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 favourable and unfavourable 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 500 companies.
SWOT analysis is a tool that identifies the Strengths, Weaknesses, Opportunities and Threats of an organisation. Specifically, SWOT is a basic, straightforward model that assesses what an organisation can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimised to achieve desired results.
SWOT Analysis This method helps to assess internal and external factors according to four main categories: | External factors | ||
Opportunities · Current customers highly content with services. · Good relationship with current service providers. · Lack of local services for small offices. | Threats · Increasing competitiveness on service markets. · Lack of information on users’ interest in new services. | ||
Internal factors | Strengths · Profound experience in service integration. · High awareness of customer needs. · Sufficient resources to implement new solutions. | Apply strengths to leverage opportunities · Develop specific services for small offices. | Apply Strengths to Reduce Threats · Conduct market survey on users’ service needs. |
Weaknesses · No obvious unique selling point (USP). · Service portfolio very diverse and not well structured. | Minimise weaknesses to seize opportunities · Develop new marketing channels · Provide suitable marketing material on provider’s USP (i.e. unique selling points) | Reduce weaknesses to avoid risks · Structure the service portfolio and concentrate on the most important customer needs. | |
The use of SWOT analysis
When using SWOT analysis, there is need to be realistic about the strengths and weaknesses of the organisation. Distinguish between where your organisation is today, and where it could be in the future. Also remember to be specific by avoiding gray areas and always analyze in relation to the competition (i.e. are you better or worse than competition?). Finally, keep your SWOT analysis short and simple, and avoid complexity and over-analysis since much of the information is subjective. Thus, use it as a guide and not a prescription (Investopedia).
- 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 to highlight and identify strengths, weaknesses, opportunities and threats. It is particularly helpful in identifying areas for development.
The usefulness of SWOT analysis is not limited to profit-seeking organisations. SWOT analysis may be used in any decision-making situation when a desired end-state (objective) has been defined. Examples include: non-profit organisations, 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. Here are some examples of what a SWOT analysis can be used to assess:
- a company (its position in the market, commercial viability, etc)
- a method of sales distribution
- a product or brand
- a business idea
- a strategic option, such as entering a new market or launching a new product
- a opportunity to make an acquisition
- a potential partnership
- changing a supplier
- outsourcing a service, activity or resource
- an investment opportunity
Sample SWOT analysis (Wohlfart, Bilan & Schimpf, 2010)
STRENGTHS · Advantages of proposition? · Capabilities? · Competitive advantages? · USP’s (unique selling points)? · Resources, Assets, People? · Experience, knowledge, data? · Financial reserves, likely returns? · Marketing – reach, distribution, awareness? · Innovative aspects? · Location and geographical? · Price, value, quality? · Accreditations, qualifications, certifications? · Processes, systems, IT, communications? · Cultural, attitudinal, behavioural? · Management cover, succession? | WEAKNESSES · Disadvantages of proposition? · Gaps in capabilities? · Lack of competitive strength? · Reputation, presence and reach? · Financials? · Own known vulnerabilities? · Timescales, deadlines and pressures? · Cash flow, start-up cash-drain? · Continuity, supply chain robustness? · Effects on core activities, distraction? · Reliability of data, plan predictability? · Morale, commitment, leadership? · Accreditations, etc? · Processes and systems, etc? · Management cover, succession? |
OPPORTUNITIES · Market developments? · Competitors’ vulnerabilities? · Industry or lifestyle trends? · Technology development and innovation? · Global influences? · New markets, vertical, horizontal? · Niche target markets? · Geographical, export, import? · New USP’s? · Tactics – surprise, major contracts, etc? · Business and product development? · Information and research? · Partnerships, agencies, distribution? · Volumes, production, economies? · Seasonal, weather, fashion influences? | THREATS · Political effects? · Legislative effects? · Environmental effects? · IT developments? · Competitor intentions – various? · Market demand? · New technologies, services, ideas? · Vital contracts and partners? · Sustaining internal capabilities? · Obstacles faced? · Insurmountable weaknesses? · Loss of key staff? · Sustainable financial backing? · Economy – home, abroad? · Seasonality, weather effects? |
Another way of utilising 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 minimise or avoid
As part of the development of strategies and plans to enable the organisation to achieve its objectives, then that organisation will use a systematic/rigorous process known as corporate planning. SWOT can be used as a basis for the analysis of business and environmental factors.
- Set objectives – Defining what the organisation is going to do
- Environmental scanning – Internal appraisals of the organisation’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 organisation.
- 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.
A SWOT analysis is a subjective assessment of data which is organized by the SWOT format into a logical order that helps understanding, presentation, discussion and decision-making. The four dimensions are a useful extension of a basic two heading list of pro’s and con’s. SWOT analysis can be used for all sorts of decision-making, and the SWOT template enables proactive thinking, rather than relying on habitual or instinctive reactions.
The SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Threats. The free SWOT template below includes sample questions, whose answers are inserted into the relevant section of the SWOT grid. The questions are examples, or discussion points, and obviously can be altered depending on the subject of the SWOT analysis. Note that many of the SWOT questions are also talking points for other headings – use them as you find most helpful, and make up your own to suit the issue being analysed. It is important to clearly identify the subject of a SWOT analysis, because a SWOT analysis is a perspective of one thing, be it a company, a product, a proposition, and idea, a method, or option, etc.
In the use of this tool, be sure to describe the subject for the SWOT analysis clearly so that all the people that are contributing to the analysis and those seeing the finished SWOT analysis, will properly understand the purpose of the SWOT assessment and implications.
References
Answers.com. (2015). Critical success factors.
Armstrong. M. (1996). Management Processes and Functions, 1996, London CIPD.
Armstrong. M. A handbook of human resource management practice (10th edition) 2006, Kogan Page, London
Hill, T. & Westbrook, R. (1997). SWOT Analysis: It’s time for a product recall. Long Range Planning 30 (1): 46–52. doi:10.1016/S0024-6301(96)00095-7.
- Scott Armstrong (1982). The value of formal planning for strategic decisions. Strategic Management Journal 3: 197–211. doi:10.1002/smj.4250030303.
ManyWorlds.com: Don’t do SWOT: A note on marketing planning
Menon, A. et al. (1999). Antecedents and consequences of marketing strategy making. Journal of Marketing (American Marketing Association) 63 (2): 18–40. doi:10.2307/1251943. http://jstor.org/stable/1251943.
Wohlfart,L., Bilan, L. & Schimpf, S. (2010). Step-by-step development of facility management services: I3CON in collaboration with University of Stuttgart, IAT. Available online through http://www.i3con.org and http://publica
