An internal analysis refers to the process of critically evaluating a business’s resources and capabilities. It is a step to the strategic planning process and it is significant for a firm to realizing its goals and objectives. One of the methods of conducting an internal analysis is by the use of the SWOT (Strengths, Weakness, Opportunities and Threats) framework. Even though the terms sound completely different, it breaks in to major two distinct segments. Strengths and weaknesses consists the internal success factors while the opportunities and threats are the external factors (Pahl and Ritcher, 2009).
A SWOT analysis can be used to explore different solutions to problems and possibilities for a new concept and effort in a business setting. It is useful to make decisions concerning the best direction for an initiative. Moreover, it aids in the determination of possible changes within a business entity. Finally it enhances the adjustment and flexibility of the market such as new opportunities.
The first step in the SWOT analysis process involves the listing of the internal factors that consists the Strengths and the weaknesses (Böhm, 2009). The areas to consider on this factor include; Human resources that comprise the business staff both skilled and unskilled, volunteers, board members and the other consultant or services providers affiliated to the organization. Physical resources also need to be analyzed for example the location, equipment and machinery, building including whether it is on a prime location or standard. Moreover, it involved financial resources, able to list the sources of income both recurrent and investment investments. Monitor the methodology and paths offered by the company for example, the integration between crucial departments and their communication efficiency. Past experiences whether bad or good need to be listed to act as a building block for success and learning. Even though the internal factors are weaknesses and strengths of the organization internal qualities it is recommended to ask for the perspective of other people outside the organization.
The next step is through listing the external factors comprising Opportunities and threats (Böhm, 2009). This is because there is no organization or company that is completely immune by outside forces and events. Future business trend fall under this category for example The Samsung latest innovation of Wi-Fi digital camera. This demonstrates a complete analysis and opportunity to fill a gap that existed in that line of business. Other factors such as the national economy for example inflation moreover demographics that include the spectrum and diversity of thee clients a company serves. There is also the legislation in line with the area of business for example polythene and alcohol manufactures normally heavily taxed. The most important element in this factor is competition; it can be positive to an entity or negative depending on the situation and laws governing a country or state.
The implication of using an incorrect and dishonest SWOT analysis is a recipe to a company’s failure and closure. First it would lead to an incorrect analysis that does not represent either an internal or external perspective of the company. This might results to losing out to competitors, lack of sales due to incorrect research on goods and services a company is producing. Secondly a company’s goals and objectives will automatically be unrealistic thereby since they are integrated by an organization’s analysis. Furthermore the company’s projection might be wrong creating a loop hole for departments such as finance to misappropriate funds meant for the company.
SWOT analysis helps by assisting a company to understand their position in the market standing this enable them to increase their popularity and customize relevant and quality goods and services. Since it is a strategic planning process it enables a company to realize it objectives by critically weighing their market threats and weaknesses thus developing a counter action to boosts its market share within an economy. Furthermore, by determining the status quo of a company through the SWOT analysis more specific steps can be undertaken such as enhancing production processes thereby producing more products in less time thus increasing more income and profitability.
Whatever, course of action a company or business entity takes the four letters of SWOT analysis prompts it to adjust in a balance way. It reminds companies to; Build on their strengths in terms of service provision, minimize their weaknesses in terms of service delivery, seize slightest opportunities and effectively counteract threats posed by competitors.
Pahl, N., & Richter, A. (2009). SWOT Analysis - Idea, Methodology And A Practical Approach. München: GRIN Verlag GmbH.
Böhm, A. (2009). The SWOT Analysis. München: GRIN Verlag.