Assignment # 02
SWOT Analysis
By
Sohail Abbas
Sp11-BEC-081
Section (A)
Instructor
Dr. Nazir A. Hawary
Course Title
Project Planning and Management
Dated:
24th September 2014
COMSATS Institute of Information Technology Lahore Department of chemical engineering
SWOT Analysis
1. History:
In the 1960’s and 70’s, Albert Humphrey is said to have developed this strategic planning tool using data from the top companies in America at the time. Its basic organizing principles have remained largely unchanged in the field of strategic management. It is a systematic framework which helps managers to develop their business strategies by appraising their internal and external determinants of their organization’s performance [1].
2. Definition of SWOT:
A SWOT Analysis is a business analysis method that organization can perform for each of its products, services and markets when deciding on the best approach to achieve future growth. A SWOT Analysis is a tool which permits users to look at the direction a company or organization may wish to move towards in the future. SWOT Analysis looks at the strengths, weaknesses, opportunities and threats that are relevant to an organization in a new venture. A SWOT Analysis is a useful tool, which in conjunction with others can help make informed decisions. By specifying clear objectives and identifying internal and external factors that are either helpful or not, a short and simple SWOT analysis is a useful resource which may be incorporated into an organizations strategic planning model [2].
i. Strengths- Internal attributes those are helpful to the organization to achieving its objective. ii. Weaknesses – Internal attributes that are harmful to the organization to achieving its objective. iii. Opportunities – External factors that help the organization achieve its objective. iv. Threats - External factors that are harmful to the organization to achieving its objective.
After identifying the SWOT’s, identification of the factors and their interdependence helps clarify the steps required to achieve the ending objectives.
3. Internal and External Factors:[3]
The SWOT analysis framework involves analyzing the strengths (S) and weaknesses (W) of the business’s internal factors and the opportunities (O) and threats (T) of its external factors of performance as shown in fig 1. Through this analysis “strengths and weaknesses within an organization can be matched with the opportunities and threats operating in the environment so that an effective strategy can be formulated”. Therefore an organization can derive an effective strategy by taking advantage of its opportunities by using its strengths and neutralize its threats by minimizing the impact of its weaknesses. Moreover, SWOT analysis can be applied to both a whole company as well as a specific project in order to identify new company strategies and appraise project feasibility.
Fig 1
3.1 Internal Analysis:
The internal analysis of organization should contain its culture, Expertise, resources and unique qualities within the market place. The strengths and weaknesses of a company relate to its internal elements such as resources, operational programs and departments such as sales, marketing and distribution. ‘Strength’ is something that has positive implication. It adds value or offers the organization a competitive advantage. More specifically, a strength is an advantageous skill or competency that a business or project possesses that allows it to create competitive advantages, such as its strong research and development capabilities. It includes tangible assets such as available capital, equipment, credit, established and loyal customers, copyrighted materials, patents, and other valuable resources. A weakness on the other hand is a strategic disadvantage such as a skill that the business or project lacks which limits it and creates potential risks in negative economic conditions. Weaknesses are those things that detract from the value of your offering or place you at disadvantage when compared with your competitors. The more accurately you identify your weaknesses, the more valuable the SWOT analysis will be.
3.2 External Analysis:
External factors include the environment your organization operates in, its market, eco-system and all of the third parties involved. An opportunity is a desirable condition which can be exploited to consolidate and strengthen a strategic position, such as growing demand for a trendy new product which it could consider selling. A threat on the other hand, is a condition that creates uncertainties which could potentially damage an organization’s performance and market share. Threats include the introduction of new competing products or services, foreign competition, technological advancements, and new regulations. Therefore, the company needs to develop strategies to overcome these threats in order to prevent the loss of its market share. It must be noted, however, that opportunities and threats exist in the environment and therefore are often beyond the control of the organization but they do offer suggestions for strategic direction. The SWOT analysis, as a result, demands a great deal of research into an organization’s present and future position. Its results provide a useful source of information from which an organization can go on to develop policies and practices which allow it to “build upon its strengths, minimize its weaknesses, seize its opportunities” and make contingency plans or measures to cancel or reduce threats.
4. Guidelines:
Before carrying out a SWOT analysis, consider the following guidelines [4]
i. Be realistic about strengths and weaknesses. When performing a SWOT analysis on your business, be neither modest nor overly optimistic. ii. Consider answers from the company’s point of view and from the point of view of customers, vendors, distributors, and others who do business with them. iii. Distinguish between where the organization is today and where it could be in the future. iv. Note that the SWOT is subjective. No two people will come up with the same SWOT.
5. Example:
Fauji Fertilizer Company brief history
FFC is a leading fertilizer production group in Pakistan, with over 60 % market share in the sector. Incorporated in 1978 as a private limited company, it is a joint venture between Fauji Foundation and Haldor Topsoe of Denmark. At present the Fauji foundation has three fertilizer plants, two at Goth Macchi and third at Mirpur Mathelo. Another plant is at Karachi named FFBL (formerly FFC-Jordan Fertilizer Company Limited) in which Fauji fertilizer has got the maximum share of 50.2%.
SWOT Analysis of Fauji Fertilizer Company
5.1 Strengths:
i. The market leader in the fertilizer sector. ii. Enjoys a very good reputation among the general public as well as the corporate sector. iii. High quality products. iv. Friendly atmosphere in the organization which leads to motivated employees and higher productivity.
5.2 Weaknesses:
i. Armed forces management. The ex-army officers lack business acumen and could be found wanting if Engro launches a hostile marketing offensive. ii. Lack of marketing. FFC products are rarely seen on satellite TV channels.
5.3 Opportunities:
i. Further increase their production capacity. ii. Introduce even better quality products. iii. Expand into neighboring countries like Afghanistan and Iran. iv. In the absence of little competition, FFC can further increase its market share.
5.4 Threats:
i. Engro Fertilizer is the biggest threat to Fauji Fertilizer due to its rapidly increasing market share and sound financial backing. ii. Adverse agricultural policies by the government could also affect FFC.
References:
1. Humphrey, Albert (December 2005). "SWOT Analysis for Management Consulting". SRI Alumni Newsletter (SRI International). 2. Chapman, A. (2007). SWOT analysis. Retrieved October 10, 2007 3. JRC European Commission. (2007). SWOT (strengths weaknesses opportunities and threats) analysis. Retrieved October 19, 2007 4. Cadle, J, Paul, D. and turner, P.(2010). Business Analysis Techniques, 72 Essential tools for Success, BCS The Chartered Institute for IT.