A SWOT analysis is a tool to identify the strengths, weaknesses, opportunities and threats involved in a business. Strengths mean characteristics of a business in advantage over others, while weaknesses are disadvantages relative to others. Opportunities mean elements that a business can exploit for its development, while threats are trouble will be face to. SWOT is to carry out the environment analysis and separate information into internal and external factors. Then, it determines whether they are favorable and unfavorable to achieve the objective so as to help an organization enhance advantages and minimize disadvantages. A SWOT analysis needs to be conducted in a proper and realistic procedure to get the complete and objective results. The participants of this analysis should be a group of people with different perspectives so that they can contribute different valid viewpoints. They can be various stakeholders of a company, such as shareholders, managers, employees, and even customers.
It is typically conducted using a SWOT matrix and holds a brainstorming session to identify the factors and bullets them with priority in each of the four categories. Participants must be realistic about the environment analysis of target organization and try to keep the analysis compact. There are two most important part of a SWOT analysis, to help a business reduce risk and improve performance (Markgraf 2013). Firstly, this analysis can identify critical threats coupled with internal weaknesses that may put a company in a trouble. It improves the viability of a business about changing environment and highlights the most serious issues. For example, a new export policy issued by government could be a serious threat to the export-led industry. They should reduce resources allocated in export business and shift focus to domestic markets.
Laurence (2013), a judicious recognition of global realities, states that to adapt to the appreciation of its currency, China’s farsighted plan is to have switched the economy to a domestic consumption-driven model. The external threats require companies to adjust their business plan to adapt to new circumstances. Secondly, a SWOT analysis can indicate actions to improve the performance of a business. Taking advantage of an opportunity from a position of strength helps ensure the success of the corresponding venture. If a company has a capital advantage and the other one has technological advantage, they can integrate firstly and then dominate other competitors.
For example, Peak the top two Chinese video-sharing websites, Youku and Tudou, jointly announced that the two companies have signed a definitive agreement to integrate into Youku Tudou Inc. on March 12th, 2012 (Peak 2012). This Merge helps them to strengthen competition power in the online video market with 35 percent share. To achieve the objective, a business has to find connection between its strengths and external opportunities. A SWOT analysis has become a popular method to help a business to identify its strengths, weaknesses, opportunities and threats. People should conduct this analysis in a proper way to appraise critical internal and external factors so that SWOT will be valuable to reduce risk and improve performance of a business.
Markgraf, B. (2013). The Two Most Important Parts of SWOT Analysis. Chron. Retrieved March 17, 2015, from http://smallbusiness.chron.com/two-important-parts-swot-analysis-61546.html
Neville, L. (2013). Cover: A New Economic Model For China. Global Finance. Retrieved March 18, 2015, from https://www.gfmag.com/magazine/january-2013/cover-a-new-economic-model-for-china
Peak, K. (2012). Chinese online video companies Youku, Tudou merge. Vatornews. Retrieved March 17, 2015, from http://vator.tv/news/2012-03-12-chinese-online-video-companies-youku-tudou-merge
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