SWOT analysis

For other uses, see SWOT.

A SWOT analysis, with its four elements in a 2×2 matrix.

SWOT analysis (alternatively SWOT matrix) is an acronym for strengths, weaknesses, opportunities, and threats and is a structured planning method that evaluates those four elements of a project or business venture. A SWOT analysis can be carried out for a company, product, place, industry, or person. 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. Some authors credit SWOT to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies.[1][2] However, Humphrey himself did not claim the creation of SWOT, and the origins remain obscure. The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit.

  • 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

Identification of SWOTs is important because they can inform later steps in planning to achieve the objective. First, decision-makers should consider whether the objective is attainable, given the SWOTs. If the objective is not attainable, they must select a different objective and repeat the process.

Users of SWOT analysis must ask and answer questions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage.

Internal and external factors

So it is said that if you know your enemies and know yourself, you can win a hundred battles without a single loss. If you only know yourself, but not your opponent, you may win or may lose. If you know neither yourself nor your enemy, you will always endanger yourself.

The Art of War by Sun Tzu

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 4Ps as well as personnel, finance, manufacturing capabilities, and so on.

The external factors may include macroeconomic matters, technological change, legislation, 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.

It is prudent not to eliminate any candidate SWOT entry too quickly. The importance of individual SWOTs will be revealed by the value of the strategies they generate. A SWOT item that produces valuable strategies is important. A SWOT item that generates no strategies is not important.

Use

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) is 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.

Strategy building

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 (using popular 2x2 matrix), selection and evaluation of the most important factors, and identification of relations existing between internal and external features.[3]

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.[4] The analysis of these relationships to determine which strategy to implement is often performed in the growth planning phase for a business.[5]

Matching and converting

One way of utilizing SWOT is matching and converting. 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.[6]

SWOT variants

Various complementary analyses to SWOT have been proposed, such as the Growth-share matrix and Porter's five forces analysis.

TOWS

Heinz Weihrich said that some users found it difficult to translate the results of the SWOT analysis into meaningful actions that could be adopted within the wider corporate strategy. He introduced the TOWS Matrix, a conceptual framework that helps in finding the most efficient actions.[7]

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 graphs differentiate managerial situations by visualizing and foreseeing the dynamic performance of comparable objects according to findings by Brendan Kitts, Leif Edvinsson, and Tord Beding (2000).[8]

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 and weakness factors have influence or likely will have highest influence in the context of value in use (e.g., capital value fluctuations).

Corporate planning

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 PEST/PESTLE can be used as a basis for the analysis of business and environmental factors.[9]

  • 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 life cycle
  • 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 results – mapping against plans, taking corrective action, which may mean amending objectives/strategies[10]

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.

Below is an example SWOT analysis of a market position of a small management consultancy with specialism in HRM.[10]

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

In community organization

The SWOT analysis has been utilized 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.[11] It is used as a preliminary resource, assessing strengths, weaknesses, opportunities, and threats in a community served by a nonprofit or community organization.[12] This organizing tool is best used in collaboration with community workers and/or community members before developing goals and objectives for a program design or implementing an organizing strategy.The SWOT analysis is a part of the planning for social change process and will not provide a strategic plan if used by itself. After a SWOT analysis is completed, a social change organization can turn the SWOT list into a series of recommendations to consider before developing a strategic plan.[13]

one example of a SWOT Analysis used in community organizing
A simple SWOT Analysis used in Community Organizing

Strengths and Weaknesses:[11] These are the internal factors within an organization.

Opportunities and Threats:[11] These are 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 various community work as a tool for identifying external and internal support to combat internal and external opposition.[11] The SWOT analysis is necessary to provide direction to the next stages of the change process.[14] It has been utilized by community organizers and community members to further social justice in the context of Social Work practice.

Application in community organization

Elements to consider

Elements to consider in a SWOT analysis include understanding the community that a particular organization is working with. This can be done via public forums, listening campaigns, and informational interviews. Data collection will help inform the community members and workers when developing the SWOT analysis. A needs and assets assessment are tooling that can be used to identify the needs and existing resources of the community. When these assessments are done and data has been collected, an analysis of the community can be made that informs the SWOT analysis.[11]

Steps for implementation

A SWOT analysis is best developed in a group setting such as a work or community meeting. A facilitator can conduct the meeting by first explaining what a SWOT analysis is as well as identifying the meaning of each term.[11]

One way of facilitating the development of a SWOT analysis includes developing an example SWOT with the larger group then separating each group into smaller teams to present to the larger group after set amount of time.[11] This allows for individuals, who may be silenced in a larger group setting, to contribute. Once the allotted time is up, the facilitator may record all the factors of each group onto a large document such as a poster board, and then the large group, as a collective, can go work through each of the threats and weaknesses to explore options that may be used to combat negative forces with the strengths and opportunities present within the organization and community.[11] A SWOT meeting allows participants to creatively brainstorm, identify obstacles, and possibly strategize solutions/way forward to these limitations.

When to use SWOT analysis

The uses of a SWOT analysis by a community organization are as follows: to organize information, provide insight into barriers[15] that may be present while engaging in social change processes, and identify strengths available that can be activated to counteract these barriers.

A SWOT analysis can be used to:

Benefits

The SWOT analysis in social work practice framework is beneficial because it helps organizations decide whether or not an objective is obtainable and therefore enables organizations to set achievable goals, objectives, and steps to further the social change or community development effort.[16] It enables organizers to take visions and produce practical and efficient outcomes that effect long-lasting change, and it helps organizations gather meaningful information to maximize their potential.[16] Completing a SWOT analysis is a useful process regarding the consideration of key organizational priorities, such as gender and cultural diversity and fundraising objectives.[17]

Limitations

Some findings from Menon et al. (1999)[18] and Hill and Westbrook (1997)[19] have suggested that SWOT may harm performance and that "no-one subsequently used the outputs within the later stages of the strategy".

Other critiques include the misuse of the SWOT analysis as a technique that can be quickly designed without critical thought leading to a misrepresentation of strengths, weaknesses, opportunities, and threats within an organization's internal and external surroundings.[20]

Another limitation includes the development of a SWOT analysis simply to defend previously decided goals and objectives. This misuse leads to limitations on brainstorming possibilities and "real" identification of barriers. This misuse also places the organization’s interest above the well-being of the community. Further, a SWOT analysis should be developed as a collaborative with a variety of contributions made by participants including community members. The design of a SWOT analysis by one or two community workers is limiting to the realities of the forces, specifically external factors, and devalues the possible contributions of community members.[15]

See also

References

  1. ↑ Humphrey, Albert (December 2005). "SWOT Analysis for Management Consulting" (PDF). SRI Alumni Newsletter. SRI International.
  2. ↑ "Albert Humphrey The "Father" of TAM". TAM UK. Retrieved 2012-06-03.
  3. ↑ Blake, Martin; Wijetilaka, Shehan (26 February 2015). "5 tips to grow your start-up using SWOT analysis". Sydney. Retrieved 10 August 2015.
  4. ↑ Osita, Christian; Onyebuchi, Idoko; Justina, Nzekwe (31 January 2014). "Organization's stability and productivity: the role of SWOT analysis" (PDF). 2 (9). International Journal of Innovative and Applied Research (2014): 23–32. Retrieved 17 March 2016.
  5. ↑ Ommani, Ahmad (30 September 2011). "SWOT analysis for business management". 5 (22). African Journal of Business Management: 9448–9454. Retrieved 17 March 2016.
  6. ↑ See for instance: Mehta, S. (2000) Marketing Strategy
  7. ↑ Heinz Weihrich. "The TOWS Matrix --- A Tool for Situational Analysis" (PDF).
  8. ↑ Brendan Kitts, Leif Edvinsson and Tord Beding (2000) Crystallizing knowledge of historical company performance into interactive, query-able 3D Landscapes http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.17.9323
  9. ↑ Armstrong. M. A handbook of Human Resource Management Practice (10th edition) 2006, Kogan Page , London ISBN 0-7494-4631-5
  10. 1 2 Armstrong.M Management Processes and Functions, 1996, London CIPD ISBN 0-85292-438-0
  11. 1 2 3 4 5 6 7 8 9 10 11 12 "Community Toolbox: Section 14. SWOT analysis". Retrieved 2014-02-22.
  12. 1 2 Westhues, Anne; Jean Lafrance; Glen Schmidt (2001). "A SWOT analysis of social work education in Canada". Social Work Education: The International Journal. 20 (1): 35–56.
  13. ↑ "Our Community". Retrieved 16 March 2014.
  14. ↑ Birkenmaier, Julie (2001). The Practice of Generalist Social Work. New York, NY: Routledge.
  15. 1 2 3 Chermack, Thomas J.; Bernadette K. Kasshanna (December 2007). "The Use of and Misuse of SWOT analysis and implications for HRD professionals". Human Resource Development International. 10 (4): 383–399.
  16. 1 2 Quincy, Ronald. "SWOT Analysis: Raising capacity of your organization". Rutgers School of Social Work. Retrieved 2013-02-25.
  17. ↑ "The Change Agency". Retrieved 16 March 2014.
  18. ↑ 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. JSTOR 1251943.
  19. ↑ 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.
  20. ↑ Koch, Adam (2000). "SWOT does not need to be recalled: It needs to be enhanced". Swineburne University of Technology.
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