SWOT analysis explained

SWOT analysis (or SWOT matrix) is a strategic planning and strategic management technique used to help a person or organization identify Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning. It is sometimes called situational assessment or situational analysis.[1] Additional acronyms using the same components include TOWS and .[2] [3]

This technique is designed for use in the preliminary stages of decision-making processes and can be used as a tool for evaluation of the strategic position of organizations of many kinds (for-profit enterprises, local and national governments, NGOs, etc.).[4] It is intended to identify the internal and external factors that are favorable and unfavorable to achieving the objectives of the venture or project. Users of a SWOT analysis often ask and answer questions to generate meaningful information for each category to make the tool useful and identify their competitive advantage. SWOT has been described as a tried-and-true tool of strategic analysis,[5] but has also been criticized for its 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 rather than strengths-based strategies. Consequently, alternative approaches to SWOT have been developed over the years.

Overview

The name is an acronym for the four components the technique examines:

Results of the assessment are often presented in the form of a matrix, or simply as paragraphs.

Internal and external factors

Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external.[6] The degree to which the internal strengths of the firm matches with the external opportunities is expressed by the concept of strategic fit.[7]

Internal factors are viewed as strengths or 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 personnel, finance, manufacturing capabilities, and all of the marketing mix's 4Ps.

External factors include macroeconomics, technological change, legislation, and sociocultural changes, as well as changes in the marketplace.

A number of authors advocate assessing external factors before internal factors.[2] [6] [8]

Use

SWOT analysis has been used at different levels of analysis in many arenas, not just in profit-seeking organizations. 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.

Strategy building

SWOT analysis can be used to build organizational or personal strategy. Steps necessary to execute strategy-oriented analysis involve identification of internal and external factors (often using the popular 2 × 2 matrix), selection and evaluation of the most important factors, and identification of relations existing between internal and external features.[9]

For instance, strong relations between strengths and opportunities can suggest good conditions in the company and allow using an strategy. On the other hand, strong interactions between weaknesses and threats could be analyzed as a potential warning and advice for using a strategy.[10]

One form of SWOT (TOWS) matrix combines each of the four components with another to examine four distinct strategies:[2]

Matching and converting

One way of using SWOT is matching and converting.[11] Matching is used to find competitive advantage by matching the strengths to opportunities. Another tactic is to convert weaknesses or threats into strengths or opportunities. An example of a conversion strategy is to find new markets. If the threats or weaknesses cannot be converted, a company should try to minimize or avoid them.

Corporate planning

See main article: Corporate planning. As part of the development of strategies and plans to enable an organization to achieve its objectives, 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 internal and environmental factors.[12]

Corporate planning includes steps such as:[13]

Marketing

See main article: Marketing management. 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. 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:

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.

Below is an example SWOT analysis of a market position of a small management consultancy with a specialism in human resource management (HRM).

Strengthswidth=25% Weaknesseswidth=25% Opportunitieswidth=25% Threats
Reputation in marketplaceShortage of consultants at operating level rather than partner levelWell established position with a well-defined market nicheLarge consultancies operating at a minor level
Expertise at partner level in HRM consultancyUnable to deal with multidisciplinary assignments because of size or lack of abilityIdentified market for consultancy in areas other than HRMOther small consultancies looking to invade the marketplace

In community organizations

The SWOT analysis has been used in community work as a tool to identify positive and negative factors within organizations, communities, and the broader society that promote or inhibit successful implementation of social services and social change efforts.[14] It is used as a preliminary resource, assessing strengths, weaknesses, opportunities, and threats in a community served by a nonprofit or community organization.[15]

(internal factors within an organization):

(external factors stemming from community or societal forces):

Although the SWOT analysis was originally designed as an organizational method for business and industries, it has been replicated in community work as a tool for identifying external and internal support to combat the internal and external opposition. Understanding the particular community can be helped via public forums, listening campaigns, and informational interviews and other data collection. The SWOT analysis provides direction to the next stages of the change process.[16] It has been used by community organizers and community members to further social justice in the context of social work practice.[16]

Limitations and alternatives

SWOT analysis is intended as a starting point for discussion and cannot, in itself, show managers how to achieve a competitive advantage, particularly in a rapidly changing environment.[17]

In a highly cited 1997 critique, "SWOT Analysis: It's Time for a Product Recall", Terry Hill and Roy Westbrook observed that one among many problems of SWOT analysis as it is often practiced is that "no-one subsequently used the outputs [of SWOT analysis] within the later stages of the strategy".[18] Hill and Westbrook, among others, also criticized hastily designed SWOT lists.[18] [19] Other examples of potential pitfalls in practice are: preoccupation with a single strength, such as cost control, leading to a neglect of weaknesses, such as product quality;[17] and domination by one or two team members doing the SWOT analysis and devaluing possibly important contributions of other team members.[20] Many other limitations have been identified.[9]

Michael Porter developed the five forces framework as a reaction to SWOT, which he found lacking in rigor and too .[21]

Business professors have suggested various ways to remedy the common problems and limitations of SWOT analysis while retaining the SWOT framework.[22]

SOAR

SOAR (strengths, opportunities, aspirations, and results) is an alternative technique inspired by appreciative inquiry.[23] [24] SOAR has been criticized as having similar limitations as SWOT, such as "the inability to identify the necessary data".[25]

SVOR

In project management, the alternative to SWOT known by the acronym SVOR (Strengths, Vulnerabilities, Opportunities, and Risks) compares the project elements along two axes: internal and external, and positive and negative. It takes into account the mathematical link that exists between these various elements, considering also the role of infrastructures. The SVOR table provides an intricate understanding of the elements hypothesized to be at play in a given project:[26]

Forces Internal Mathematical link External
Total Forces Total Forces given constraints = Infrastructures / Opportunities Opportunities
Vulnerabilities given constraints = 1 / Total Forces constant k Opportunities given constraints = 1 / Risks
Vulnerabilities Risks given constraints = k / Vulnerabilities Risks

Constraints consist of: calendar of tasks and activities, costs, and norms of quality. The "k" constant varies with each project (for example, it may be valued at 1.3).[26]

History

In 1965, three colleagues at the Long Range Planning Service of Stanford Research Institute—Robert F. Stewart, Otis J. Benepe, and Arnold Mitchell—wrote a technical report titled Formal Planning: The Staff Planner's Role at Start-Up.[27] The report described how a person in the role of a company's staff planner would gather information from managers assessing operational issues grouped into four components represented by the acronym SOFT: the "satisfactory" in present operations, "opportunities" in future operations, "faults" in present operations, and "threats" to future operations.[27] Stewart et al. focused on internal operational assessment and divided the four components into (satisfactory and fault) and (opportunity and threat),[27] and not, as would later become common in SWOT analysis, into (strengths and weaknesses) and (opportunities and threats).

Also in 1965, four colleagues at the Harvard Graduate School of Business Administration—Edmund P. Learned, C. Roland Christensen, Kenneth R. Andrews, and William D. Guth—published the first of many editions of the textbook Business Policy: Text and Cases.[28] (was a term then current for what has come to be called strategic management.[29]) The first chapter of the textbook stated, without using the acronym, the four components of SWOT and their division into internal and external appraisal:

Looking back from three decades later, in the book Strategy Safari (1998), management scholar Henry Mintzberg and colleagues said that Business Policy: Text and Cases "quickly became the most popular classroom book in the field", widely diffusing its authors' ideas, which Mintzberg et al. called the "design school" model (in contrast to nine other schools that they identified) of strategic management, "with its famous notion of SWOT" emphasizing assessment of a company's internal and external situations.[30] [31] [29] However, the textbook contains neither a 2 × 2 SWOT matrix nor any detailed procedure for doing a SWOT assessment.[28] Strategy Safari and other books identified Kenneth R. Andrews as the co-author of Business Policy: Text and Cases who was responsible for writing the theoretical part of the book containing the SWOT components.[30] [32] [33] More generally, Mintzberg et al. attributed some conceptual influences on what they called the "design school" (of which they were strongly critical) to earlier books by Philip Selznick (Leadership in Administration, 1957) and Alfred D. Chandler Jr. (Strategy and Structure, 1962),[30] with other possible influences going back to the McKinsey consulting firm in the 1930s.[31] [34]

By the end of the 1960s, the four components of SWOT (without using the acronym) had appeared in other publications on strategic planning by various authors,[35] and by 1972 the acronym had appeared in the title of a journal article by Norman Stait, a management consultant at the British firm Urwick, Orr and Partners.[36] By 1973, the acronym was well-known enough that accountant William W. Fea, in a published lecture, mentioned "the mnemonic, familiar to students, of S.W.O.T., namely strengths, weaknesses, opportunities, threats".[37] An early example of a 2 × 2 SWOT matrix is found in a 1980 article by management professor Igor Ansoff (but Ansoff used the acronym T/O/S/W instead of SWOT).[38]

In popular culture

See also

Further reading

SWOT analysis is described in very many publications. A few examples of books that describe SWOT analysis and are widely held by WorldCat member libraries and available in the Internet Archive are:

Notes and References

  1. For example: : "For convenience, the matrix that will be introduced is called TOWS, or situational analysis";
  2. Weihrich . Heinz . April 1982 . The TOWS matrix—a tool for situational analysis . Long Range Planning . 15 . 2 . 54–66 . 10.1016/0024-6301(82)90120-0 . 154914972 .
  3. Nutt . Paul C. . Backoff . Robert W. . Summer 1993 . Transforming public organizations with strategic management and strategic leadership . . 19 . 2 . 299–347 (316) . 10.1016/0149-2063(93)90056-S . The SWOTs perspective is often used to pose questions for strategic management (e.g., Ansoff, 1980). Steiner's (1979) 'WOTS' approach, Rowe, Mason and Dickel's (1982) WOTS-UP, and Delbecq's (1989) 'TOWS' framework identify three of many derivations..
  4. Book: Silva, Carlos Nunes . 2005 . SWOT analysis . Encyclopedia of the city . Caves . Roger W. . Abingdon; New York . . 444–445 . 978-0415862875 . 55948158 . 10.4324/9780203484234 . https://archive.org/details/encyclopediaofci0000unse_o0h4/page/444 . registration.
  5. Examples of the "tried-and-true" trope:
    • Book: Sevier, Robert A. . 2001 . Not SWOT, but OTSW . Thinking outside the box: some (fairly) radical thoughts on how colleges and universities should think, act, and communicate in a very busy marketplace . Hiawatha, Iowa . Strategy Pub. . 46 . 0971059705 . 48165005 . https://archive.org/details/thinkingoutsideb0000sevi/page/46 . registration . Few people realize that there is an inherent danger in conducting a situational analysis using the old tried and true SWOT. The danger is this: When you look inside the organization first, you create a set of glasses through which you will look at the world. In doing so, you are highly likely to overlook significant opportunities and threats.. See also .
    • Book: Staples, Lee . 2004 . Roots to power: a manual for grassroots organizing . 2nd . Westport, Conn. . . 136 . 0275969975 . 56085984 . The tried and true SWOT Assessment examines positive and negative factors as does a Force Field Analysis, but a SWOT has a particular focus on the upsides and downsides for the action group itself..
    • Book: Lambert . Ron . Parker . Tom . 2006 . Is that your hand in my pocket?: the sales professional's guide to negotiating . Nashville . Nelson Business . 132 . 0785218777 . 63125604 . registration . Before you as a salesperson can develop a strategy, you have to assess the situation. We recommend the tried-and-true SWOT analysis. You start by taking a look at your Strengths and Weaknesses, your Opportunities and any Threats. Then you do exactly the same thing from the perspective of each of your competitors..
  6. Web site: Minsky . Laurence . Aron . David . 23 February 2021 . Are you doing the SWOT analysis backwards? . . 7 November 2021 . The results of a SWOT analysis can be (and almost always are) presented simply as a 2 × 2 grid, with one dimension representing the internal versus external factors, and the other depicting positive versus negative valence. ... To improve the inventory collection, you should start with the external factors, then turn your attention to the firm's internal ones.. See also .
  7. Book: Andrews, Kenneth R. . Kenneth R. Andrews . 1971 . The concept of corporate strategy . Homewood, Ill. . Dow Jones–Irwin . 37 . 0870940120 . 151781 . registration.
  8. Web site: Watkins . Michael D. . Michael D. Watkins . 27 March 2007 . From SWOT to TOWS: answering a reader's strategy question . . 7 November 2021.
  9. Pickton . David W. . Wright . Sheila . March 1998 . What's swot in strategic analysis? . Strategic Change . 7 . 2 . 101–109 . 10.1002/(SICI)1099-1697(199803/04)7:2<101::AID-JSC332>3.0.CO;2-6.
  10. Osita . Christian . Onyebuchi . Idoko . Justina . Nzekwe . 31 January 2014 . Organization's stability and productivity: the role of SWOT analysis . International Journal of Innovative and Applied Research . 2 . 9 . 23–32 . 17 March 2016.
  11. Piercy . Nigel . Giles . William . May 1989 . Making SWOT analysis work . Marketing Intelligence & Planning . 7 . 5/6 . 5–7 . 10.1108/EUM0000000001042.
  12. Book: Armstrong, Michael . A handbook of human resource management practice . 8th . 2001 . . London . 51 . 9780749433932 . 59549399 . registration.
  13. Book: Armstrong, Michael . Management processes and functions . 1990 . Management studies series . London . Institute of Personnel Management . 0-85292-438-0 . 21301791 . registration.
  14. Web site: Community Toolbox: Section 14. SWOT analysis . . . 2014-02-22.
  15. Westhues . Anne . Lafrance . Jean . Schmidt . Glen . February 2001 . A SWOT analysis of social work education in Canada . Social Work Education: The International Journal . 20 . 1 . 35–56. 10.1080/02615470020028364 . 143892190 .
  16. Book: Birkenmaier . Julie . Berg-Weger . Marla . 2017 . Organizational engagement, assessment, and planning . The practice of generalist social work . 4th . New York . . 552–577 . 9781138057852 . 971892636.
  17. Book: Dess . Gregory G. . Lumpkin . G. Thomas . Eisner . Alan B. . McNamara . Gerry . 2012 . The limitations of SWOT analysis . Strategic management: text and cases . 6th . New York . . 82 . 9780078029318 . 740281685 . https://archive.org/details/strategicmanagem0000unse_l3o3/page/n127 . registration.
  18. Hill . Terry . Westbrook . Roy . SWOT analysis: it's time for a product recall . Long Range Planning . 30 . 1 . 46–52 . February 1997 . 10.1016/S0024-6301(96)00095-7 . 10.1.1.469.2246.
  19. Koch . Adam . SWOT does not need to be recalled: It needs to be enhanced . B>Quest . . 2000 . 1084-3981.
  20. Chermack . Thomas J. . Kasshanna . Bernadette K. . The use of and misuse of SWOT analysis and implications for HRD professionals . Human Resource Development International . December 2007 . 10 . 4 . 383–399 . 10.1080/13678860701718760 . 145098663.
  21. Porter . Michael . Michael Porter . Argyres . Nicholas . McGahan . Anita M. . 2002 . An interview with Michael Porter . The Academy of Management Executive (1993–2005) . 16 . 2 . 43–52 . 4165839.
  22. Some examples of publications that suggest remedies for common problems and limitations of SWOT analysis:
    • Valentin . Erhard K. . April 2001 . SWOT analysis from a resource-based view . Journal of Marketing Theory and Practice . 9 . 2 . 54–69 . 40470032 . 10.1080/10696679.2001.11501891. 167660094 .
    • Coman . Alex . Ronen . Boaz . October 2009 . Focused SWOT: diagnosing critical strengths and weaknesses . International Journal of Production Research . 47 . 20 . 5677–5689 . 10.1080/00207540802146130. 109603771 .
    • Helms . Marilyn M. . Nixon . Judy . August 2010 . Exploring SWOT analysis—where are we now? A review of academic research from the last decade . Journal of Strategy and Management . 3 . 3 . 215–251 . 10.1108/17554251011064837.
    • Agarwal . Ravi . Grassl . Wolfgang . Pahl . Joy . January 2012 . Meta‐SWOT: introducing a new strategic planning tool . Journal of Business Strategy . 33 . 2 . 12–21 . 10.1108/02756661211206708.
    • Bell . Geoffrey G. . Rochford . Linda . November 2016 . Rediscovering SWOT's integrative nature: a new understanding of an old framework . The International Journal of Management Education . 14 . 3 . 310–326 . 10.1016/j.ijme.2016.06.003.
    • Lohrke . Franz T. . Mazzei . Matthew J. . Frownfelter-Lohrke . Cynthia . June 2021 . Should it stay or should it go? Developing an enhanced SWOT framework for teaching strategy formulation . . 46 . 2 . 345–382 . 10.1177/10525629211021143. 236311321 .
  23. Book: Stavros . Jacqueline M. . Cooperrider . David . David Cooperrider . Kelley . D. Lynn . SOAR: a new approach to strategic planning . 2007 . Holman . Peggy . Devane . Tom . Cady . Steven . The change handbook: the definitive resource on today's best methods for engaging whole systems . 2nd . San Francisco . Berrett-Koehler . 375–380 . 9781576753798 . 66527256 . https://archive.org/details/The_Change_Handbook_9781576755099/page/375 . registration.
  24. Book: Stavros . Jacqueline M. . Hinrichs . Gina . 2009 . The thin book of SOAR: building strengths-based strategy . Bend, OR . Thin Book Pub. Co. . 9780982206805 . 662578328.
  25. McLean . Gary N. . Winter 2017 . Will SOAR really help organization development soar?: an invited reaction to Zarestky and Cole, 2017 . New Horizons in Adult Education and Human Resource Development . 29 . 1 . 25–28 . 10.1002/nha3.20168.
  26. Book: Mesly, Olivier . 2017 . Project feasibility: tools for uncovering points of vulnerability . Industrial innovation series . Boca Raton, FL . . 9781498757911 . 953982371 . 10.1201/9781315295251.
  27. Puyt . Richard W. . Lie . Finn Birger . De Graaf . Frank Jan . Wilderom . Celeste P. M. . July 2020 . Origins of SWOT analysis . Academy of Management Proceedings . 2020 . 1 . 17416 . 10.5465/AMBPP.2020.132. 225400774 .
  28. Book: Learned . Edmund Philip . Christensen . C. Roland . Andrews . Kenneth R. . Guth . William D. . 1965 . Business policy: text and cases . 1st . Homewood, Illinois . Richard D. Irwin, Inc. . 20 . 680327 . registration. (See also .) Many publications cite this textbook as an early statement of the ideas behind SWOT, although it contains neither a 2 × 2 matrix nor any detailed procedure for doing a SWOT assessment; for example, Robert S. Kaplan and David P. Norton called this textbook "one of the early SWOT references", in: Book: Kaplan . Robert S. . Norton . David P. . 2008 . The execution premium: linking strategy to operations for competitive advantage . Boston, MA . . 67 . 9781422121160 . 227277585 . registration.
  29. Book: Browne . Michael . Banerjee . Bobby . Fulop . Liz . Linstead . Stephen . 1999 . Managing strategically . Fulop . Liz . Linstead . Stephen . Management: a critical text . South Yarra, Vic. . . 364–413 (373–379) . 0732937191 . 39837267 . 10.1007/978-1-349-15064-9_11.
  30. Book: Mintzberg . Henry . Henry Mintzberg . Ahlstrand . Bruce W. . Bruce Ahlstrand . Lampel . Joseph . 1998 . The design school: strategy formation as a process of conception . Strategy safari: a guided tour through the wilds of strategic management . New York . . 24–25 . 0684847434 . 38354698 . https://archive.org/details/strategysafarigu00mint_0/page/24 . registration.
  31. An analysis of the "design school" model was also in Mintzberg's earlier publications such as: Mintzberg . Henry . Henry Mintzberg . March 1990 . The design school: reconsidering the basic premises of strategic management . . 11 . 3 . 171–195 . 2486485 . 10.1002/smj.4250110302. free .
  32. Book: Kiechel, Walter . Walter Kiechel . 2010 . The lords of strategy: the secret intellectual history of the new corporate world . Boston, MA . . 121 . 9781591397823 . 259247279 . registration . What Andrews and his colleagues in the Business Policy course resolutely refused to do—and the main reason his ideas largely disappear from the subsequent history of strategy—was to agree that there were standard frameworks or constructs that could be applied to analyzing a business and its competitive situation. Oh, they might allow one, perhaps because they had helped develop it: so-called SWOT analysis, which called for looking at the strengths, weaknesses, opportunities, and threats besetting an enterprise..

  33. "The work of Kenneth Andrews has been especially influential in popularizing the idea that good strategy means ensuring a fit between the external situation a firm faces (threats and opportunities) and its own internal qualities or characteristics (strengths and weaknesses)."

  34. Book: McKinsey, James Oscar . James O. McKinsey . 1932 . Adjusting policies to meet changing conditions . General management series . G.M. 116 . New York . . 10865820. Presented at the AMA General Management Conference held in New York, May 3, 1932.
  35. Examples of publications in the late 1960s that mention the four components of SWOT without using the acronym include:
    • Quinn . James Brian . James Brian Quinn . Autumn 1968 . Technological strategies for industrial companies . Management Decision . 2 . 3 . 182–188 . 10.1108/eb000858.
    • Hargreaves . D. . March 1969 . Corporate planning: a chairman's guide . Long Range Planning . 1 . 3 . 28–37 . 10.1016/0024-6301(69)90069-7.
    • Humble . John W. . June 1969 . Corporate planning and management by objectives . Long Range Planning . 1 . 4 . 36–43 . 10.1016/0024-6301(69)90044-2.
    • Ringbakk . Kjell-Arne . December 1969 . Organised planning in major U.S. companies . Long Range Planning . 2 . 2 . 46–57 . 10.1016/0024-6301(69)90009-0.
    • Book: Steiner, George A. . 1969 . Top management planning . Studies of the modern corporation . New York . Macmillan . 220043.
  36. Stait . Norman H. . July 1972 . Management training and the smaller company: SWOT analysis . Industrial and Commercial Training . 4 . 7 . 325–330 . 10.1108/eb003232.
  37. Fea . William W. . 1973 . The sixtieth Thomas Hawksley lecture: The accountant—overhead burden or service? . . 187 . 1 . 687–697 (689) . 10.1243/PIME_PROC_1973_187_155_02.
  38. Ansoff . H. Igor . H. Igor Ansoff . April 1980 . Strategic issue management . . 1 . 2 . 131–148 . 2486096 . 10.1002/smj.4250010204. 167511003 .
  39. Web site: Synopsis: Silicon Valley – 'Homicide'. .

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "SWOT analysis".

Except where otherwise indicated, Everything.Explained.Today is © Copyright 2009-2024, A B Cryer, All Rights Reserved. Cookie policy.