SWOT
ANALYSIS
SWOT analysis is a strategic planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats involved in a project or in a business venture.
It involves specifying the objective of the business venture or project and identifying the
internal and external factors that are favorable and unfavorable to achieve that
objective. The technique is credited to Albert Humphrey, who led a convention at
Stanford University in the 1960s and 1970s using data from Fortune 500 companies.
A SWOT analysis must first start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model. Strategic Planning has
been the subject of much research.
Strengths: characteristics of the business or team that give it an
advantage over others in the industry.
Weaknesses: are characteristics that place the firm at a disadvantage
relative to others.
Opportunities: external chances to make greater sales or profits in the
environment.
Threats: external elements in the environment that could cause trouble for
the business.
Identification of SWOTs is essential because subsequent steps in the process of
planning for achievement of the selected objective may be derived from the SWOTs.
First, the decision makers have to determine whether the objective is attainable, given
the SWOTs. If the objective is NOT attainable a different objective must be selected and
the process repeated.
The SWOT analysis is often used in academia to highlight and identify strengths,
weaknesses, opportunities and threats. It is particularly helpful in identifying areas for
development.
Matching and converting
Another way of utilizing SWOT is matching and converting.
Matching is used to find competitive advantages by matching the strengths to
opportunities.
Converting is to apply conversion strategies to convert weaknesses or threats into
strengths or opportunities.
An example of conversion strategy is to find new markets.
If the threats or weaknesses cannot be converted a company should try to minimize or
avoid them
Evidence on the use of SWOT
SWOT analysis may limit the strategies considered in the evaluation. J. Scott Armstrong
notes that "people who use SWOT might conclude that they have done an adequate job
of planning and ignore such sensible things as defining the firm's objectives or
calculating ROI for alternate strategies." Findings from Menon et al. (1999) and Hill and
Westbrook (1997) have shown that SWOT may harm performance. As an alternative to
SWOT, Armstrong describes a 5-step approach alternative that leads to better
corporate performance.
Internal and external factors
The aim of any SWOT analysis is to identify the key internal and external factors that
are important to achieving the objective. These come from within the company's unique
value chain. SWOT analysis groups key pieces of information into two main categories:
Internal factors – The strengths and weaknesses internal to the
organization.
External factors – The opportunities and threats presented by the external
environment to the organization.
The internal factors may be viewed as strengths or weaknesses depending upon their
impact on the organization's objectives. What may represent strengths with respect to
one objective may be weaknesses for another objective. The factors may include all of
the 4P's; as well as personnel, finance, manufacturing capabilities, and so on. The
external factors may include macroeconomic matters, technological change, legislation,
and socio-cultural changes, as well as changes in the marketplace or competitive
position. The results are often presented in the form of a matrix.
SWOT analysis is just one method of categorization and has its own weaknesses. For
example, it may tend to persuade companies to compile lists rather than think about
what is actually important in achieving objectives. It also presents the resulting lists
uncritically and without clear prioritization so that, for example, weak opportunities may
appear to balance strong threats.
It is prudent not to eliminate too quickly any candidate SWOT entry. The importance of
individual SWOTs will be revealed by the value of the strategies it generates. A SWOT
item that produces valuable strategies is important. A SWOT item that generates no
strategies is not important.
Use of SWOT analysis
The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT
analysis may be used in any decision-making situation when a desired end-state
(objective) has been defined. Examples include: non-profit organizations, governmental
units, and individuals. SWOT analysis may also be used in pre-crisis planning and
preventive crisis management. SWOT analysis may also be used in creating a
recommendation during a viability study/survey.
SWOT - landscape analysis
The SWOT-landscape systematically deploys the relationships between overall
objective and underlying SWOT-factors and provides an interactive, query-able 3D
landscape.
The SWOT-landscape grabs different managerial situations by visualizing and
foreseeing the dynamic performance of comparable objects according to findings by
Brendan Kitts, Leif Edvinsson and Tord Beding (2000).
Changes in relative performance are continually identified. Projects (or other units of
measurements) that could be potential risk or opportunity objects are highlighted.
SWOT-landscape also indicates which underlying strength/weakness factors that have
had or likely will have highest influence in the context of value in use (for ex. capital
value fluctuations).
Corporate planning
As part of the development of strategies and plans to enable the organization to achieve
its objectives, then that organization will use a systematic/rigorous process known as
corporate planning. SWOT alongside PEST/PESTLE can be used as a basis for the
analysis of business and environmental factors.
Set objectives – defining what the organization is going to do
Environmental scanning
o Internal appraisals of the organization's SWOT, this needs to
include an assessment of the present situation as well as a portfolio
of products/services and an analysis of the product/service life
cycle
Analysis of existing strategies, this should determine relevance from
the results of an internal/external appraisal. This may include gap analysis
which will look at environmental factors
Strategic Issues defined – key factors in the development of a corporate
plan which needs to be addressed by the organization
Develop new/revised strategies – revised analysis of strategic issues may
mean the objectives need to change
Establish critical success factors – the achievement of objectives and
strategy implementation
Preparation of operational, resource, projects plans for strategy
implementation
Monitoring results – mapping against plans, taking corrective action
which may mean amending objectives/strategies.
Marketing
Main article: Marketing management
In many competitor analyses, marketers build detailed profiles of each competitor in the
market, focusing especially on their relative competitive strengths and weaknesses
using SWOT analysis. Marketing managers will examine each competitor's cost
structure, sources of profits, resources and competencies, competitive positioning and
product differentiation, degree of vertical integration, historical responses to industry
developments, and other factors.
Marketing management often finds it necessary to invest in research to collect the data
required to perform accurate marketing analysis. Accordingly, management often
conducts market research (alternately marketing research) to obtain this information.
Marketers employ a variety of techniques to conduct market research, but some of the
more common include:
Qualitative marketing research, such as focus groups
Quantitative marketing research, such as statistical surveys
Experimental techniques such as test markets
Observational techniques such as ethnographic (on-site) observation
Marketing managers may also design and oversee various environmental
scanning and competitive intelligence processes to help identify trends
and inform the company's marketing analysis.
Using SWOT to analyze the market position of a small management consultancy with
specialism in HRM.
Strengths Weaknesses Opportunities Threats
Reputation in Shortage of Well established Large consultancies
marketplace consultants at position with a well operating at a minor
operating level rather defined market niche level
than partner level
Expertise at partner Unable to deal with Identified market for Other small
level in HRM multi-disciplinary consultancy in areas consultancies looking
consultancy assignments because other than HRM to invade the
of size or lack of marketplace
ability