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Unit 5: Organisational Appraisal: Internal Assessment 1

players developing luxury cars targeted at the Indian market include Ford, Honda Notes
and Toyota. In fact the entire Indian market has become a target for other global
competitors including Maruti Udyog, General Motors, Ford and others.
4. Rising prices in the global economy could pose a threat to Tata Motors Limited on
a couple of fronts. The price of steel and aluminium is increasing putting pressure
on the costs of production. Many of Tata's products run on Diesel fuel which is
becoming expensive globally and within its traditional home market.

Source: www.marketingteacher.com
5.2.3 Critical Assessment of SWOT Analysis

SWOT analysis is one of the most basic techniques for analyzing firm and industry conditions.
It provides the “raw material” for analyzing internal conditions as well as external conditions of
a firm. SWOT analysis can be used in many ways to aid strategic analysis. For example, it can be
used for a systematic discussion of a firm’s resources and basic alternatives that emerge from
such an analysis. Such a discussion is necessary because a strength to one firm may be a weakness
for another firm, and vice-versa. For example, increased health consciousness of people is a
threat to some firms (e.g. tobacco) while it is an opportunity to others (e.g. health clubs).
According to Johnson and Sholes (2002), a SWOT analysis summarises the key issues from the
business environment and the strategic capability of an organisation that impacts strategy
development. This can also be useful as a basis for judging future courses of action. The aim is to
identify the extent to which the current strengths and weaknesses are relevant to, and capable of,
dealing with the changes taking place in the business environment. It can also be used to assess
whether there are opportunities to exploit further the unique resources or core competencies of
the organisation. Overall, SWOT analysis helps focus discussion on future choices and the extent
to which the company is capable of supporting its strategies.

5.2.4 Advantages and Limitations

Advantages

1. It is simple.
2. It portrays the essence of strategy formulation: matching a firm’s internal strengths and
weaknesses with its external opportunities and threats.
3. Together with other techniques like Value Chain Analysis and RBV, SWOT analysis
improves the quality of internal analysis.

Limitations

1. It gives a static perspective, and does not reveal the dynamics of competitive environment.
2. SWOT emphasizes a single dimension of strategy (i.e. strength or weakness) and ignores
other factors needed for competitive success.
3. A firm’s strengths do not necessarily help the firm create value or competitive advantage.
4. SWOT’s focus on the external environment is too narrow.

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