Strengths, weaknesses, opportunities, and threats: Which is the most important?
SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal factors that a company can control while opportunities and threats are external factors that a company cannot control. The strengths and weaknesses are related to the opportunities and threats. An organization can take the advantage of their opportunity by using the strength and neutralize their threat by eliminating the weakness. A SWOT analysis is for an organization to identify the strengths and weaknesses to manage a business strategy. A business strategy is when a company sets to achieve their objective.
PEST is an acronym for political, economic, social and technology. This analysis is all external factors. A company cannot control what happens A PEST analysis helps to determine how the factors will affect the performance of the business in the long-term.
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A strength is what the business is good at. It is mainly about competitive advantages. Examples are low cost and differentiation. On the other hand, weakness is the opposite of strength such as fading of a brand, not a strategic location and high overheads.
An opportunity is a condition that can support the strength of a company. Example of this situation is when your competitor goes into liquidation. Your company can take over your competitor customer and the business will become more successful. A threat is where a company cannot prevent coming. For example, when a new competitor enters your business and mainly Brexit. Brexit is where the United Kingdom (UK) will leave the European Union (EU).
The political aspect can refer to the political stability of a country and tax guideline. For example, when there is a war in a country, the country cannot export their things to other countries. Legal factors are also connected with political factors. One of the legal factors are the changes in the law. For example, if we own a watch company and the law says that everyone needs to wear a watch every day. Then, our markets will go higher. Unfortunately, if the change back to normal, our markets will go downwards.
Economic factors focus on the stability of the exchange and interest rate. Both are different. Exchange rates are how much another currency can buy. For example, in January 2018 the exchange rate for British Pound to US Dollar is $1.41. An interest rate is a reward for saving and the cost of borrowing. The rates will change every hour that will set by the Bank of England.
The social analysis generally refers to the population of a culture.
The technological focus on the level of technological development of a country. For example, China has more modern technology than South Africa.