Strategic Management, the SWOT Model - Essay Example

Strategic Management Strategic Management Conventionally, Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis is auseful tool for personal as well as business management (The Economist, 2009). Procedurally, it unveils one’ or business’ and helps them identify their strengths and weaknesses relative to the available opportunities and strengths. When applied at a personal level, it helps one to pursue the right career based on their talents abilities and opportunities at hand. In a business context, it is useful in creating a sustainable market niche. Specifically, the SWOT model is a structured business planning model that considers the strengths, weaknesses, opportunities and threats that may be involved in a business venture. This paper analyses the SWOT business model applied in a business context. Identification of the SWOT is important in informing about the future steps that may involve in the growth of the business. Hollensen (2015) assert that the first step for decision makers in using the SWOT model is to identify attainable objectives and if after the analysis the objective is not achievable then a different one must be chosen. When using the model of SWOT one needs to ask themselves specific questions that reveal meaningful information concerning each category of the SWOT with the aim of generating a competitive advantage after the analysis (Fox, & van der Walt 2007). In this regard, SWOT is extremely a powerful tool for strategic management that may be applied for two courses. On one hand, it uses little thought to uncover the opportunities that are well placed for the business to exploit, and by identifying the weaknesses, the management is able to eliminate threats that may otherwise have caught the business unaware. On the other hand, the model helps decision makers distinguish themselves from competitors hence enabling them to compete successfully in the business field. The SWOT analysis begins by identifying the strengths. Strengths can be defined as the internal attributes of a business that support a successful outcome of a business. In this model, strengths are considered internally and from the customers’ and other players in the market view. Strengths should be thought of in relation to the competitors of the business. For example, one should consider whether the competitors are offering high-quality products it implies that the production process should be of quality and that is a necessity in the market. In evaluating the strengths, the following questions may provide the necessary information required. Among others, the questions that need to be answered may include the advantages that your business has over competitors, what your business can do better than anyone else in the market, the specific, unique low cost resources that the business might use, what other market participants consider as your weaknesses, and the organization’s unique selling proposition often referred to as USP (Hollensen 2015). For instance, considering a start-up that intends to invest in consultancy, the following may be the potential strengths of the business. The business may be able to respond immediately for approval of higher management, may have the ability to give excellent customer care because it has a small amount of work as its strengths. Further, the business since it is a start-up will have low overheads so that it can offer a valuable service to the customers. Notably, Abdi, Azadegan-Mehr, & Ghazinoory (2011) assert that strengths are considered as internal, that is, they depend on the internal structure, organization and other features of the business. Weaknesses are considered as the internal business attributes that work against a successful outcome of a business. However, they are considered from an internal and external basis. This means that one should also consider other peoples’ perception of the business’ weaknesses that the business may not be aware of. Also, this includes an analysis of what other businesses in your field in the organization’s field are doing better. Moreover, after their identification, the decision maker has to be quick in responding to these unpleasant truths about the business (Hitt, Hoskisson, & Ireland, 2013). For instance, in the case of a consultancy start-up, it may have little reputation in the market; the staff may be so small with a shallow skill base such that it does not cover all the relevant areas of the business. In addition, the business may not have the relevant marketing experience, have a limited budget, lack a detailed plan and the customer staff might not have the required training. Other weaknesses may be cited as vulnerability to important staff being sick and leaving the business while the cash flow may present challenges in the early stages of the business. The two above discussed letters in the acronym S (strengths) and W (weaknesses) refer to how the model analyses internal factors of the business (Free-business-plans.com, 2015). In this case, internal factors mean the resources and the experience readily available to the business. Broadly, the typical areas considered in this analysis of internal factors include financial resources such as funding, sources of income and also investment opportunities, physical resources that may include location of the business, its facilities and equipment, access to specific natural resources like trademarks, copyrights and patents, and the current processes involved in the business which may involve software systems, departmental hierarchies and employee programs. Most importantly, organizations when listing strengths and weaknesses need to take caution and be genuine to them. The performance of a SWOT is dependent on a genuine definition and true listing of these attributes. Therefore, Hitt, Hoskisson and Ireland (2013) warn that sugarcoating or glazing inherent weaknesses may lead to unpredicted outcome. Again, businesses should also consider other elements of the business such as the organization’s culture, its image, operational efficiency, potential operational efficiency, and the roles played by key staff. The other two letters in the acronym, O (opportunities) and (Threats) analyze the external factors that relate to the business. Actually, external factors influence any individual, company or organization in the business world (Chai, Liu & Ngai 2013). The emphasize of the SWOT analysis is to identify those external factors that are connected to the organization either directly or indirectly and, in this case, related to either the opportunities or threats. The SWOT model requires that the decision maker takes note and documents any of the external factors related to the business either as an opportunity or as a threat. Typically, the external factors related to any business may be the market trends like the shifts in audience needs, new technologies and products in the market, economic trends that include international, national and local financial trends. Also, funding in some industries like donations and the legislature, demographics like the target market age, gender, race and culture, and the relationships with partners and suppliers. Consideration of the political environment regarding environmental and economic regulations should include in this part of the analysis (Hitt, Hoskisson, & Ireland, 2013). This way, the SWOT model is able to advice on the effective marketing strategy, identifying market opportunities, analyzing the pricing structure in the industry that may be a future threat to the business. According to The Economist (2009), opportunities refer to external factors that the organization can capitalize on its advantage in the SWOT model. The questions regarding getting information on the opportunities may be looking for the good opportunities that can be spotted and interesting trends taking place in the market relative to the organization. Useful opportunities for the organization may be in the changes in technology and the markets either on the broad or narrow scale, changes in government policy and regulation that are related to the organization, local events and importantly from the changes in social patterns, lifestyle and the population profiles. In the consultancy start-up identified, potential opportunities may include that the organization service may surprise, users may respond positively to the new organization in the market, the business sector within which the startup operates may be expanding, local government may be in a process of encouraging local businesses, and for some reasons like the high costs of change, competitors may not be positioned well so as to adopt changes in the technology. Pahl and Richter (2009) state that the last acronym T (Threats) in the model refers to external factors that are likely to jeopardise a project. To get the specific threats related to this business the organization should think of the obstacles that it faces, that the competitors are doing, changes in the specifications, quality of the product or service regarding to what the organization does, changes in technology that may threaten the position of the firm, bad debts problems and how any of the weaknesses identified threaten the organization. Therefore, the threats may be considered as the elements in the environment that may cause troubles in the organization or its projects. In regards to decision-making, the profitable approach when looking for opportunities is looking at the strengths and considering they may open any opportunities. As an alternative, the decision maker may also look at the weaknesses and consider how they can create opportunities if overcame. Conversely, like in the case of internal factors, when looking at the external factors, it is important that none of the relative external factors are overlooked (Böhm, 2009). The application of this model often uses matching and converting. Matching is applied in deciding on the competitive advantage and it involves matching strengths against the opportunities. On the other hand, converting is applied by converting weaknesses or threats into strengths or opportunities and those negative factors that cannot be converted are minimised if unavoidable. Despite its seemingly straightforward application and prediction of a positive outcome, the SWOT model may also fail for various reasons. One reason for this may be that it is highly dependent on hard facts (Mueller 2010).. The collection, analysis and interpretation of the facts may be time-consuming and often many businesses skip some parts so that they may save on costs. Further, the interpretation of the results is based on the skills of the decision maker which rely on their experience in the field. In this regard, the collection of inadequate facts may lead to inconclusive results or incorrect predictions. Moreover, the level of experience of the decision maker matters as a more experience decision maker may draw a more accurate prediction. To avoid this mistake, some businesses outsource the services of data and information collection especially concerning the external factors while also using the opinions of experienced experts at times. Another reason why the SWOT may fail, as Hill, Jones, and Schilling (2014) observe, is because it involves long lists of the factors in consideration. Further, many of them are immeasurable and depend on subjective judgments of the decision maker since they are qualitative in nature. Also, Gao and Peng (2011) add that there is the issue of prioritization in which the decision maker may not be able to rank the impacts of different factors that may affect the business depending on their potential weights. In addition, some of the factors often in the same section may conflict that they cannot be implemented simultaneously. These considerations imply that the organization cannot implement the SWOT model exactly as it predicts. In most cases, the facts employed in the SWOT analysis rely on secondary data. This information and especially one provided by the government, in many cases is compiled for some certain objectives and often those who provide it may alter to suit certain political needs. Wrong information certainly will lead to wrong conclusions as well as wrong predictions. For instance, in many cases countries alter information regarding the economic growth so as to attract investors. When a business is invested based on this factor of growth of the economy will ultimately not survive if the growth is not real. Therefore, this failure may be attributed to the analysis model while in the real sense the business failed because of wrong information (Hitt, Hoskisson, & Ireland, 2013). In addition, there are failures in the method resulting from definitions of the factors. As such, Dibb and Simkin (1995) observe that some decision makers may be hard positioned defining what factors to include into what specific category. Furthermore, it is from the definition that the factors are categorised as strengths, weaknesses, opportunities or threats. Henry (2008) agree that wrong classification will also lead to incorrect classifications. Decisions based on this model that has faults in the classification of the factors will also not post a positive outcome as expected. The SWOT model has been used commonly by consulting firms and in the private sector (Hill, Jones, & Schilling, 2014). Basically, the SWOT model helps in bringing out the reality of an organization’s ideas. It most importantly gives the decision maker a list of action points to follow. Despite the listed drawbacks, Haberberg and Rieple (2007) suggest that the SWOT model offers a good foundation strategy for a business proposition, defines the position of the organization well and enlightens one on the specific ideas worth persuading. In conclusion, the SWOT model is not used as a standalone tool, such that it replaces all the other decision-making tools. Contrary, it is used as a supplement to other means like brainstorming and business planning. The defects of the model having been identified should be avoided so that the results of the analysis may be more accurate. The model is an important part of any company’s strategic planning process and accurately connects the objectives of the business and the strategies and converts them into actionable tactics that can be implemented by employees. References List Abdi, M., Azadegan-Mehr, M., & Ghazinoory, S. (2011). SWOT methodology: a state-of-the-art review for the past, a framework for the future. Journal of Business Economics and Management, (1), 24-48. Böhm, A. (2009). The SWOT Analysis. München, GRIN Verlag. Chai, J., Liu, J. N., & Ngai, E. W. (2013). Application of decision-making techniques in supplier selection: A systematic review of literature. Expert Systems with Applications, 40(10), 3872-3885. Dibb, S., & Simkin, L. (1995). The market segmentation workbook: target marketing for marketing managers. London, Routledge. Fox, W., & van der Walt, G. (2007). A guide to project management. Cape Town, Juta. Free-business-plans.com, (2015). SWOT Analysis. [online] Gao, C. Y., & Peng, D. H. (2011). 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