Question

Is a SWOT analysis the best way to assess a company's internal and external environment? Are there other models you might suggest to supplement/replace the SWOT analysis? (min 200 words per question)

Answer 1

SWOT analysis is that kind of analysis that identifies the strengths, weaknesses, opportunities, and threats of a Company that is related not only to itself but also with that of the outside world. In this regard, it helps in assessing a company’s internal and external environment efficiently. This analysis helps in determining the factors that may influence the very survival of the business. Here, the first two elements of the SWOT aids in the analysis of the internal aspects of the Company which may include Company’s own strengths and weaknesses while the next two elements examines the external aspect of the Company that is the outside stakeholders or circumstances that may have an influence over the business.

It could be used to understand the field of business because it involves the study of both, the external and internal environments surrounding the business. A careful study of the factors that impact business operations, or the study that involves the following of trends in the market, examining the actions of the rivals in the market, the consumer behavior and purchase pattern, the Government support, the stakeholder’s cooperation, etc.,, gives a fine idea of understand the file of business.

In terms of its utility in a Company, SWOT is important for strategic formulation in order to undertake the competitor analysis. Hence it provides strategic information to the Company in this regard. It helps in predicting the dynamics of competitor actions, responses and intentions. It further helps in analyzing the internal environment in terms of resources, capabilities and core competencies such that the strategies could be formulated based on these factors. The various strategic models such as Resource based model of AAR, the VRIO framework, the Value chain analysis, etc. could be all designed under the strategic formulation, based on the SWOT. Therefore, it serves as an important tool to analyze a company’s internal and external environment.

However, SWOT analysis is not the only analysis that assists in assessing the same. I believe PESTEL analysis could also be used as a tool to assess the environment better as well.