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Examining the strengths, weaknesses, opportunities, and threats (SWOT) of a company is an integral
part of strategic planning for that company. In many respects, the SWOT analysis is a report card on
where the subject company is positioned in the competitive marketplace. Any attempt to identify the
direction a company should take in the future must be grounded in an honest understanding of where
that company is now.
Without assessing each of the key areas of SWOT analysis, no effective strategic plan can be
formulated.
SWOT analysis is part of the environmental scanning step in the strategic planning
process. Essentially, the environmental scanning step is broken down into three specific activities:
1. A thorough internal analysis of the firms strengths and weaknesses.
2. A task environment analysis of the firms industry that looks at entry barriers, suppliers,
customers, substitute products, and competitors.
3. An external macro environmental analysis that focuses on opportunities and threats.
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.
1. Strengths: characteristics of the business or team that give it an advantage over others in the
industry.
2. Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
3. Opportunities: external chances to make greater sales or profits in the environment.
4. Threats: external elements in the environment that could cause trouble for the business.
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.
Weaknesses
Weaknesses can include any area in which the company lacks strength. Poor product positioning,
deteriorating physical assets, out-of-date production equipment, and poor customer service all are
among the weaknesses of the firm. High employee turnover that causes the firm to lose talented
people can be a major weakness of the firm. Talent is hard to replace, especially in the innovative
environment of today. Sometimes a strength can be a weakness, such as if the firms physical plant is
state of the art but saddles the firm with a large amount of debt that limits what the company can
invest in to improve earnings.
Opportunities
Opportunities can be subject to interpretation. In general, any changes in the external environment
can be an opportunity to the firm. If competitors are weakened by a poor cash-flow position, it is an
opportunity for the firm to capture market share. Changes in tax structure, improvements in
economic trends, or the passage of favorable laws can all be opportunities of which the firm should
take advantage. Market positioning, new technologies, and international trade agreements can
provide substantial opportunities as well.
Threats
Threats arise from a lack of opportunities or from the strengths of competitors that may place the
firm at an extreme disadvantage. Changes in consumer preferences, new competitor innovations,
restrictive regulations, and unfavorable trade barriers are all examples of threats. Loss of favorable
distribution networks and the restrictions on the firms cash flows can threaten the firms market
position. Changes in the economic climate can also put a substantial strain on the firm.
and promotion); 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 quadrant matrix chart.
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.
For assistance on how to effective conduct a purposeful SWOT Analysis for your business, we
encourage you to contact us at Trinity Web Works for a no-cost professional marketing consultation
today.