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SWOT Analysis: Internal and External Environment

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SWOT Analysis: Internal and External Environment

SWOT Analysis: Internal and External Environment

SWOT analysis is a method by which the strengths and weaknesses of an enterprise (internal affairs) can be identified, and the possible opportunities and threats created by the external environment can be assessed. The name “SWOT” is an acronym of the initial letters of the words strengths, weaknesses, opportunities and threats, thus representing the four areas of interest for a business.

Fortunately, owing to the SWOT analysis, you can comprehensively evaluate your company’s business, find problematic areas or new opportunities for company development. SWOT analysis should be part of your company ‘s strategic management, and you should do so and take it into attention when planning your business strategy.

The SWOT analysis is an evaluation of the internal and external environment as defined below.

Analysis Type 1: Internal Environment

The internal environment defines the strengths and weaknesses of the company. They are in the company’s direct competence, and it is possible to change them quite simply, in contrast to the opportunities and threats that are caused by the company’s external environment.

The internal analysis should be measured through:

  • Position In The Market
  • Assets
  • The Existence Of An Information System
  • Technical And Technological Competency
  • Business Financing
  • All 4 Ps Of Marketing
  • Relationship With Customers
  • Suppliers, Etc.

Once the business has figured out their strengths, they should then work on improving and banking on their assets. Whilst, their weaknesses need to be scrutinized and observed, need to be sorted in different factions and then decisions need to be taken on them. It is imperative for the business to work towards eradicating all potential and current weaknesses.

Analysis Type 2: External Environment

The second phase is the analysis of the company’s external environment. Factors outside the business environment lie outside the control of the business. The objective of the company’s external environment analysis is to identify possible opportunities for company development and to identify potential risks that could possibly halt and obstruct the growth of the company or might even threaten the existing position of the company in the market. Only a detailed and meticulous examination of the company’s external environment allows the development of the company.

The external analysis should be measured through:

  • The Social Situation
  • Demographics
  • Cultural Factors
  • Technical And Technological Environment
  • Economic Factors
  • Political And Legislative Influences
  • Potential Competition, Etc.

Threats and opportunities are not in themselves possible to minimize or maximize; it is however only possible to reduce or increase their impact on your business. Opportunities allow the company to strengthen its position in the market, it empowers them to diversify and increase their economies of scale. Nonetheless, by analysing and understanding the threats posed towards the business, the enterprise should work towards minimizing these potential perils, if not then the business should be prepared at least for their consequences. Opportunities and threats may change over time, so it’s advisable to monitor them regularly. For this reason, stakeholders must keep their mind and should center their thought process on keeping an eye on these matters, in order to sustain and flourish their business.

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