Models of Decision Making :: Business Management

MODELS OF DECISION MAKING: ïÆ'Ëœ SWOT Analysis Model ïÆ'Ëœ Poster’s Five Forces Analysis ïÆ'Ëœ PEST Analysis SWOT Analysis SWOT Analysis is the most common and renowned model for decision making in the business world today. It is used for conducting the audit, study and analyze the overall strategic position of the business and the environment in which the business operates SWOT is an abbreviation of Strengths, Weaknesses, Opportunities and Threats. The main objective of SWOT analysis is to devise the best strategy for the organization, using it to prepare the business model for the company while keeping in view the resources, capabilities and constraints that are applicable. It is in fact used to assess the internal potential of the organization and how it can be utilized to exploit the avenues available in the environment. It takes into consideration all the favorable and unfavorable factors associated with the organization. This tool when used consistently can help in the predicting the future outcome and including those forecasts in the organization’s strategy. Conducting SWOT analysis is not a complex task but includes a very simple and interesting activity. It also includes brainstorming sessions. SWOT analysis may be used to develop the business idea, assessing an opportunity to make an acquisition, analyzing a potential partnership or making decision about a brand, product, an investment opportunity. SWOT analysis is conducted using a template which is usually in the form of a grid and consists of four sections. An example of the template is produced below: STRENGTHS Financial Resources Human Resource Market Access Brands Patents Copy Rights Technology Infrastructure Quality Cost minimization Effective management Geographical edge Expertise and Experience Backward and Forward Integration Other assets WEAKNESS Cash shortage or lack of access to financial resources Lack of access to market Incompetent human resource and management Lack of infrastructure Non availability of technology Lack of competitive strengths Ineffective supply chain management Narrow Product Range Poor Decision Making Huge Debts High employee turnover Obsolete equipment Complex decision making process Large wastage of raw material OPPORTUNITIES New market New Government policy or change in recent policy Lifestyle or industry Niche market Increase in level of income of individuals New Products and services THREATS Political factors Legislative issues Environmental factors High turnover of staff Takeover by a big giant New technology by competitor Disagreement with key contractors and customers Seasonal impacts Change in attitude, tastes or lifestyle International market impacts on local market Change in the market demand Ever changing technology Price war leading to decrease in profitability Increased competition leading to access capacity Lets have a view on each of the four factors: Strengths: Strengths are the competitive edge or the capabilities an organization has to be utilized when competing with its competitors.