The SWOT analysis or the SWOT matrix is a popular management technique. But did you know who invented this system? It was a business consultant from USA named Albert S. Humphrey. He came up with the system in the 1960s, yet the SWOT analysis has stood the test of time. Let us study it in detail.
SWOT Analysis or SWOT Matrix
The SWOT analysis is a mnemonic, the full form is Strengths, Weakness, Opportunities and Threats Analysis. So as it is self-evident from the name, in this analysis, the entrepreneur must analyze the internal and external environment of the business.
This will help him identify the threats looming on the business or any weakness it has. It will also help him identify the strengths of the business and any future opportunities that may present themselves.
A SWOT analysis can be done on the whole business in general or even on a project by project basis. We can even do a SWOT matrix for entrepreneurs themselves. It is a good way to check the progress of the company according to projections. Let us take a look at the four elements of a SWOT matrix.
These are the things that the business is excelling at. These are the qualities that give you an edge over your competitors, something that makes you stand apart.
It can even be an intangible thing like the reputation of the business or the entrepreneur. Maybe it is the uniqueness of the product or service. At times it is the quality of your human resources, like the excellent leadership qualities of the entrepreneur.
Once we have identified the strengths, the next logical step is to identify the weaknesses of the business. This requires some critical thinking and self-awareness on the part of the entrepreneur.
These weaknesses can be many things that the company lacks. Or the things that your competitors do better than your business. It can be a lack of adequate or quality resources like the lack of experienced staff, or the lack of financial backing. Sometimes the product is unclear, confusing or too run of the stream.
SWOT analysis also involves a thorough study of the external environment by the entrepreneurs. This allows the entrepreneur to identify the opportunities that may present themselves in the near future. Then he can work on capitalizing on these opportunities to expand his business or increase his profitability.
There are a variety of opportunities that can present themselves for an entrepreneurship business. There can be a new emerging market for your products or services. The number of competitors in your area or market could be on the decline. Your business recently had some media exposure or publicity. These are all opportunities.
The last element of a SWOT matrix is threats. No business can function without facing some threats from its external environment. This involves everything that poses a risk to the company that can hinder its growth or its survival.
Threats can involve a multitude of factors like many emerging competitors, changing rules or laws in the market, changing of customer attitude etc.
Solved Question on SWOT Analysis
Q: Press coverage is always an opportunity for the business. True or False?
Ans: This is a False statement. If the press coverage is negative or the company has had bad publicity, then this can also be a threat to the business.