Due to the globalization, enterprises fight really hard in order to continue to exist because the competition is not anymore only in the domestic market but also to the international markets.(1) A major concern of all the managers is the compliance with these changes in order to ensure the efficient existence of the enterprises that they manage. For this reason, environmental analysis is a vital component of the strategic planning procedure and many researchers try unstoppable to develop new tools or enhance the existing. (2) So after a thorough research in the academic literature, I noticed that there are many business environmental analysis tools developed by strategic and marketing academics. However the most commonly used are Swot analysis, Porter's Five Forces, Pestel and steep analysis which are widely recognized for their effectiveness. For the Purpose of this assignment, we will analysis in depth S.W.O.T. analysis tool and we will make a comparison with the tools that were used in our Global Business Environment group assignment. More specifically we wiil discuss for the usage of swot analysis and the benefits and drawbacks that it has.
The concept of SWOT analysis.
According to (3) the SWOT analysis tool has it origins from the business management literature and scholars in the Stanford Research Institute developed it. Panagiotou (2003) 4 refered to the reason that SWOT analysis was introduced as it was necessary a way to be found in order to exlain why corporate planning not always succeed. So the aim of SWOT analysis was to come and cover this gap by recognizing if the strategy of an organization is related with its strengths and weaknesses and if it can absorb the changes that happened continuously in the business environment(3).According to the same authors, SWOT analysis is a way for companies to be ready for avoiding or absorbing problems that may occur by developing potential plans or to clear which information are valuable in order to simplify difficult strategic decisions.
Explanation of SWOT analysis
Before the presentation of the benefits and the disadvantages of the use of this analytical tool, it is important to describe the dimensions from which SWOT analysis is derived his name and explain every dimension in detail.
The word SWOT took this name from the first letter of the words Strengths, Weaknesses, Opportunities, Threats.. According the authors (2), the environmental analysis of SWOT is not focusing only in the external business environment but also analyses internal business factors that have potential impact in the business. The (3) say that strengths are the abilities of a company to grow and become stronger, while weaknesses are the companies inherent differences that have the opposite results. It is important to note that according to many authors such as Porter (1985) and Ansoff and McDonnell (1990) the analysis of the strengths and weaknesses should only be focused in relation with their competitors in order the results to be comparable. Turning now to the opportunities and the threats according with (3) opportunities are the high chances that a companies has for growth regarding the external enviroment, while threats are the high challenges that an enterprise potentially will face and will be a considerable obstacle for the growth of the company. The authors also say that in order a strategic plan to be successful, companies strengths should weight more from the weaknesses and threats have to be transferred to opportunities in order a business to succeed. Additionally, Porter (1985) and Ansoff and McDonnell (1990) insist that opportunities and threats are regarding only the actions that happened within the same business environment and have impact to the companies and their competitors.
According with (2) SWOT analysis is characterized as a simple way of analyzing the environment because it does not take into consideration all the parameters which are important for the analysis of the environment and this creates unpredictable risks.So according to the authors is better to be used in the initial stages of the business planning analysis and of course not in a naive level.
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