SWOT Analysis Definition – Example and Importance for Business

swot analysis definition

SWOT Analysis Definition with Example

SWOT Analysis Definition – “An analysis of a company’s strengths, weaknesses, opportunities, and threats”.

In simple words it is a process of identifying the strength and weakness of the company. At the same time, it also identifies the potential threats and opportunities for the organisation. Main purpose of SWOT is to develop a business strategy keeping in mind all these four things. It is very helpful for the company to fulfill its vision.

SWOT is an abbreviation which stands for strength, weakness, opportunities and threats. Strength and weakness are internal factors of an organisation such as patents, copyrights, workforce, location, etc. Some efforts are required to control them.  However, opportunities and threats are external such as fluctuations in prices, competitors. They are beyond your control. Whether you like them or not, you cannot control them.

When to do SWOT Analysis?

Existing organisation – These can use SWOT anytime in order to assess the dynamic environment. This results in tackling the changes effectively and efficiently. Organisation should try that they at least conduct it either half yearly or annually. As it plays an important role in strategic planning.

New Business – A new organisation must go for SWOT while doing planning for business. To do a correct analysis can make your business stand alone among various companies.

SWOT Analysis Example

Let’s do the SWOT of Pepsico. It is second biggest firm in the global food and beverages. Let’s have a look over its S – strength, W – weakness, O – opportunities, T – Threats

StrengthWeakness
OpportunitiesThreats

PepsiCo’s Strength

  • Very strong brand images
  • Extensive global distribution network
  • Extensive global production network
  • A very broad product mix

PepsiCo Weakness

  • The business portfolio is limited.
  • Doesn’t market as a healthy drink for health conscious customers.
  • Penetration outside America is very low

Opportunities for PepsiCo

  • Increase market share in developing countries.
  • diversification of business.

Threats

  • High competition
  • People are becoming more health conscious

In order to tap the opportunities, it become must for the company to diversify its business, increase the penetration in the developing countries and add some health factor to the drink.

Related Financial Terms

Importance of SWOT Analysis

  1. It helps in identifying the strength of the business so that these can be utilized for growing business.
  2. Analysis the weak points and allows the companies to work on them.
  3. Identifies the opportunities so that business can grow and achieve its vision.
  4. Tells about the potential threats that can act as an obstacle in the growth of the organization.
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