SWOT analysis 1

SWOT analysis
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.
• Strengths: attributes of the person or company that are helpful to achieving the objective(s).
• Weaknesses: attributes of the person or company that are harmful to achieving the objective(s).
• Opportunities: external conditions that are helpful to achieving the objective(s).
• Threats: external conditions which could do damage to the objective(s).
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. It is particularly helpful in identifying areas for development.

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]

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]
These criticisms are addressed to an old version of SWOT analysis that precedes the SWOT analysis described
above under the heading "Strategic and Creative Use of SWOT Analysis." This old version did not require that
SWOTs be derived from an agreed upon objective. Examples of SWOT analyses that do not state an objective can be
"Human Resources" and "Marketing."
SWOT analysis 2

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.

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.

SWOT - landscape analysis

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 The SWOT-landscape systematically deploys the
context of value in use (for ex. capital value fluctuations). relationships between overall objective and
underlying SWOT-factors and provides an
interactive, query-able 3D landscape.
SWOT analysis 3

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
• 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]

Marketing
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]
SWOT analysis 4

Strengths Weaknesses Opportunities Threats

Reputation in marketplace Shortage of consultants at operating level Well established position with a Large consultancies operating at a
rather than partner level well defined market niche minor level

Expertise at partner level Unable to deal with multi-disciplinary Identified market for consultancy Other small consultancies looking
in HRM consultancy assignments because of size or lack of ability in areas other than HRM to invade the marketplace

See also
• Albert S Humphrey
• Six Forces Model
• VRIO
• PEST analysis
• Porter's Four Corners Model

External links
• SWOT Analysis, video and template [9]
• SWOT analysis, method and examples [10]
• SWOT analysis factsheet giving introductory guidance [11], Chartered Institute of Personnel and Development
(CIPD)
• Free online software tool for SWOT Analysis [12]

References
[1] See for instance: Mehta, S. (2000) Marketing Strategy (http:/ / www. shsu. edu/ ~mkt_ssm/ mkt570/ Chap04. ppt)
[2] ManyWorlds.com: Don’t do SWOT: A Note on Marketing Planning (http:/ / manyworlds. com/ exploreco. aspx?coid=CO85041445304)
[3] Menon, A. et al. (1999). "Antecedents and Consequences of Marketing Strategy Making" (http:/ / jstor. org/ stable/ 1251943). Journal of
Marketing (American Marketing Association) 63(2) (2): 18–40. doi:10.2307/1251943. .
[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] Armstrong.M Management Processes and Functions, 1996, London CIPD ISBN 0-85292-438-0
[9] http:/ / www. mindtools. com/ pages/ article/ newTMC_05. htm
[10] http:/ / www. businessballs. com/ swotanalysisfreetemplate. htm
[11] http:/ / www. cipd. co. uk/ subjects/ corpstrtgy/ general/ swot-analysis. htm
[12] http:/ / www. inghenia. com/ gadgets/ swot/ swot_en. php
Article Sources and Contributors 5

Article Sources and Contributors

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Image Sources, Licenses and Contributors

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