SWOT Analysis

Today, we further discussed about SWOT Analysis and processing it to be useful for decision making. After identifying the internal and external factors that may affect a business operation, positive and negative comments are made about these factors. The positive and negative comments are then grouped and totaled to get the net internal and external factor. This value is useful for making Grand Strategy Matrix that involves strength and weakness in the horizontal axis (strength as the positive value and weakness as the negative value)as well as opportunity and threat in the vertical axis (opportunity as the positive value and threat as the negative value). The values gotten from the net internal (horizontal axis) and external (vertical axis) factors are plotted in the matrix to form a coordinate.

- Positive External and Positive Internal factor result in Expansion strategy
Expansion is a company's attempt to allocate its resources to make the business bigger. There are basically two types of expansion strategy, concentration (can be vertical and horizontal) and diversification (concentric and conglomerate). Concentration is the expansion of a business in the same industry in the same (horizontal) or different (vertical) level of business activity, while diversification is the expansion of a business to a different industry with (concentric) or without (conglomerate) any similarity in the business type.

- Positive External and Negative Internal factor result in Stability
When a company wants to maintain its stability, then it should ensure that its present course is well run.

- Negative External and Negative Internal factor result in Retrenchment
This is the final stage of a company that doesn't have any other way out, that is, reducing the use of its resources in order not to worsen efficiency. There are several ways to do this, they are turnaround (making former product improvement), divestment (taking out current investment) or liquidation (liquidating assets to generate more cash AKA announcing bankruptcy!

- Negative External and Positive Internal factor result in Combination
This situation with unfavorable threat from the industry and the favorable strength of the company can be handled through the combination of several strategies simultaneously or sequentially to achieve its goals.

This analysis may help us in determining the present condition of our company, whether it is favorable or unfavorable and assist us in making the right decision and taking the right action. But of course, it depends on the type of business, its scale of operation and lots of other factors. In my opinion, this analysis is quite simple to conduct but should be supported with any other analysis such as product life cycle and value analysis.