SWOT ANALYSIS (Strengths, Weaknesses, Opportunities, and Threats)

One of the ways through which managers can quickly assess the situation of the company and make the
necessary plan of action is by doing a SWOT analysis. , it refers to the internal strengths and weaknesses
of a firm and the environmental opportunities and threats it faces.

Strength- is a resource that is owned or controlled by or is available to a firm. Strength will give a firm
an advantage over its competitors. Such strength could be utilized by the firm in many different ways
such as lowering costs associated with production and operating the business, maintaining the superior
quality of products and services, and having the ability to better serve customers. A small restaurant has
an advantage over its competitors if the owner is an excellent cook as he or she does not have to rely on
the expertise of other people in order to offer quality dishes to customers. A firm’s strength could be its
ability to maintain a low level of rejects or defective products coming out directly from production.
Some firms are known for the superior quality of their products. In the Philippines, the strength of a
company engaged in the manufacture of bread products is a highly mechanized process.

Weakness is a limitation which affects a firm’s position relative to its competitors. Weaknesses may
affect the way the firm delivers products and services to customers. For example, if a hotel has limited
financial capacity, it will not be able to make improvements in its facilities for the convenience of
clients/patrons. With the same problem, the small barbershop in the town center will not be able to buy
an air-conditioning unit or purchase even a small television set for the pleasure of those waiting to be
served. On the other hand, if a pharmaceutical firm is weak in the area of research and development, it
will lose opportunities to develop new drugs while its competitors are aggressively introducing to the
market new kinds of medication.

Opportunity is a situation in the external environment which the firm can take advantage of. If a firm has
enough resources which can be utilized to take advantage of those opportunities, then the decision
makers of that firm will take those opportunities into consideration in the process of making financial
projections. When culinary arts became popular in the Philippines, schools offering Hotel and Restaurant
Management (HRM) and/or Tourism Management or Administration opened a department in culinary
arts and offered it either as a certificate course (nondegree) or a bachelor’s degree. With the growing
number of young urban professionals with higher incomes, a number of real estate companies started
building high-rise condominium units targeting the younger market who live in urban areas either to
attend school or for employment.

Threat is an unfavorable situation in a firm’s external environment which may adversely affect the way a
firm does business. A small store in the neighborhood may be threatened by a bigger store which offers
a wider selection of goods. A hospital may suffer from a decrease in the number of admissions and
outpatient visits once a new nearby hospital with more modern facilities and equipment opens.
Strengths, weaknesses, opportunities, and threats are all factored in during the process of making
financial projections. The firm may increase its targets and become more optimistic in their projections
or it may decide to be more conservative. The key is for the firm to use its strengths to take advantage
of opportunities and counter the threats, and to do something to improve on its weaknesses.