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SWOT Analysis: Definition, Elements, Benefits, Factors, and Examples

What is a SWOT analysis? Understanding SWOT Analysis is a strategic planning method for evaluating influential factors in achieving goals, SWOT is a shorten from strengths, weaknesses, opportunities, and threats, both short and long term goals .

The term SWOT analysis we often find in the scope of economics and business. The purpose of this analysis method is to describe the situation and condition being faced and not an analytical tool that can provide a solution to the problem being faced.

SWOT analysis plays an important role in business because it aims to frame the situation and conditions in a company from the perspective of SWOT (Strengths, Weaknesses, Opportunities, Threats). In this article, we will discuss in full the understanding of SWOT analysis and its benefits in business.

In order to better understand what SWOT analysis is, we can refer to the opinions of the following experts;

1. Philip Kotler

According to Philip Kotler, the notion of SWOT analysis is an evaluation of all strengths, weaknesses, opportunities, and threats, which are found in individuals or organizations.

2. Pearce and Robinson

According to Pearce and Robinson, the notion of SWOT analysis is part of the company's strategic management process that aims to identify the company's main strengths and weaknesses. These main weaknesses and strengths are compared with external opportunities and threats as a basis for generating various alternative strategies.

3. Yusanto and Wijdajakusuma

According to Yusanto and Wijdajakusuma, the understanding of SWOT analysis is the company's internal and external instruments that rely on the annual database with a 3-1-5 pattern.

Explanation of this pattern is that the available data includes data on company development in the three years prior to the analysis, what is desired in the year when the analysis was carried out (read: Understanding Analysis), and the tendency of the company in the five years post analysis.

4. Freddy Rangkuti

According to Rangkuti, the definition of a SWOT analysis is an effort based on logic that can maximize strengths and opportunities, while at the same time minimizing weaknesses and threats. This analysis aims to identify various factors systematically to formulate the company's strategy.

5. Rais

According to Rais, the notion of SWOT analysis is the most basic analytical method that is useful for knowing topics and problems from four different sides. The final results of this analysis are directions or recommendations to maintain or enhance existing strengths and opportunities, as well as reduce weaknesses and avoid threats.

The Elements of SWOT Analysis

SWOT is a method used to evaluate strengths, weaknesses, opportunities and threats in business. Generally SWOTs are depicted with tables on large paper sizes to facilitate analysis of the relationships between aspects. Making a SWOT analysis involves specific business objectives and identification of internal-external factors to achieve these objectives.

As mentioned above, the SWOT analysis involves four main elements, namely Strength, Weakness, Opportunity and Threats. Following is an explanation of each of these elements:

1. Strength (Strength)

Analysis of the elements of strength possessed by the company. For example, analyzing what strengths a company has, such as in terms of technology, quality of production, strategic location, or other elements of strength that emphasize more on company excellence.

Usually in a SWOT analysis companies tend to make as many strengths as possible in a competitive effort.

2. Weakness

In addition to seeing the company's strengths, it is very important to know what weaknesses the company has. To find out the weaknesses of the company can be done by comparing with competitors like what other companies have but not your company.

If you want to make a list of the company's weaknesses more objectively, you can testify with consumers who generally know better what is lacking from a company.

3. Opportunity

The opportunity element is usually created at the beginning of building a business. This is because businesses are formed based on opportunities or opportunities to make profits.

The opportunity element includes a list of what allows a business to survive and be accepted in the community, both in the short and long term.

4. Threats

Analysis of the element of threat is very important because it determines whether the business can survive or not in the future. Some things are included as an element of threat for example the number of competitors, the availability of resources, the period of consumer interest, and so forth.

Making a list of company threats can be for the short term or long term and can at any time increase or decrease.

Benefits of SWOT Analysis

Many sources say that the SWOT analysis is the most basic analysis method. This analysis is useful to find out a problem from four different sides, namely strengths, weaknesses, opportunities, and threats, which are owned by a company.

The results of this analysis can provide recommendations for increasing strength and maintaining opportunities, while at the same time reducing weaknesses and avoiding potential threats.

SWOT analysis also acts as a useful instrument in strategic analysis activities. With this analysis, organizations can minimize weaknesses and reduce the impact of threats that must be faced.

So, in general the benefits of a SWOT analysis are as follows:
  • Companies become more understanding of its strengths and provide recommendations to improve it.
  • The company can see an opportunity and can maintain the opportunity.
  • The company recognizes weaknesses and looks for solutions to reduce those weaknesses.
  • The company is aware of potential threats and seeks solutions to avoid these threats.

Factors Affecting SWOT Analysis

Broadly speaking, there are 2 main factors that influence the SWOT analysis, namely internal factors and external factors. Here's a brief explanation:

1. Internal Factors

Internal factors are factors that come from within a company, namely the strengths and weaknesses of the company itself. As for some things that are part of internal factors are;
Adequate financial resources
Competent human resources
The latest technological property
Community trust in the company
Good marketing skills
Good distribution ability
And others

2. External Factors

External factors are all factors that come from outside the company (threats and opportunities) and affect the company's performance. As for some things that are part of external factors are;
Business trends
Community culture
Social politics and ideology
A country's economic conditions
Government regulations and policies
Technological development
And others

Example of SWOT Analysis

We can make a SWOT analysis of the StarBucks brand as a reference for making a SWOT analysis. Consider the following picture,

From the picture above we can find out the strengths, weaknesses, opportunities, and threats for Starbucks business. Here's a brief explanation:

1. The power of Starbucks

  • Having high quality products and services
  • The brand is internationally famous, and has the power of branding
  • Store location is in a strategic place
  • Have a good relationship with the supplier
  • Effective and efficient in the supply chain

2. Starbucks weaknesses

  • The health effects of consuming Starbucks products
  • Future growth is increasingly dependent on the international segment
  • Depends on the operating segment in America
  • Natural disasters greatly affect supply
  • Depends on relationships with suppliers

3. Starbucks Opportunities

  • Make use of the Starbucks brand even more than the outlets
  • Global consumer product group
  • Expansion of the international operations segment
  • Product innovation and new growth platforms
  • Future growth is increasingly dependent on the international segment

4. Threats to Starbucks

  • Latest health studies on the effects of sugar
  • A large number of competitors in the specialty coffee business
  • Coffee supply and prices are subject to significant volatility
  • Economic conditions in America can reduce consumer spending
  • A surge in minimum wages decreases profitability and decreases supply

The Importance of SWOT Analysis in Business
When referring to the explanation above, SWOT analysis is very important to do, namely as a framework for analyzing what the company has and does not have. This analysis is not only important for building a business, but very important for business continuity.

SWOT analysis has been considered as a method of analysis to describe the most basic companies. Through SWOT analysis, it can be used as material to make strategic planning and achieve company goals more systematically.

Analysis that is well implemented and carried out correctly in a company will be very helpful to see the sides of the company that have not been seen. Without analyzing it can be that the business that is built does not run efficiently and effectively.

Thus a brief explanation of the meaning of SWOT analysis, elements, benefits, and examples. Hopefully this article is useful and broadens your horizons.
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