The company gets relevant information about the current market place they’re in
through the situational analyses. The gathered data is then used to form the
SWOT-analysis, which stands for strengths, weaknesses, opportunities and
threats. It is one of the first stages of planning and helps the company to focus on
key issues and that why it is particularly helpful in identifying areas for
development. (Middleton et al. 2009: 209)
The SWOT- analysis is a combination of both the internal and external factors
that are dealt with in the situation analyses. Strengths are usually accounted for as
internal factors and are the company’s resources and capabilities that can be used
as a basis for competitive advantage. Company’s strength may for example be
strong brand names, good reputation among customers and favorable access to
distribution networks. The absence of certain strengths can be viewed as
weaknesses, which are also accounted for as internal factors. Weaknesses can
range from high cost structure to poor customer contact staff. Not all weaknesses
can be removed but once identified the company should minimize their effects or
remove them altogether where possible. Both strengths and weaknesses are often
matters of perception, which makes them sometimes hard to identify. Consumer
research is a good way to learn more about these internal factors so customer
feedback should always be read and dealt with thoroughly. (Middelton et al. 2009:
209-210)
Opportunities are usually accounted to be external factors researching the external
environment of the company and may reveal new opportunities for development.
For example there could be new technology coming up that could be useful for the
company or maybe some competitor is ineffective or has gone out of business and
has created an opportunity for the company to get some of their customers. A
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company should always be searching for ways to develop and think about the
ways to do so.
Changes in the external environment can also present threats to the company. The
changes can include for example a new competitor in the market and more
increasingly, as have been seen during the past years; international terrorism.
Whatever the threats are it is important for the company to be aware of the threats
for when something happens in the external environment that has an influence to
the company, it is prepared for it.
SWOT analysis should be systematic, wide-ranging and creative and as such it
has been proven to be invariably productive. The analysis should not be done by
only one manager of the company but one should bring other managers as well as
the staff into the process. This way the maximum amount of expertise and
perception is drawn out. (Middleton et al.2009: 209-212)