In strategic planning and strategic management, SWOT analysis (also known as the SWOT matrix, TOWS, WOTS, WOTS-UP, and situational analysis) is a decision-making technique that identifies the strengths, weaknesses, opportunities, and threats of an organization or project. SWOT analysis evaluates the strategic position of organizations and is often used in the preliminary stages of decision-making processes to identify internal and external factors that are favorable and unfavorable to achieving goals. Users of a SWOT analysis ask questions to generate answers for each category and identify competitive advantages. SWOT has been described as a "tried-and-true" tool of strategic analysis, but has also been criticized for limitations such as the static nature of the analysis, the influence of personal biases in identifying key factors, and the overemphasis on external factors, leading to reactive strategies. Consequently, alternative approaches to SWOT have been developed over the years.
Overview The name is an acronym for four components:
Strengths: characteristics of the business or project that give it an advantage over others Weaknesses: characteristics that place the business or project at a disadvantage relative to others Opportunities: elements in the environment that the business or project could exploit to its advantage Threats: elements in the environment that could cause trouble for the business or project Results of the assessment are often presented in the form of a matrix.
Internal and external factors Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external. The degree to which an organization's internal strengths matches with its external opportunities is known as its strategic fit. Internal factors may include:
Human resources—staff, volunteers, board members, stakeholders Physical resources—location, building, equipment, plant Financial—revenue, grants, investments, other sources of income Activities and processes—projects, programs, systems Past experiences—reputation, knowledge External factors may include:
Future trends in the organization's field or society at large (e.g. macroeconomics, technological change) The economy—local, national, or international Funding sources—investors, foundations, donors, legislatures Demographics—changes in the age, race, gender, culture of those in the organization serviceable area Physical environment—growth of location in which organization is situated, access to location Legislation Local, national, or international events A number of authors advocate assessing external factors before internal factors.
Use SWOT analysis has been used at different levels of analysis, including businesses, non-profit organizations, governmental units, and individuals. It is often used alongside other frameworks, such as PEST, as a basis for the analysis of internal and environmental factors. SWOT analysis may also be used in pre-crisis planning, preventive crisis management, and viability study recommendation construction.
Strategic planning SWOT analysis can be used to build organizational or personal strategy. Steps necessary to execute strategy-oriented analysis involve identifying internal and external factors, selecting and evaluating the most important factors, and identifying relationships between internal and external features. For instance, strong relations between strengths and opportunities can suggest good conditions in the company and allow using an aggressive strategy. On the other hand, strong interactions between weaknesses and threats could be analyzed as a warning to use a defensive strategy. One form of SWOT analysis combines each of the four components with another to examine four distinct strategies:
WT strategy (mini–mini): Faced with external threats and internal weaknesses, how to minimize both weaknesses and threats? WO strategy (mini–maxi): Faced with external opportunities and internal weaknesses, how to minimize weaknesses and maximize opportunities? ST strategy (maxi–mini): Faced with internal strengths and external threats, how to maximize strengths and minimize threats? SO strategy (maxi–maxi): Faced with external opportunities and internal strengths, how to maximize both opportunities and strengths?
Matching and converting A SWOT analysis can be used to generate matching and converting strategies. Matching refers to seeking competitive advantage by matching strengths to opportunities. This strategy ensures that an organization leverages its core competencies, resources, and capabilities to capitalize on favorable market conditions, emerging trends, or unmet customer needs. Conversion refers to converting weaknesses or threats into strengths or opportunities. An example of a conversion strategy is to buy off a threat through collaboration or merger.
Marketing
In competitor analysis, marketers can use SWOT analysis to detail and profile the competitive strengths and weaknesses of each competitor in the market. This process may involve analysing competitors' cost structures, sources of profits, resources and competencies, competitive positioning, product differentiation, degree of vertical integration, historical responses to industry developments, among other factors. Relevant marketing research methods may 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.
In community organizations
… excerpt ends here. Continue reading the full article.
