SWOT Analysis as a Strategic Management Tool - Essay Example

The next section will tackle SWOT analysis' advantages and limitations. The paper will conclude with its findings. SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is one of the most widely utilized strategic management tools in assessing the position of a business entity. This analysis is an integration of the results of other tools like the PESTEL analysis, industry analysis, and internal analysis. The company's strengths and weaknesses are derived from internal analysis while the PESTEL and industry analyses provide the required information to ascertain the opportunities and threats specific to the company.

According to Thomson (2004), a company's strength is "something a company is good at doing or a characteristic that gives it enhanced competitiveness." A strength can take several forms like a skill or important expertise, valuable physical assets valuable human assets, valuable intangible assets, competitive capabilities, an achievement or attribute that puts the company in a position of market advantage, and alliances or cooperative ventures. Meanwhile, a weakness denotes to a something that a company lacks or is not good at doing relative to its competitors and puts the company in a disadvantage. . tity: "deficiencies in competitively important skills or expertise or intellectual capital of one kind or another; lack of competitively important physical, organizational or intangible assets; and missing or weak competitive capabilities in key areas" (Thomson 2002).

Opportunities are essential external factors, which can propel the business entity into higher profitability. However, distinction should be made in order to determine whether an opportunity is an industry or company opportunity. While company opportunity is an opportunity specific to a business institution, industry opportunity needs to be thoroughly evaluated in order to assess if a company has the required resources to take advantage of the opportunity. Threats are external factors which causes threats to a business entity's profitability and competitive well-being.

An Application The following table shows the SWOT analysis as applied to the large computer manufacturer Dell, Inc.StrengthsWeaknesseslarge market sharestrong brand equityno inventory buildupcost efficiencydirect to customer business modelcustomizationtotal command of supply chainstrategic alliance with suppliersno proprietary technologyhigh dependence on component suppliersOpportunitiesThreatsstrong potential markets in Europe, China , and Indialow costs and advanced technologygrowth in business, education, and government marketsmore intense rivalrycurrency fluctuationshigh customer bargaining powerSWOT Analysis: A CritiqueSWOT analysis is indeed a useful tool in determining the internal capability and incapability and the external forces that affects the operation and profitability of a business organization.

As shown above, SWOT analysis is very useful in assessing the strengths and weaknesses of Dell,