Creating a business plan for a company is a task that involves extensive research and analysis on factors that contribute to the company’s performance and the market’s behavior. There are certain risks that a company has to face when making important business decisions. To properly weigh their options, a company uses SWOT analysis. With this, they are able to analyze the internal and external factors that need to be considered before coming up with the right marketing strategy.
The strengths and weaknesses of a company would refer to its internal factors. These are the resources that a company possesses. The strengths refer to the advantages that the company has against its competitors in the market. This would also include the materials used in terms of manufacturing and developing products. On the other hand, the weaknesses pertain to the issues or concerns that a company needs to improve or avoid. This could be about problems in the past that have not yet been resolved.
Through this, the company is able to properly manage and control the areas of operation that need to be attended to. Additionally, this may be used as basis in developing future plans for the company.
Since the first two letters of the acronym represent the internal factors then that would mean that the remaining two denote the external factors. These are the things that a company has no control of. This is the environment of which the organisation operates in, such as its market and the ecosystem. The opportunities and threats of a company are the things that they cannot avoid rather, it’s something that that has to be dealt with accordingly.
Opportunities refer to the various changes that happen in the market that can contribute to the growth of the company. This would include the advances in technology and new production methods. Threats, on the other hand, involves evaluating the external risks of the company. Unfortunately, these threats are inevitable for a company. It’s important for a business analysis to develop resolutions and new strategies to deal with this problem.
In order to apply SWOT analysis, a company must first analyze its internal characteristics. This can be done by assessing the one’s performance in its specified market over a given period of time. Through this, a company may identify the various factors that may have contributed to its successful or failed business ventures. With proper factor analysis, a company may easily determine marketing strategies that can keep the business afloat.
Around the 1960s and the 1970s, a man named Albert Humphrey led a research project at Stanford University. With the data acquired from various companies, his team aimed to identify the reasons for corporate planning failures. With this, they used a tool called the SOFT analysis example to identify key areas that contribute to the problem.
SOFT, which stands for Satisfactory, Opportunity, Fault, and Threat, was later developed into what we now know as SWOT analysis.