SWOT analysis

From Free net encyclopedia

A SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture or in any other situation requiring a decision. The required first step in SWOT analysis is the definition of the desired end state or objective. The definition of objective must be explicit and approved by all participants in the process. This first step must be performed carefully because failure to identify correctly the end state aimed for leads to wasted resources and possibly failure of the enterprise. In relation to objectives the following terms have been used in the literature: desired end states, plans, policies, goals, objectives, strategies, tactics and actions. Definitions vary, overlap and fail to achieve clarity. The following concept has been found useful. The items listed above may be organized in a hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO), Second Rank Objective, Third Rank Objective, etc. From any rank, the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?" The exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. That is how the TRO is defined. An example may help to clarify the concept presented above.

Once the objective has been identified, SWOTs are discovered and listed. SWOTs are defined precisely as follows:

Strengths are attributes of the organization that are helpful to the achievement of the objective.

Weaknesses are attributes of the organization that are harmful to the achievement of the objective.

Opportunities are external conditions that are helpful to the achievement of the objective.

Threats are external conditions that are harmful to the achievement of the objective.

See SWOT diagram.

Correct identification of SWOTs is essential because subsequent steps in the process are all derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, in view of the SWOTs. If the objective is NOT attainable (in view of the SWOTs) a different objective must be selected and the process is repeated.

If, on the other hand, the objective seems attainable, the SWOTs are used as inputs to the creative generation of possible strategies, by asking and answering the following four questions many times:

1. How can we Use each Strength?

2. How can we Stop each Weakness?

3. How can we Exploit each Opportunity?

4. How can we Defend against each Threat?

Ideally a cross-functional team or a task force that represents a broad range of perspectives should carry out SWOT analyses. For example, a SWOT team may include an accountant, a salesperson, an executive manager, an engineer, and an ombudsman.

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Possible examples

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Strengths and Weaknesses

Resources: financial, intellectual, locational
Customer Service
Efficiency
Competitive Advantages
Infrastructure
Quality
Staff
Management
Price
Distribution Channels and Hours of operations
After sales service and Sales promotion techniques
Transportation and Delivery time
Diversified fields, Product line and multiple services/offers (Technical, Commercial, Designing & Turnkey Projects etc )

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Opportunities and Threats

Competitors' actions
Economic conditions
Interest rates
Increasing market saturation
Changes in laws and regulations

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Errors to Be Avoided

The following errors have been observed in published accounts of SWOT Analysis. Making these errors can result in serious losses.

1. Conducting a SWOT Analysis before defining and agreeing upon an objective (desired end state). A moment of reflection will reveal an indisputable truth: SWOTs cannot exist in the abstract. They can exist only with reference to an objective. If the desired end state is not openly defined and agreed upon, each participant may have a different end state in mind and the outcome is confusion.

2. Opportunities [external to the company] are often confused with strengths [internal to the company]. Keep them separate.

3. Another error is to confuse SWOTs with possible strategies. This error is made especially with reference to Opportunities. To avoid this error, it may be useful to think of Opportunities as "Auspicious Conditions." It may also be useful to keep in mind that SWOTs are descriptions of conditions. Possible strategies define actions.

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