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SWOT – Strengths, Weaknesses, Opportunities and Threats

Swot analyse

Strengths, Weaknesses, Opportunities and Threats

SWOT is short for Strengths, Weaknesses, Opportunities and Threats.

By definition, Strengths and Weaknesses are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities and Threats are regarded to be external factors of which you basically have no control.

SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment.

Its primary function is to discover the strategies that will create a company specific business model which will best position an organization’s resources and capabilities to the requirements of the environment in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and limitations and the likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in predicting the changing trends and also helps in including them in the decision making process of the company.

An overview of the factors

Strengths – Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which success can be made and maintained. Strengths can be either corporate or incorporate. These are what you are well-versed in or what you good at, the traits and qualities your employees possess and the distinct features that give your organization its life. Strengths are the positive aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, and so forth.

Weaknesses – Weaknesses are the qualities that stand in the way of accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet. Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and eliminated. For instance – to overcome obsolete machinery, new machinery can be purchased. Other examples of organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc.

Opportunities – Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organizations can gain competitive advantage by making use of opportunities. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients and getting desired results is a difficult task. Opportunities may arise from market, competition, industry/government and technology. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter telecom sector and compete with existing firms for revenue.

Threats – Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. They compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are – unrest among employees, changing technology, increased competition leading to excess capacity, price wars and reducing industry profits.

The benefits of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a subjective element. It is best when used as a guide, and not as a solution. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats. They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner      

It is a source of information for strategic planning.

Builds organization’s strengths.

Reverse its weaknesses.

Maximize its response to opportunities.

Overcome organization’s threats.

It helps in identifying core competencies of the firm.

It helps in setting of objectives for strategic planning.

It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive environment in which the firm operates.

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very subjective as there is great degree of uncertainty in market. SWOT Analysis does stress upon the significance of these four aspects, but it does not tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management.

Price increase

Raw materials

Government legislation

Economic environment

Searching a new market for the product which is not having overseas market due to import restrictions

Internal limitations might include

Insufficient research and development facilities

Faulty products due to poor quality control

Poor industrial relations

Lack of skilled and efficient labor

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Due Diligence – What it means and what it can do for you!

Due Diligence

You may have heard about Due Diligence when a business is being sold and wondered what it meant. If you want to sell or buy a business of your own you’ll definitely need to know just what due diligence means and how it’s used.

In its simplest form due diligence is a comprehensive process that investigates a business to assure the intending purchaser that all facts and financial figures are as stated by the vendor and that there are no unpleasant and unwanted surprises that have been concealed.

This process of due diligence is usually conducted by the purchaser’s accountant and legal advisors, who may also call in specialists for matters relating to stock or capital equipment, among other possible areas under examination.

The sale of a retailer, for example, might require an expert in that particular line of goods to gain an accurate valuation of the stock in the business. The purchaser of a manufacturing business would want to be sure that the equipment is in good condition and has been suitably maintained.

Due diligence is a part of every business sale or purchase, regardless of the size of the enterprise. The more complex the business is, the longer the due diligence is likely to take, but today’s purchasers shouldn’t even contemplate buying a business until due diligence has been completed.

Is this the Best Company you can Purchase?

Due diligence is conducted to answer a number of questions, including whether the timing is appropriate for the purchaser to buy and why the vendor is selling the business. Some businesses have peaked and are starting to slide which might make them affordable but also means they aren’t capable of improvement and represent bad investments for purchasers.

Due diligence examines the market for the products sold by the companyand determines their positions in the life-cycle of each product. It looks at the marketplace to uncover signs of saturation, or to locate opportunities the new owner can exploit.

Every business for sale comes with claims of turnover, expenses and profitability, but how can the purchaser know that these are accurate representations? Due diligence inspects the books of the business including tax records for at least the previous three years to validate or challenge claims by the vendor.

Due diligence will also look for details of how capital equipment was acquired to ensure that the ownership status is as claimed and no outstanding loans or charges over the equipment exist.

Who Buys from the Business?

Many businesses are highly dependent on a small number of large customers. The departure of just one of these can be a serious problem, and the purchaser needs to be certain that existing customers will stay after the sale of the business.

Due diligence will examine all existing contracts and sales agreements, and if necessary introduce new agreements to carry customers over to the new owner. It will also verify claimed purchase levels of key customers and evaluate their growth potential if required.

The Condition of the Premises

The acquisition of most businesses involves taking over premises, usually ones that have been leased by the former owner. The due diligence process looks at the condition of the premises so that the purchaser isn’t stuck with expensive repairs, and investigates the terms of the lease to ensure it’s sufficiently long and the rental amount is appropriate.

Another critical factor that relates to the premises is its location. Is it in an area that’s affected by high crime rates or high volumes of heavy transport? Does it permit parking for employees who drive to work, and can customers access the premises easily if they want to?

Compliance with all Applicable Legislation

Every business requires a number of permits and licenses to operate; issuing authorities can range from local governments to the State and Federal Government. Lack of licensing may lead to the condemnation of the firm or at least to expensive legal actions and possible lawsuits.

Due diligence will identify all those permits required by the business being offered for sale and ascertain whether the company is in full compliance. It will also examine proposed or pending legislation to ensure that no changes to the regulatory environment will affect the business.

Customers

Customers and employees are vital to most businesses. Due diligence examines the staffing of the enterprise and whether the people now in the business will remain there under a new owner. It also considers any need for redundancies of existing staff and the estimated cost to the business.

The process of due diligence can be extended to the preparation of contracts and workplace agreements for staff to keep them with the business after the transfer of ownership.

One of the most important areas of due diligence is to look at the importance of the previous owner to the operation of the business. Is that person essential to the firm’s success? Will the new owner’s skills be sufficient to continue trading as before? Some businesses are so technology dependent that when the former owner departs they will be unable to survive.

Intellectual Properties

A businesses’ IP can include patents, trademarks, copyrighted materials and even customer lists and sales records. In most transfers of ownership the new owner acquires the rights to this IP and it remains with the business.

Due diligence will establish the validity of all intellectual property that is included in the sale and ensure that it is transferred along with the other assets being bought by the purchaser.

The Transition Period

Due diligence will establish whether the outgoing owner will remain with the business for a period of time to assist the new owner, and determine a length of time in which the previous owner is ‘locked out’ of competition with their former firm.

It can also set a period of time for the incoming owner to run the business on a ‘trial’ basis while all the financials can be checked out and the outgoing owner introduces customers to the new owner.

Due diligence is an essential yet flexible process that every purchaser needs to understand and incorporate into the acquisition of a business. It can take place after an offer has been made and accepted, or it can be used to help the purchaser determine the most appropriate price to pay for the business.

About Marketing in a world of Marketers

A bachelor degree in marketing is probably one of the oddest degrees you’re going to earn. Marketing is one of those things that takes quite a few skills and yet doesn’t really fall into any one category. You really have to be able to do quite a few things very well. That’s why the curriculum for a marketing degree is quite diverse.

In order to get your bachelor degree in marketing you have to take your main marketing courses, which in most colleges are simply called marketing 1 through marketing 4. Each course usually takes two semesters. The marketing courses themselves usually teach the principals of advertising. They’ll walk you through developing a product and then developing an advertising campaign for that product. This usually comes in year four, where you will also have to do a major research paper on an established company and how they market their products. The analysis gets pretty in depth.

But there is more to a bachelor degree in marketing than just taking marketing courses. As I said, many skills are needed to be a good marketer. You also need to be in possession of some pretty good writing skills. So a bachelor degree in marketing will usually require you to take quite a few English related courses including creative writing. This is absolutely critical if you’re going to be a good marketer.

Marketing also requires that a person have a pretty good business background as marketing is a good part of business. So, a bachelor degree in marketing will usually also require you to take several basic courses in business such as economics and finance. You might even take some business management courses.

As most students take 32 courses in the course of their four years in college, the above alone only takes up a small fraction of the curriculum. You have to figure four marketing 8 marketing courses, 4 business courses and 4 English courses. This still leaves the average marketing major with 16 courses left to take in his four-year program. How does he fill these in?

Well, as with most bachelor programs, there are a number of “elective” courses that you can take. In the case of getting your bachelor degree in marketing, you’d probably want to take a course or two in psychology. Why? It’s probably a good idea to get a basic understanding of how people behave if you’re going to try to come up with a marketing plan or advertising campaign that is going to appeal to most people.

It may not be a bad idea also to take some courses in basic math. Why? Well, you’re going to have to figure out advertising budgets and may need to be able to do some simple percentages. If you’ve forgotten this stuff from high school, you may want at least to take a refresher course. A marketer who can’t add is not a good thing to be.

After you finally do get your bachelor degree in marketing, there are a world of opportunities open to the creative mind. Get ready for a very exciting life.