Exotech| In the business world, you will often hear the term SWOT analysis (strengths, weaknesses, opportunities, and threats). Carrying out this analysis is part of evaluation efforts within the company environment. However, do you really know what SWOT analysis means and its function? If not, see the article below.
Understanding SWOT Analysis
SWOT analysis is an analysis technique that has been developing for a very long time. This technique was introduced by Albert Humphrey between the 1960s and 1970s. At that time, Humphrey utilized data from the world's leading companies that were part of the Fortune 500.
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In other words, SWOT analysis is an analytical technique that is useful in carrying out the process of evaluating strengths, weaknesses, opportunities and threats in a company, organization or particular project. Its implementation provides many benefits, including analyzing company growth, assessing performance, and so on.
Implementing a SWOT Analysis
1. Strengths
The first element is the strength or advantages of the project or business you are running. This strength can take various forms, either in the form of assets or invisible attributes. Examples of strengths include HR assets, technology assets, company brand, and so on.
2. Weaknesses
Next is the element of weakness. Elements included in weaknesses are various factors that risk hampering business or project activities. Examples of weaknesses are limited budget, minimal skilled human resources, and so on.
3. Opportunities
The opportunities element is the opportunities that the company has. Opportunity factors in SWOT analysis come from the environment outside the company which you can then use to increase business competitiveness.
4. Threats
The final element is threats. In a SWOT analysis, threats refer to various aspects that could pose a risk to a company's business activities or project success. Examples of threats include the existence of new laws and regulations, the emergence of new competitors, and so on.
Factors in SWOT Analysis
In understanding what is meant by SWOT analysis, you also need to know the factors that influence it. There are 2 categories of factors that influence the SWOT analysis, namely internal and external factors.
1. Internal Factors
Internal factors are aspects of SWOT analysis that come from within the organization or company. There are 2 internal factors, namely strengths and weaknesses. To get a clear picture of the internal factors of a company or organization, there are several efforts you can take, namely:
- Analysis of strengths and weaknesses : You can carry out an analysis by first being open and honest. That way, you will get the right assessment and understand the strengths and weaknesses of the company or organization.
- Compile a list of strengths and weaknesses : You can also find out your strengths and weaknesses by compiling a list. In the process of compiling the list, you can think about aspects that add value to the company and things that add negative value.
- Use third parties : If you have difficulty knowing your weaknesses and strengths, it's a good idea to use advice from a third party. Through this effort, you can obtain an objective assessment regarding the strengths and weaknesses of the business.
- Pay attention to customer complaints : The next way is to listen to the voices of customers. A good company will have good communication channels with consumers. From there, you will get a lot of input and criticism which can be used as an effort to improve service quality.
2. External Factors
In contrast to internal factors, external factors are elements in a SWOT analysis that originate from the environment outside the organization or company. In SWOT analysis, external factors include opportunities and threats.
Companies can make various efforts to identify opportunities and threats, including:
- Market research : Through this effort, you can find out more detailed market information. You will know the opportunities that the company can take advantage of. At the same time, you can also get information regarding competitors.
- Pay attention to market trends : There is also a solution to find out opportunities and threats by observing market trends. From these observations, you can find out opportunities that may arise and can be exploited. Apart from that, you can also get information regarding threats and efforts to anticipate them.
- The emergence of new technology.
Technological advancements have a major impact on the market. Therefore, entrepreneurs can consider it both an opportunity and a threat to business.
- Change in economic situation : Economic situations on a broad scale can give rise to opportunities and threats in business. It is possible that changes in the economic situation will have a direct impact on consumer behavior.
- Changes in consumer preferences : There are times when consumers will experience changes in preferences when making purchases. This situation can occur when consumers encounter products that they consider to be of better quality and priced according to their capabilities.
Example of SWOT Analysis
To better understand what is meant by SWOT analysis, here are examples. Botanical Bounty is a plantation business that has various types of plant products. This company has been operating for two years and has the status of a family business. The initial establishment came from the hobby of a business owner who had knowledge related to the world of plantations.
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The company carried out a SWOT analysis with the following results:
- Strengths: There are 3 main advantages that Botanical Bounty has, namely consistency in producing quality products, abundant production quantities, and experienced business owners not only in the plantation sector, but also in business aspects.
- Weaknesses: Botanical Bounty has 2 crucial weaknesses. The first is limited funds, and the owner even has to borrow debt from the bank for business operations in the first year. Second, Botanical Bounty does not yet have a good reputation to compete in the market.
- Opportunities: Consumers have a tendency to be loyal to certain vendors. In addition, the market share for plantation products continues to increase.
- Threats: The main threat that Botanical Bounty must face is weather. Moreover, weather changes occur erratically. On the other hand, there are also threats in the form of pests.
From the results of this analysis, Botanical Bounty can formulate a strategy for developing its business as follows:
- Customer testimonials : Botanical Bounty needs to collect testimonials from customers. The hope is that these testimonials can help the company build its brand in the eyes of consumers.
- Sales channels : Companies also need to build strong sales channels with supplement companies. This effort is important so that Botanical Bounty can establish positive relationships with these companies.
That is a complete explanation regarding what is meant by SWOT analysis. At this point, you will know that SWOT has an important role in efforts to develop a business. Next, you can make various efforts to encourage this development.