An “opportunity” is considered as a favorable circumstance which can be utilized for beneficial purposes. It is offered by outside environment and the management can decide as to how to make the best use of it. Such an opportunity may be the result of a favorable change in any one or more of the elements that constitute the external environment. It may also be created by a proactive approach by the management in molding the environment to its own benefit. Some of the opportunities are:
- Strong economy
- Possible new markets
- Emerging new technologies
- Complacency among competing organizations
- Vertical or horizontal integration
- Expansion of product line to meet broader range of customer needs
- Falling trade barriers in attractive foreign markets
A “threat” is a characteristic of the external environment which is hostile to the organisation. Management should anticipate such possible threats and prepare its strategies in such a manner that any such threat is neutralized. Some of the elements that can pose a threat are:
- Entry of lower cost foreign competitors Cheaper technology adopted by rivals
- Rising sales of substitute products
- Shortages of resources
- Changing buyer needs and preferences
- Recession in economy
- Adverse shifts in trade policies of foreign governments
- Adverse demographic changes
SWOT analysis involves evaluating a company’s internal environment in terms Of strengths and weaknesses and the external environment in terms of opportunities and threats and formulating strategies that take advantage of all these factors. Such analysis is an essential component of thinking strategically about a company’s situation.
