Business Swot Analysis

A SWOT analysis is used to identify the strengths, weaknesses, opportunities and threats that aid a business or organisation in their strategic planning and decision making processes. It is necessary for a business to devise a SWOT analysis in order to optimise its success rate by planning for high-quality future performance.

Albert S. Humphrey, a renowned business and management consultant, is credited by some as the creator of the SWOT analysis. During the 1960s’ Humphrey worked at the Stanford Research Institute and collected research from the Fortune 500 companies in the United States. His findings led to the development of the Team Action Model (TAM) which is a model which encourages cooperation and collaboration between groups of people

This part of the analysis encompasses a business’ resources and experiences. A comprehensive look at factors such as physical and human resources is critical in an analysis. For example, a business’ location can either be a strength or weakness depending on the amount of public exposure it provides. Human resources, such as employees, can either increase or decrease profits as well as improve or tarnish the business’ image. It is therefore vital that the business provides for employee training in their planning. Financial resources should also be taken into consideration when analysing strengths and weaknesses. A business should allocate its funds in a manner that will maximise its profits, while still being socially responsible. It is also imperative that businesses have strict internal and external control measures to minimise the misuse of finances. Past experiences should also be taken into consideration when analysing internal factors. Applications of business concepts that have succeeded in the past can be expanded on and improved in order to act as a strength in the current business plan. Past ventures that have failed can be analysed in order to detect a business’ weaknesses and thus improve on it so that a reoccurrence or expansion of the failure can be prevented (Renault,

The purpose of a SWOT analysis is to identify and simplify complex factors that will have an influence on the business. The analysis therefore has the tendency to oversimplify problems by not providing an in depth explanation of various factors affecting the business. For example the opportunity presented in the SWOT analysis to retrench a few employees and outsource a business’ IT department will impact positively in the short run as it will improve profitability, however in the long run it may pose a great stress on the business’ remaining employees and create a negative working atmosphere, thus negatively affecting employee efficiency (Firth, 2015). A SWOT analysis also creates limitations of various degrees depending on the person who drew up the analysis. A manager, for example, may have different views of which elements form part of strengths, weaknesses, opportunities and threats compared to a marketer, sales representative, accountant or shareholder. A SWOT analysis is also subject to various interpretations which could create different opinions on the actions that need to follow the analysis. The analysis also fails to provide exact, key actions that managers or directors may need to take in order to act in the best interest of the business, but rather acts as a framework or guideline for managers. Legislations and market shifts may