SWOT Analysis, is a strategic
planning tool 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 achieving that
objective.
STRATEGIC AND CREATIVE USE OF S.W.O.T ANALYSIS
Strategic Use: Orienting SWOTs to An Objective
Illustrative diagram of SWOT analysis
If SWOT analysis does not start with defining a desired end state or objective,
it runs the risk of being useless. A SWOT analysis may be incorporated into the
strategic planning model. An example of a strategic planning technique that
incorporates an objective-driven SWOT analysis is SCAN analysis. Strategic
Planning, including SWOT and SCAN analysis, has been the subject of much
research.
• Strengths: attributes of the organization that are helpful to achieving the
objective.
• Weaknesses: attributes of the organization that are harmful to achieving the
objective.
• Opportunities: external conditions that are helpful to achieving the
objective.
• Threats: external conditions that are harmful to achieving the objective.
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.
Creative Use of SWOTs: Generating Strategies
If, on the other hand, the objective seems attainable, the SWOTs are used as
inputs to the creative generation of possible strategies, by asking and
answering each of the following four questions, many times:
1. How can we Use each Strength?
2. How can we Stop each Weakness?
3. How can we Exploit each Opportunity?
4. How can we Defend against each Threat?
Ideally a cross-functional team or a task force that represents a broad range of
perspectives should carry out the SWOT analysis. For example, a SWOT team may
include an accountant, a salesperson, an executive manager, an engineer, and an
ombudsman.
SWOT analysis may limit the strategies considered in the evaluation. "In
addition, 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."
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. 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.
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 (People, Place, Promotion, Price); 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.
Avoiding Errors
1. Conducting a SWOT analysis before defining and agreeing upon an objective (a
desired end state). SWOTs should not exist in the abstract. They can exist only
with reference to an objective. If the desired end state is not openly defined
and agreed upon, the participants may have different end states in mind and the
results will be ineffective.
2. Opportunities external to the company are often confused with strengths
internal to the company. They should be kept separate.
3. SWOTs are sometimes confused with possible strategies. SWOTs are descriptions
of conditions, while possible strategies define actions. This error is made
especially with reference to opportunity analysis. To avoid this error, it may
be useful to think of opportunities as "auspicious conditions".
Examples of SWOTs
Strengths and weaknesses
• Resources: financial, intellectual, location
• Cost advantages from proprietary know-how and/or location
• Creativity (ability to develop new products)
• Valuable intangible assets: intellectual capital
• Competitive capabilities
• Effective recruitment of talented individuals
Opportunities and threats
• Expansion or down-sizing of competitors......LPK
• Market trends
• Economic conditions
• Expectations of stakeholders
• Technology
• Public expectations
• All other activities or inactivities by competitors
• Criticisms by outsiders
• Changes in markets
• All other environmental condition
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.
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 intending to do
• Environmental scanning
o Internal appraisals of the organisations 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
In competitor analysis, 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. As such, they often
conduct 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.