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7/31/2015

SWOTAnalysis

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SWOTAnalysis

SWOTanalysisisasimpleframeworkforgeneratingstrategicalternativesfroma

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situationanalysis.Itisapplicabletoeitherthecorporatelevelorthebusinessunit
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levelandfrequentlyappearsinmarketingplans.SWOT(sometimesreferredtoas
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TOWS)standsforStrengths,Weaknesses,Opportunities,andThreats.TheSWOT
frameworkwasdescribedinthelate1960'sbyEdmundP.Learned,C.Roland
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Christiansen,KennethAndrews,andWilliamD.GuthinBusinessPolicy,Textand
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Cases(Homewood,IL:Irwin,1969).TheGeneralElectricGrowthCouncilusedthis
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formofanalysisinthe1980's.Becauseitconcentratesontheissuesthatpotentially
havethemostimpact,theSWOTanalysisisusefulwhenaverylimitedamountof
timeisavailabletoaddressacomplexstrategicsituation.
ThefollowingdiagramshowshowaSWOTanalysisfitsintoastrategicsituation
analysis.

SituationAnalysis
/
\
InternalAnalysis
ExternalAnalysis
/\
/\
StrengthsWeaknesses OpportunitiesThreats
|
SWOTProfile
Theinternalandexternalsituationanalysiscanproducealargeamountof

7/31/2015

SWOTAnalysis

information,muchofwhichmaynotbehighlyrelevant.TheSWOTanalysiscan
serveasaninterpretativefiltertoreducetheinformationtoamanageablequantity
ofkeyissues.TheSWOTanalysisclassifiestheinternalaspectsofthecompanyas
strengthsorweaknessesandtheexternalsituationalfactorsasopportunitiesor
threats.Strengthscanserveasafoundationforbuildingacompetitiveadvantage,
andweaknessesmayhinderit.Byunderstandingthesefouraspectsofitssituation,
afirmcanbetterleverageitsstrengths,correctitsweaknesses,capitalizeon
goldenopportunities,anddeterpotentiallydevastatingthreats.

InternalAnalysis
Theinternalanalysisisacomprehensiveevaluationoftheinternalenvironment's
potentialstrengthsandweaknesses.Factorsshouldbeevaluatedacrossthe
organizationinareassuchas:
Companyculture
Companyimage
Organizationalstructure
Keystaff
Accesstonaturalresources
Positionontheexperiencecurve
Operationalefficiency
Operationalcapacity
Brandawareness
Marketshare
Financialresources
Exclusivecontracts
Patentsandtradesecrets
TheSWOTanalysissummarizestheinternalfactorsofthefirmasalistofstrengths
andweaknesses.

ExternalAnalysis
Anopportunityisthechancetointroduceanewproductorservicethatcan
generatesuperiorreturns.Opportunitiescanarisewhenchangesoccurinthe
externalenvironment.Manyofthesechangescanbeperceivedasthreatstothe
marketpositionofexistingproductsandmaynecessitateachangeinproduct
specificationsorthedevelopmentofnewproductsinorderforthefirmtoremain
competitive.Changesintheexternalenvironmentmayberelatedto:

7/31/2015

SWOTAnalysis

Customers
Competitors
Markettrends
Suppliers
Partners
Socialchanges
Newtechnology
Economicenvironment
Politicalandregulatoryenvironment
Thelastfouritemsintheabovelistaremacroenvironmentalvariables,andare
addressedinaPESTanalysis.
TheSWOTanalysissummarizestheexternalenvironmentalfactorsasalistof
opportunitiesandthreats.

SWOTProfile
Whentheanalysishasbeencompleted,aSWOTprofilecanbegeneratedandused
asthebasisofgoalsetting,strategyformulation,andimplementation.The
completedSWOTprofilesometimesisarrangedasfollows:
Strengths

Weaknesses

1.
2.
3.
.
.
.

1.
2.
3.
.
.
.

Opportunities

Threats

1.
2.
3.
.
.

1.
2.
3.
.
.

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SWOTAnalysis

Whenformulatingstrategy,theinteractionofthequadrantsintheSWOTprofile
becomesimportant.Forexample,thestrengthscanbeleveragedtopursue
opportunitiesandtoavoidthreats,andmanagerscanbealertedtoweaknessesthat
mightneedtobeovercomeinordertosuccessfullypursueopportunities.

MultiplePerspectivesNeeded
ThemethodusedtoacquiretheinputstotheSWOTmatrixwillaffectthequalityof
theanalysis.Iftheinformationisobtainedhastilyduringaquickinterviewwiththe
CEO,eventhoughthisonepersonmayhaveabroadviewofthecompanyand
industry,theinformationwouldrepresentasingleviewpoint.Thequalityofthe
analysiswillbeimprovedgreatlyifinterviewsareheldwithaspectrumof
stakeholderssuchasemployees,suppliers,customers,strategicpartners,etc.

SWOTAnalysisLimitations
Whileusefulforreducingalargequantityofsituationalfactorsintoamore
manageableprofile,theSWOTframeworkhasatendencytooversimplifythe
situationbyclassifyingthefirm'senvironmentalfactorsintocategoriesinwhich
theymaynotalwaysfit.Theclassificationofsomefactorsasstrengthsor
weaknesses,orasopportunitiesorthreatsissomewhatarbitrary.Forexample,a
particularcompanyculturecanbeeitherastrengthoraweakness.Atechnological
changecanbeaeitherathreatoranopportunity.Perhapswhatismoreimportant
thanthesuperficialclassificationofthesefactorsisthefirm'sawarenessofthem
anditsdevelopmentofastrategicplantousethemtoitsadvantage.

StrategicManagement>SWOTAnalysis
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