1. Identify strengths
The analysis of the internal environment help to
identify the strengths of the firm. The internal environment refers to
plans and policies of the firm, its resources-physical, financial and human
resources e.g. If company has good relations with workers, the strength
of the company can be identified through the workers loyalty and
dedication on the part of workers.
2. Identify weaknesses
A firm may be strong in certain areas, whereas it
may be weak in some other areas. The firm should identify such
weaknesses through SWOT analysis so as to correct them as early as
possible e.g. Lack of capital may be a weakness of the company, but
company should try to raise additional funds to correct the weaknesses.
3. Identify Opportunities
An analysis of the external environment helps
the business firms to identify the opportunities in the market. The
business firm should make every possible effort to grab the opportunities,
as and when they come
4. Identify threats
Business may be subject to threats from competitors
and others. Identification of threats at an earlier date is always beneficial
to the firm as it helps to defuse the same. For instance, a competitor may
come up with innovative product. This not only affects the firm‟s
business but also endanger its survival, so business firm should take
necessary steps to counter the strategy of the competitors.
5. Effective Planning
A proper study of environment helps a business
firm to plan its activities properly. Before planning, it is very much
necessary to analysis the internal as well as external environment. After
SWOT analysis , the firm can list out well-defined and time-bound
objectives, which in turn help to frame proper plans.
6. Facilitates Organising Resources
Environment analysis not only
helps in organizing the resources of right type and quantity. A proper
analysis of environment enables a firm to know the demand potential in
the market. Accordingly, the firm can plan and organize the right amount
of resources to handle the activities of the organization.
7. Face Competition
A study of business environment enable a firm to
analyse the competitor‟s strengths and weaknesses. This would enable
the firm to incorporate the competitor‟s strengths in its working. The firm
may also try to exploit the competitors weaknesses in its favour.
8. Flexibility in Operations
The environmental factors are
uncontrollable and a business firm finds it difficult to influence the
surrounding of its choice. A study of environment will enable a firm to
adjust its operations depending upon the changing environmental
situation.
9. Provides logical framework
SWOT analysis provides organisation an overall strong and logical framework for better analysis, planning, executing of the strategies and generation and choice of options within the freedom allowed by the internal and external environment.
10. Presents comparative analysis
SWOT analysis presents the information about both external and internal environment in a structured form where it is possible to compare external opportunities and threats with internal strength and weaknesses. In one particular model strategist can compare every aspect connected to decision making activity of the oraganisation.
