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SWOT Analysis Methods and Activity-Based Costing (ABC) Method

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    After reading through the assigned chapters from Blocher text, the two strategic allocation techniques/concepts that interested me most includes: The SWOT Analysis techniques and the activity based costing method (ABC). However, before discussing these concepts in details, it will be important for readers of this paper to understand what SWOT means in business. SWOT in business stands for: “Strength, Weaknesses, Opportunities and Threats”. SWOT technique is one of the analytical tools utilized by many organizations to determine the successes and failure being made over certain period of time. This technique can also be useful in identifying other important factors that can be useful in the implementation of organizational strategies. The used of SWOT technique or approach as described in the required textbook Blocher, “can be traced back to the 50’s, and it have been a very essential technique utilized by organizations for analyzing and determining” how limited financial resources can be allocated to achieve the set out goals.

    Moreover, in my own opinion, the SWOT analysis technique is such a flexible framework that can easily be combine with other methods and approaches in order to trace the revenue and expenditure of organizations. Using SWOT analysis techniques for organizations will help in identifying the internal strengths and weaknesses of all form of organization. In addition to the above points, we cannot talk about business without mentioning the environment in which they operate. For business or other organization to succeed, conducive environments are needed for their operations. SWOT analysis technique as understood from the textbook also help in the assessment of the operational environments of many businesses to identify what opportunities and threats organizations are likely to face during their course of operation.

    More so, in identifying the strengths and weaknesses of organizations, the following factors are to be considered: “line of products, research and development, management team, operations, marketing and other strategies”. Opportunities and threats in most organizations can be effectively determined by considering the operational industry of the organization, barriers, competitiveness, substitute goods, bargaining power, political, social economic, ecological technological and other environmental factors. In addition, a completed SWOT technique enables management team of organizations to seek more opportunities that will lead to the creation of value and to also help in identifying challenges that threaten its value. Identified strengths are positively related to the current revenues of the business and the identified opportunities could positively impact the future revenues of an organization.

    Conversely, identified weaknesses may be negatively impacting current revenues and threats could negatively impact future revenues of an organization. There is no iota of doubt in mind that revenues and expenses of organizations are great linked to the SWOT analysis. Organizational strengths could help in minimizing expenses and outside opportunities could also lead to less expenses such as improvements gains in efficiency. As for organizational weaknesses, they may increase expenses and external threats could also lead to an increase in expenses. Activity Based Costing (ABC) is another concepts learned from the textbook, which also interested me most. This method have been utilized by many organizations over the years since 1980, which have proved to be helpful in strategic planning and the allocating of limited financial resources. The activity based costing according to the readings from the textbook, was more preferred to that of the traditional or volume based by many organization due to it numerous benefits. Among the major benefits, activity based costing proves that many firms have helped in improving information that provides them with better profitability measures when compared to others .

    Activity-based costing (ABC) as understood from the textbook is one of the most effective cost allocation methods that identifies activities in an organization and assigns the cost of each activity to all products and services produce that are consume by final users. This method assigns more indirect costs into direct costs when compared to that of a conventional costing method. Finally, there is an optimism that through strategic planning, organizations will have the ability to construct unity of purpose and direction while adapting to external challenges. More so, Strategic planning (resource-based planning, and competency-based planning) allows “organizations to confront and shape complex realities”. Successful strategic planning will also help in examining the history of organization achieve its current status. However, solely understanding historical context provides organizations with little ability to adapt in the future. “Organizational futures are also determined contingent on future decisions”.

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