better distribution networks
Weakness: In absence of strength, weakness gets prominent in an organization. But in some cases weakness has a flipside of strength. For instance, an organization may have large capacity of manufacturing. This may be viewed as strength as the competitors do not have it. However, the problem will be faced by the organization in reacting quickly to some change in manufacturing procedures, thus making it a weakness.
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Some examples of weakness are: • Unknown brand name • Unprotected patent • Low reputation products • High cost products • Less access to natural resources • Less access to the distribution channels Opportunities: Opportunities are the external factors. An organization should be smart enough to identify opportunities in an industry and then should be audacious enough to capitalize and explore them. An organization should keep on making external environmental analysis to keep a track of new opportunities. The examples include: • Untapped customers’ need • Advent of new technologies • Relaxation in regulations • Ease in international trade barriers Threats: Threats are again factors from external environment. Changes in external environment can become a threat for an organization. Ideally an organization should be proactive enough to be threat proof and should always thrive to convert a threat into an opportunity. The examples of threats are: • Change in consumer preferences away from the organization's products • Abundance of substitute products • Strict regulations • Emergence of trade barriers
Reference: http://www.researchomatic.com/swot-143913.html
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