SWOT analysis

From Wikipedia, the free encyclopedia

Jump to: navigation, search

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.[citation needed]

 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 are 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.[citation needed] It is particularly helpful in identifying areas for development.
[citation needed]

Contents
[hide]

 1 Matching and converting

o 1.1 Evidence on the use of SWOT
 2 Internal and external factors
 3 Use of SWOT analysis
  4 SWOT - landscape analysis
 5 Corporate planning
o 5.1 Marketing
 6 See also
 7 References
 8 External links

[edit] 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.[1]

[edit] 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." [2] Findings from Menon et al. (1999) [3] and Hill and Westbrook (1997) [4] 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.[5]

[edit] 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. - Use a PEST or PESTLE analysis to help
identify factors

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.

[edit] 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.

[edit] 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).[6]

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).

[edit] 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.[7]

 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.[8]

[edit] 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 analyse the market position of a small management consultancy with specialism
in HRM.[8]

Strengths Weaknesses Opportunities Threats

Reputation in Shortage of consultants Well established Large consultancies
marketplace at operating level rather position with a well operating at a minor
than partner level defined market niche level
Expertise at partner Unable to deal with Identified market for Other small
level in HRM multi-disciplinary consultancy in areas consultancies looking to
consultancy assignments because of other than HRM invade the marketplace
size or lack of ability

[edit] See also

 Albert S Humphrey
 Six Forces Model
 VRIO
 PEST analysis
 Porter's Four Corners Model

[edit] References
1. ^ See for instance: Mehta, S. (2000) Marketing Strategy
2. ^ ManyWorlds.com: Don’t do SWOT: A Note on Marketing Planning
3. ^ 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.
4. ^ Hill, T. & R. Westbrook (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.
5. ^ J. Scott Armstrong (1982). "The Value of Formal Planning for Strategic Decisions". Strategic
Management Journal 3: 197–211. doi:10.1002/smj.4250030303.
6. ^ Brendan Kitts, Leif Edvinsson and Tord Beding (2000) Crystallizing knowledge of historical
company performance into interactive, query-able 3D Landscapes
http://de.scientificcommons.org/534302
7. ^ Armstrong. M. A handbook of Human Resource Management Practice (10th edition) 2006,
Kogan Page , London ISBN 0-7494-4631-5
8. ^ a b Armstrong.M Management Processes and Functions, 1996, London CIPD ISBN 0-85292-
438-0
[edit] External links