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SWOT Analysis

Identifying Strengths, Weaknesses, Opportunities and Threats. Explanation of SWOT analysis.

What is a SWOT analysis? Description

A SWOT analysis is a tool, used in management and strategy formulation. It can help to identify the Strengths, Weaknesses, Opportunities and Threats of a particular company. 

 

Strengths and weaknesses are internal factors that create value or destroy value. They can include assets, skills, or resources that a company has at its disposal, compared to its competitors. They can be measured using internal assessments or external benchmarking.

 

Opportunities and threats are external factors that create value or destroy value. A company cannot control them. But they emerge from either the competitive dynamics of the industry/market or from demographic, economic, political, technical, social, legal or cultural factors (PEST).

 

Typical examples of factors in a SWOT Analysis diagram:

 

Strengths

  • Specialist marketing expertise
  • Exclusive access to natural resources
  • Patents
  • New, innovative product or service
  • Location of your business
  • Cost advantage through proprietary know-how
  • Quality processes and procedures
  • Strong brand or reputation

Weaknesses

  • Lack of marketing expertise
  • Undifferentiated products and service (i.e. in relation to your competitors)
  • Location of your company
  • Competitors have superior access to distribution channels
  • Poor quality of goods or services
  • Damaged reputation

Opportunities

  • Developing market (China, the Internet)
  • Mergers, joint ventures or strategic alliances
  • Moving into new attractive market segments
  • A new international market
  • Loosening of regulations
  • Removal of international trade barriers
  • A market that is led by a weak competitor

Threats

  • A new competitor in your own home market
  • Price war
  • Competitor has a new, innovative substitute product or service
  • New regulations
  • Increased trade barriers
  • A potential new taxation on your product or service

 

Any organization must try to create a fit with its external environment. The SWOT diagram is a very good tool for analyzing the (internal) strengths and weaknesses of a corporation and the (external) opportunities and threats. However, this analysis is just the first step. To really create the fit with the external environment is often the most difficult work.

 

Confrontation Matrix

A tool to combine the internal factors with the external factors is the Confrontation Matrix.

 

 

Opportunities

Threats

Strengths

  

Offensive

make the most of these

 

 Adjust

restore strengths

Weaknesses

  

Defensive

watch competition closely

 

 Survive

turn around

 

Often in reality the two columns of the SWOT diagram are pointing in opposite directions. Strategists must still deal with the paradox of creating alignment. This can be done via Outside-in strategy formulation (market-driven strategy) or Inside-out strategy formulation (resource-driven).


Note: you can also apply a SWOT analysis to competitors, often providing interesting new perspectives.

 

SWOT Analysis Forum

Recent User Comments
Khushboo - India What is SWOT analysis? "A SWOT analysis is like showing a mirror to oneself. It tells where the person stands. Strength: gives power. One should analyse his Weakness. Opportunities should be grabbed and one should overcome his Threats."    2
Mark - DK SWOT as a tool "It is my experience that the SWOT analysis as a standalone tool is not better than a simple brainstorming process focused on the four different issues. In order to make it work, it is necessary to work several other analysis e.g. value chain analysis, competitor analysis, PEST analysis, Porters five forces, financial analysis etc before you can determine if you have a solid case. Otherwise you don't have any kind of proof to support why you think that your technology for instance is superior to your competitors, or that lack of size is a threat in the global competition.
Only after you have done the initial work, you will be able to harvest the real value of the SWOT and if you decide to go a step further the TOWS matrix (=confrontation matrix)."		    6
Fred Moran - USA SWOT Process Steps "Here's a list of typical phases in a medium size SWOT process (modify as needed).
1. Determine clear objective(s)
2. Determine SWOT team (size, level, find good facilitator and contributors (mix of experts and creative people)
3. Gather Information / Research (who does what)
4. Prepare SWOT workshop (timing, find a suitable room, create a free open atmosphere, agenda with times, send invitations)
5. Workshop - Brainstorm and list the Strengths
6. Workshop - Brainstorm and list the Weaknesses
7. Workshop - Brainstorm and list the Opportunities
8. Workshop - Brainstorm and list the Threats
9. Workshop - Evaluate and Prioritize (use objectives)
10. Communicate the Results
11. Implement the Results
12. Monitor the Results"		    11
 - india SWOT analysis "As an MBA student, when we started to learn SWOT analysis it was difficult for us to understand, but once I found that it is so simple to learn. once we learnt it properly it became very easy to interprete it. SWOT analysis is simple and easy way to judge any organization or you can say any brand. its simply balance card of positive and negative sides of organization or brand. if there is imbalance in that balance card, whole organization or brand has to pay for that mean it high lights loss part of firm. "    16
Bayo - USA SWOT - research is important "A swot analysis can only be effectively executed if detailed and proper research work has been carried out. With detailed research you won't be groping in the dark, you have a comprehensive concept of both the internal and external factors and how to creatively and innovatively develop a strategy that is directional, cost effective and of course executable."    3
Best User Comments
Jake Vance - US SWOT Strengths and VRIO test "In order to analyze true, valid strengths in a SWOT Analysis, you can use the VRIO test: VALUE - Does the strength generate efficiency or more effectiveness? RARE - Is the strength also posessed by many competitors? IMITABILITY - Hard to copy / imitate? ORGANIZATIONAL - Can it be exploited by this organization?"    15
Lorenzo - UK Opportunity or Threat? "There can be considerable debate about what is a threat and what is an opportunity. When a company spots a new trend early and acts upon it well, then it has an opportunity. If another company does not see the same trend coming, or fails to act upon it well, then it is facing a threat. Furthermore, people with an entrepreneurial or can-do mentality view almost anything as an opportunity, while pessimistic, bureaucratic people view almost anything as a threat."    13
Debbie Rosaforte - US Uses of SWOT analysis "A SWOT analysis is frequently used in an early stage of strategic or marketing planning for decision-making, problem solving, and as a tool to increase the awareness of certain people about the situation the firm is in. But you can also use SWOT as a personal career planning tool to assess and reflect upon your own personal Strenghts, Weakenesses, Opportunites and Threats. Likewise, within the personnel department we can use SWOT to assess candidates for a function. You can even perform a SWOT on your football or hockey team..."    12
Gianvittorio - Netherlands SWOT or (maybe better) TOWS? "While I was teaching Business Policy, I noted the limitation of the SWOT analysis because students did not take the next step in developing alternative strategies based on the internal strengths and weaknesses and the external opportunities and threats. Consequently, I developed the TOWS Matrix. The original article "The TOWS Matrix--A Tool for Situational Analysis" was published in LONG RANGE PLANNING, Vol. 15, No. 2, 1982, pp. 54-66. This model has been used for research and strategy formulation around the globe. In the meantime, I applied the concept to career strategy as well as for analyzing the competitive advantages of nations. More information can be found on my website shown below. I trust that I shed some light at the origin and further development of the TOWS Matrix concept. usfca.edu/fac_staff/weihrichh/docs/tows.pdf"    8
Ryan - Korea SWOT is Commodity "Actually I admit a SWOT analysis is a simple and powerful tool for the early steps of a strategy decision. However it is so popular and sort of a commoditized tool."    6

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Compare with: Core Competence  |  Parenting Advantage  |  Porter's five forces model  |  Outsourcing  |  Industry Change  |  OODA Loop  |  BCG Matrix  |  GE Matrix

 

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  § Ben Bult (Netherlands) SWOT research "A SWOT is like making a photoshot from an organization. The more research, the more pixels. However, there is a moment that you've got enough pixels. Don't analyse just for the sake of analyzing. So a SWOT is always a good step in analyses because "if you don't know where you are, any direction is good" ( read direction as Strategy). So Swotting is a valuable tool for getting the right number of pixels and it gives you the possibility to make change scenario's as well. Good tool, a base for formulating strategies and a proven tool for gap analysis."

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  § kamekish (India) Pessimistic and bureaucratic "I think the combination of two words like pessimistic and bureaucratic speaks volume about today's trend. Bureaucratic people are equally dangerous to well conected civilized society as pessimistics are. Especially in a country like India where bureaucratic prevails like hell and get continuous support from top political leaders. This situation is very dangerous to growing society. This must vanish. The world of today demand new social as well as organisational system to make use of opportunities. Further research in this direction is paramount for sustainable growth of a society."

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  § Joan Russ (UK) More SWOT applications "Other SWOT application areas include assessing potential: - Product Development options, - R&D efforts, - Brand Management options, - Supplier Management options, Outsourcing options, - Acquisition options, - Partnership options."
  § Catherine Abou-Zaid (Bahrain) SWOT analysis "Thank you Debbie I was just sitting writing an appraisal and saw your comment very informative and I will do a swot analysis on this persons strengths and weaknesses. Thanks"
  § Hugh (USA) Applying a SWOT for change "Nice applications of SWOT Debbie, Joan and Catherine. One key element of SWOT, touched on by Rodger, is it's subjectivity/time-sensitivity to the person COMPILING the diagram. Using it broadly in staff/management perception analysis(either collectively at workshops, or individually through self-completion or qualitative interviews), for perspectives around in the company. Then"Objectize"(my word) the final company SWOT to make overall analysis meaningful and accessible to all stakeholders. Do"hierarchy/strata/level", "Team" or even "Departmental" opinion, SWOTs, with the same purpose.Assess the fit between the perception of vertical or horizontal strategies. Understanding and committing to a company change or policy is vital to making that change effectively . Apply a GAP approach,looking to envision what the company would like the SWOT to say at some time in the future, to provide a powerful and attractive strategic picture to work towards."
  § Jim McC (USA) Green, friendly, sustainable use? "Can SWOT be an effective tool for use in developing a green\-friendly, sustainable business model?"
  § Jim W (USA) SWOT usage "A SWOT analysis can be used to effectively evaluate and refine a green-friendly model, but it will be of limited use in developing one. A SWOT analysis of a related business may reveal opportunities for pursuing a green-friendly model."
  § Professor Bill (USA) Identifying Opportunities "The SWOT process finds its roots in the strategic planning process. The value of using this tool is to assist in identifying opportunities, that if developed and employed, would result in some contribution to an organization's competitive advantage. Over time the SWOT process has been used as a tool to identify opportunities that range from strategic planning to enhancing teaming behaviors to intrapersonal goal development. It is in fact, just a tool. It is used to "suggest" direction. There are more appropriate approaches/templates that will facilitate a much more effective business plan that the SWOT process. A good business model template will demand detailed evaluation of the managerial, marketing and financial dimesions of the planned enterprise and lead you (and your investors) to a "go" or "no go" decision."
  § Vivek Joshi (India) SWOT to open up minds "I have foud the SWOT to be very useful in opening up the minds of managers, particularly in small firms driven by promoters. The systematic analysis actually demonstrates to them that there are various aspects within and outside their firms which they have never studied systematically. This opening up of minds leads to willingness to progress further in Strategy Formulation. In many such cases, the first analysis is best done qualitatively."
  § Emilie Young (USA) Usage of SWOT "The SWOT Analysis is an immensely useful tool which can be applied in any area or discipline - from marketing to management to your personal life. Organizations must use it to assess itself and its environment in order to gain competitive advantage and increase productivity and profitability."

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