Internal Retail Strategy Analysis (SWOT Analysis)
What Is Internal Analysis?
Internal
Analysis focuses
on evaluating all aspects of the organization itself. Although internal
analysis can sometimes take into account the actions of external organizations
or market-wide shifts, it is largely related to the inherent traits of the
organization at hand.
For example,
internal analysis can allow you to identify both strong and weak aspects of
your organization, without taking into account the performance of external
organizations.
Here’s another
way to think about internal analysis: if your organization was the only one
that existed — meaning your organization had no competition — and your business
environment was entirely neutral — meaning it didn’t in any way affect your
organization — then what factors would you consider when analysing your
organization?
Why Is Internal Analysis Important?
In the context of strategic management,
internal analysis is crucial for a few reasons. Your organization might be
spending too much in some areas due to internal inefficiencies, or,
alternatively, your organization could be leaving money on the table. The only
way to reveal these things and get a true understanding of how resources are
being used in your organization is by means of internal analysis.
SWOT Analysis
Definition:
SWOT Analysis is a strategic management tool that assists an enterprise in
discerning their internal Strengths, and Weaknesses, and external
Opportunities, and Threats, to determine its competitive position in the
market.
The
SWOT Analysis helps in ascertaining the factors that influences the efficiency
and effectiveness of any product, project, or business entity. These are
explained as under:
1. Strengths: The strengths of a company are the core
competencies, in which the business has an edge over its competitors. It covers
aspects such as:
o Strong financial condition
o A large customer base.
o Strong brand name or a unique product
o Latest technology or patents
o Influential advertising and promotion.
o Cost Advantage
o Quality in product and customer service.
2. Weaknesses: Weaknesses can be described as the
areas of limitations of the business, that hinders the growth of the company
and even leads to a strategic disadvantage. These are the areas which need
improvement to perform competitively. It encompasses:
o Obsolete facilities and outdated
technology.
o The unit cost of a product is higher than
the competitors.
o No or less internal control.
o Less quality in products and services
offered.
o Weak brand image.
o Financial condition is not very sound.
o Underutilization of plant capacity.
o Lack of major skills or competencies, and
intellectual capital.
3. Opportunities: Opportunities can be understood as the
condition, which is favourable or beneficial to the organization in the
business environment, that the business could exploit to gain an advantage.
These are:
o Looking for areas of development, by
utilizing skills and technology to enter new markets
o Adding new products to the existing
product line to increase customer base.
o Forward and backward integration.
o Acquiring rivals businesses.
o Joint ventures, mergers and alliances to
increase market coverage.
4. Threats: Threat implies an adverse condition
which can lead the business enterprise to losses, and can also harm the overall
position and reputation of the enterprise. It entails:
o A downtrend in market growth.
o A new entrant to the market.
o Substitute products that can decrease
sales.
o Increasing the bargaining power of customers
and suppliers.
o New regulatory requirements
o Changes in a demographic environment that
will decrease demand for firm’s product.
Importance of SWOT Analysis
1. Logical
framework of analysis:
SWOT Analysis equips the management with an insightful framework for
eliminating issues in a systematic manner, that can influence the condition of
business, formulation of various strategies and their selection.
2. Presents
a comparative report: The
analysis facilitates in presenting systematic information about the internal
and external environment. This helps in making a comparison of external
opportunities and threats with internal strengths and weaknesses, as well as
reconciling the internal and external business environment, to help the managers
in choosing the best strategy, by considering various patterns.
3. Strategy
Identification: Every
organization has its strengths weakness, opportunities and threats. So, the
SWOT Analysis acts as a guide to the strategist to reckon the exact position, i.e.,
where the business stands, so as to identify the primary objective of the
strategy under consideration.
SWOT
Analysis helps the company’s management in designing a business model specific
to the firm. The model perfectly suits or aligns the company’s resources or
competencies, as per the needs of the business environment, wherein the
organization operates and helps in gaining a competitive advantage over the
rivals. This will increase the profitability, market share and the chances to
survive in the dynamic competitive business environment.
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