Every business and organization operates in a environment where the external factors also influence the company. It is not possible for the company to keep control on everything that happens in a business. Sometimes some things generate from external sources as well and these are not in control of the company.
The environmental or the external factors can be good or bad for the growth and the prosperity of the company. When these factor are in favor of the growth of the company, then they are known as opportunities but in the case when these external factors limits the growth or are bad for the company then it is termed as threats.
It is required that the company along with understanding their internal strengths and weaknesses, they should be aware of the opportunities and the threat that can hit their company any time. When the company is aware for the upcoming opportunities, they can be fully prepare to utilize that opportunity to the top and reach the top of the industry. Knowing the threats will also help the company to be ready to face the upcoming risks and thus the company can adopt different risk management strategy in order to mitigate, avoid, or reduce the impact of the upcoming threats.
Opportunities are like a lift for the company that can help the company to reach to a height in less time. The opportunities comprises of the external factors like increase in the demand of particular product, sudden decrease in the price of the raw material, favorable changes in the government policies etc.
Threat are like down fall for the company that might leads to the shut down or major loss to the company. The threats are also external factors that includes the unfavorable changes in the government policies, increase in the price of the raw material, etc.
The company can identify the opportunities and the threats to the company by analyzing two systems that are the functional dimensions and the external stakeholders. The external stake holders comprises of the competitor companies, suppliers, transmission, receivers, and many more other institutions. While the functional dimensions includes technology, politics, ecology, financial condition of the market etc.
Before understanding how to identify the opportunities and threats to the company, It is required that you should know what are opportunities and threats.
What are opportunities for the company?
Opportunities refers to the positive phenomenon or the tendencies for the company which originates from the external source but when applied leads to stimulation of the growth or the prosperity of the company. There are lift for the company that stimulate their growth and helps in weakening the impact of threats on the company.
The examples of opportunities includes the sudden increase in the demand of the product, generation of new group of customer, introduction of product in the new market, diversification of the product ranges, company’s takeover, changes in the demography, expansion of the assortment, etc and many more.
Having the prior information of the opportunities is helpful for the company so that they can get themselves ready to take the most or the maximum advantage of the upcoming opportunities and accelerate their growth to the maximum. This is why the company requires to know the way to identify the opportunities for their company thus they can grab all the opportunities and make good place in the industry.
What are threats for the company?
Like opportunities, the threat are also external source generated phenomenon or the tendencies but they are having negative impact on the growth of the company. They are often referred as the barrier or the limitation for the company that leads to the loss of the company and also hinders in their way to development. In the case when no preventive and risk management measures are adopted, it can also lead to the shut down or severe loss to the company.
The example of threats includes increase in the price of the raw material, higher shares on the market of substitutes, new foreign competitors, change in the needs of the customers, loss of the major group of the customers, unfavorable changes in the law, economic crisis, poor financial condition of the market, low pace of the market growth, etc and many more.
Also, many times, threats generate along with the opportunities and prevent the company to fully utilize the opportunities. For example when the demand of the product is increased but it is accompanied with the increase in the price of the raw material. In this case, the increase in the demand of the product is opportunity while the increase in the price of the raw material is threat for the company. This threat prevents the company to fully utilize the opportunity. But in the case if the company has the proper risk management strategy, they can mitigate the effect of the threats by making more purchase of the raw material when the price is low and then using it when the demand of the product is high.
This is why the company should be aware for the identification of the threats and risks and this will help them adopt proper strategy in order to avoid or reduce the upcoming threats. Also, with proper strategy, the company can turn the threast in opportunities.
How to identify the opportunities and threats to the company?
The SWOT analysis is the perfect way to identify the major opportunities and the threats to the company along with understanding the strengths and the weaknesses of the company. While analyzing the opportunities and threats, the company should analyze the:
- Any change in the government polices whether favorable or unfavorable.
- Check for the progress in the technology which will ease the process and thus opportunity for the company.
- Change in the market trend and the lifestyle of the people.
- Competition and the strategy of the competitor companies.
- Market condition, economic changes in the market, etc.
The bottom line
This way the company should make full evaluation of the opportunities and threats.