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SWOT Analysis

A SWOT analysis (or SWOT matrix) is a strategic planning technique used to identify Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning. It is intended to specify the objectives of the business venture or project and identify the internal and external factors that are favorable and unfavorable to achieving those objectives.

Strengths and weakness are frequently internally-related, while opportunities and threats commonly focus on the external environment. The name is an acronym for the four parameters the technique examines:

  • Strengths: characteristics of the business or project that give it an advantage over others.

  • Weaknesses: characteristics of the business 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.

SWOT analysis aims to identify the key internal and external factors seen as important to achieving an objective. SWOT analysis groups key pieces of information into two main categories:

  1. Internal factors — the strengths and weaknesses internal to the organization

  2. External factors — the opportunities and threats presented by the environment external to the organization

Analysis may view the internal factors as strengths or as weaknesses depending upon their effect on the organization's objectives. What may represent strengths with respect to one objective may be weaknesses (distractions, competition) for another objective. The factors may include all of the Marketing Mix 4Ps (Product, Price, Place, Promotion) and as well as personnel, finance, manufacturing capabilities, and so on.

The external factors may include macroeconomic matters, technological change, laws & regulations and sociocultural changes, as well as changes in the marketplace or in 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 its users to compile lists rather than to think about actual important factors 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.

SWOT analysis can be used effectively to build organizational or personal strategy. Steps necessary to execute strategy-oriented analysis involve identification of internal and external factors, selection and evaluation of the most important factors, and identification of relations existing 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 potential warning and advice for using a defensive strategy.

As part of the development of strategies and plans to enable the organization to achieve its objectives, that organization will use a systematic/rigorous process known as corporate planning. SWOT, alongside 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 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 lifecycle

  • Analysis of existing strategies — this should determine relevance from the results of an internal/external appraisal. This may include gap analysis of environmental factors

  • Strategic Issues defined — key factors in the development of a corporate plan that the organization must address

  • 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 all results — mapping against plans, taking corrective action, which may mean amending objectives/strategies

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