SWOT analysis

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For other uses, see SWOT.

The four components of SWOT in a 2 × 2 matrix
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In strategic planning and strategic management, SWOT analysis (also known as the SWOT matrix, TOWS, WOTS, WOTS-UP, and situational analysis)[1] is a decision-making technique that identifies the strengths, weaknesses, opportunities, and threats of an organization or project.

SWOT analysis evaluates the strategic position of organizations and is often used in the preliminary stages of decision-making processes[2] to identify internal and external factors that are favorable and unfavorable to achieving goals. Users of a SWOT analysis ask questions to generate answers for each category and identify competitive advantages.

SWOT has been described as a "tried-and-true" tool of strategic analysis,[3] but has also been criticized for limitations such as the static nature of the analysis, the influence of personal biases in identifying key factors, and the overemphasis on external factors, leading to reactive strategies. Consequently, alternative approaches to SWOT have been developed over the years.

Overview

The name is an acronym for four components:

  • Strengths: characteristics of the business or project that give it an advantage over others
  • Weaknesses: characteristics that place the business or project at a disadvantage relative to others
  • Opportunities: elements in the environment that the business or project could exploit to its advantage
  • Threats: elements in the environment that could cause trouble for the business or project

Results of the assessment are often presented in the form of a matrix.[4]

Internal and external factors

Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external.[5] The degree to which an organization's internal strengths matches with its external opportunities is known as its strategic fit.[6][7][8]

Internal factors may include:[9]

  • Human resources—staff, volunteers, board members, stakeholders
  • Physical resources—location, building, equipment, plant
  • Financial—revenue, grants, investments, other sources of income
  • Activities and processes—projects, programs, systems
  • Past experiences—reputation, knowledge

External factors may include:[9]

A number of authors advocate assessing external factors before internal factors.[5][10][11]

Use

SWOT analysis has been used at different

non-profit organizations, governmental units, and individuals.[12] It is often used alongside other frameworks, such as PEST, as a basis for the analysis of internal and environmental factors.[13] SWOT analysis may also be used in pre-crisis planning, preventive crisis management, and viability study recommendation construction.[14]

Strategic planning

SWOT analysis can be used to build organizational or personal strategy. Steps necessary to execute strategy-oriented analysis involve identifying internal and external factors, selecting and evaluating the most important factors, and identifying relationships between internal and external features.[15] For instance, strong relations between strengths and opportunities can suggest good conditions in the company and allow using an aggressive strategy. On the other hand, strong interactions between weaknesses and threats could be analyzed as a warning to use a defensive strategy.[16]

One form of SWOT analysis combines each of the four components with another to examine four distinct strategies:[10]

  • WT strategy (mini–mini): Faced with external threats and internal weaknesses, how to minimize both weaknesses and threats?
  • WO strategy (mini–maxi): Faced with external opportunities and internal weaknesses, how to minimize weaknesses and maximize opportunities?
  • ST strategy (maxi–mini): Faced with internal strengths and external threats, how to maximize strengths and minimize threats?
  • SO strategy (maxi–maxi): Faced with external opportunities and internal strengths, how to maximize both opportunities and strengths?

Matching and converting

A SWOT analysis can be used to generate matching and converting strategies.[17] Matching refers to seeking competitive advantage by matching strengths to opportunities. This strategy ensures that an organization leverages its core competencies, resources, and capabilities to capitalize on favorable market conditions, emerging trends, or unmet customer needs. Conversion refers to converting weaknesses or threats into strengths or opportunities. An example of a conversion strategy is to buy off a threat through collaboration or merger.[17]

Marketing

Main article: Marketing management
See also: Marketing mix

In competitor analysis, marketers can use SWOT analysis to detail and profile the competitive strengths and weaknesses of each competitor in the market. This process may involve analysing competitors' cost structures, sources of profits, resources and competencies, competitive positioning, product differentiation, degree of vertical integration, historical responses to industry developments, among other factors. Relevant marketing research methods may include:

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.

SWOT analysis of the market position of a small management consultancy with a specialism in human resource management[18]
Strengths Weaknesses Opportunities Threats
Reputation in marketplace Shortage of consultants at operating level rather than partner level Well established position with a well-defined market niche Large consultancies operating at a minor level
Expertise at partner level in HRM consultancy Unable to deal with multidisciplinary assignments because of size or lack of ability Identified market for consultancy in areas other than HRM Other small consultancies looking to invade the marketplace

In community organizations

An example of a SWOT template that includes cells for strategies, not only assessments
A simple SWOT template

Although the SWOT analysis was originally designed for business and industries, it has been used in non-governmental organisations as a tool for identifying external and internal support to combat internal and external opposition for successful implementation of social services and social change efforts.[9] Understanding particular communities can come from public forums, listening campaigns, and informational interviews and other data collection.[9] SWOT analysis provides direction to the next stages of the change process.[19] It has been used by community organizers and community members to further social justice in the context of social work practice,[19] and can be applied directly to communities served by a specific nonprofit or community organization.[20]

Limitations and alternatives

SWOT analysis is intended as a starting point for discussion and not to, in itself, show managers how to achieve a competitive advantage.[21]

In a highly-cited 1997 critique, "SWOT Analysis: It's Time for a Product Recall", Terry Hill and Roy Westbrook observed that one among many problems of SWOT analysis as often practiced is that "no-one subsequently used the outputs [of SWOT analysis] within the later stages of the strategy".[22] Hill and Westbrook, among others, also criticized hastily designed SWOT lists.[22][23] Other limitations of SWOT practice include: preoccupation with a single strength, such as cost control, leading to a neglect of weaknesses, such as product quality;[21] and domination by one or two team members doing the SWOT analysis and devaluing possibly important contributions of other team members.[24] Many other limitations have been identified.[15]

Business professors have suggested various ways to remedy the common problems and limitations of SWOT analysis while retaining the SWOT framework.[12]

Porter's five forces

Main article: Porter's five forces analysis
See also: Porter's four corners model

Michael Porter developed the five forces framework as an alternative to SWOT analyses, which he found lacking in rigor and over-dependent on individual company circumstances.[25]

SOAR

SOAR (strengths, opportunities, aspirations, and results) is an alternative technique inspired by appreciative inquiry.[26][27] SOAR has been criticized as having similar limitations as SWOT, such as "the inability to identify the necessary data".[28]

SVOR

In project management, the alternative to SWOT known by the acronym SVOR (Strengths, Vulnerabilities, Opportunities, and Risks) compares the project elements along two axes: internal and external, and positive and negative.[29] It takes into account the mathematical link that exists between these various elements, considering also the role of infrastructures. The SVOR table provides an intricate understanding of the elements hypothesized to be at play in a given project:[29]: 9 

Forces Internal Mathematical link External
Positive Total Forces Total Forces given constraints = Infrastructures / Opportunities Opportunities
Mathematical link Vulnerabilities given constraints = 1 / Total Forces constant k Opportunities given constraints = 1 / Risks
Negative Vulnerabilities Risks given constraints = k / Vulnerabilities Risks

Constraints consist of: calendar of tasks and activities, costs, and norms of quality. The "k" constant varies with each project (for example, it may be valued at 1.3).[29]: 9 

History

In 1965, three colleagues at the Long Range Planning Service (LRPS) of

Stanford Research Institute—Robert F. Stewart, Otis J. Benepe, and Arnold Mitchell—wrote a technical report titled Formal Planning: The Staff Planner's Role at Start-Up.[30] The report described how a person in the role of a company's staff planner would gather information from managers assessing operational issues grouped into four components represented by the acronym SOFT: the "satisfactory" in present operations, "opportunities" in future operations, "faults" in present operations, and "threats" to future operations.[30] Stewart et al. focused on internal operational assessment and divided the four components into present (satisfactory and fault) and future (opportunity and threat),[30] and not, as would later become common in SWOT analysis, into internal (strengths and weaknesses) and external (opportunities and threats).[6]

Also in 1965, four colleagues at the

Harvard Graduate School of Business Administration (later the Harvard Business School)—Edmund P. Learned, C. Roland Christensen, Kenneth R. Andrews, and William D. Guth—published the first of many editions of the textbook Business Policy: Text and Cases.[6] (Business policy was a term then current for what has come to be called strategic management.[31]
) The first chapter of the textbook stated, without using the acronym, the four components of SWOT and their division into internal and external appraisal:

Deciding what strategy should be is, at least ideally, a rational undertaking. Its principal subactivities include identifying opportunities and threats in the company's environment and attaching some estimate of risk to the discernible alternatives. Before a choice can be made, the company's strengths and weaknesses must be appraised.[6]

Looking back from three decades later, in the book Strategy Safari (1998), management scholar

McKinsey consulting firm in the 1930s.[32][35]

However, a 2023 history of SWOT by Richard W. Puyt and colleagues criticized Mintzberg's "vilification of SWOT" and Mintzberg's apparently poor knowledge of the LRPS at Stanford.[36] Puyt et al. considered the LRPS to be the originator of SWOT (via SOFT) and said that the claim of Mintzberg and others that SWOT was invented at, or disseminated by, Harvard Business School is an "academic urban legend".[36]

By the end of the 1960s, the four components of SWOT (without using the acronym) had appeared in other publications on strategic planning by various authors,[37] and by 1972 the acronym had appeared in the title of a journal article by Norman Stait, a management consultant at the British firm Urwick, Orr and Partners.[38] By 1973, the acronym was well-known enough that accountant William W. Fea, in a published lecture, mentioned "the mnemonic, familiar to students, of S.W.O.T., namely strengths, weaknesses, opportunities, threats".[39] Early examples of a 2 × 2 SWOT matrix are found in John Argenti's book Systematic Corporate Planning (1974)[40] and in a 1980 article by management professor Igor Ansoff (but Ansoff used the acronym T/O/S/W instead of SWOT).[4] In the 1960s Ansoff had worked with the LRPS, where the SOFT approach originated.[41]

  • Television: In the 2015 Silicon Valley episode "Homicide" (Season 2, Episode 6), Jared Dunn (Zach Woods) introduces the Pied Piper team to SWOT analysis. Later in that episode Dinesh (Kumail Nanjiani) and Gilfoyle (Martin Starr) employ the method when deciding whether or not to inform a stunt driver that the calculations for his upcoming jump were performed incorrectly.[42]

See also

References

  1. doi:10.1016/0149-2063(93)90056-S. The SWOTs perspective is often used to pose questions for strategic management (e.g., Ansoff, 1980). Steiner's (1979) 'WOTS' approach, Rowe, Mason and Dickel's (1982) WOTS-UP, and Delbecq's (1989) 'TOWS' framework identify three of many derivations. See also: Weihrich 1982, p. 54: "For convenience, the matrix that will be introduced is called TOWS, or situational analysis"; Sevier 2001
    , p. 46.
  2. OCLC 55948158
    .
  3. ^ Examples of the "tried-and-true" trope:
  4. ^
    S2CID 167511003
    .
  5. ^ a b Minsky, Laurence; Aron, David (23 February 2021). "Are you doing the SWOT analysis backwards?". Harvard Business Review. Retrieved 7 November 2021. The results of a SWOT analysis can be (and almost always are) presented simply as a 2 × 2 grid, with one dimension representing the internal versus external factors, and the other depicting positive versus negative valence. ... To improve the inventory collection, you should start with the external factors, then turn your attention to the firm's internal ones. See also Sevier 2001.
  6. ^
    OCLC 227277585
    .
  7. OCLC 151781
    .
  8. ^
    OCLC 38354698
    .
  9. ^ a b c d "Community Toolbox: Section 14. SWOT analysis". Community Tool Box. Center for Community Health and Development at the University of Kansas. Retrieved 2014-02-22.
  10. ^
    S2CID 154914972
    .
  11. ^ Watkins, Michael D. (27 March 2007). "From SWOT to TOWS: answering a reader's strategy question". Harvard Business Review. Retrieved 7 November 2021.
  12. ^ a b Some examples of publications that suggest remedies for common problems and limitations of SWOT analysis:
  13. OCLC 59549399
    .
  14. doi:10.1108/SL-05-2023-0056
    .
  15. ^
    doi:10.1002/(SICI)1099-1697(199803/04)7:2<101::AID-JSC332>3.0.CO;2-6
    .
  16. ^ Osita, Christian; Onyebuchi, Idoko; Justina, Nzekwe (31 January 2014). "Organization's stability and productivity: the role of SWOT analysis" (PDF). International Journal of Innovative and Applied Research. 2 (9): 23–32. Retrieved 17 March 2016.
  17. ^
    doi:10.1108/EUM0000000001042
    .
  18. OCLC 21301791
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  19. ^
    OCLC 971892636
    .
  20. S2CID 143892190
    .
  21. ^
    OCLC 740281685
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  22. ^
    doi:10.1016/S0024-6301(96)00095-7
    .
  23. ISSN 1084-3981
    .
  24. S2CID 145098663
    .
  25. JSTOR 4165839
    .
  26. OCLC 66527256
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  27. OCLC 662578328
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  28. doi:10.1002/nha3.20168
    .
  29. ^
    OCLC 953982371
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  30. ^
    S2CID 225400774
    .
  31. ^
    OCLC 39837267
    .
  32. ^
    JSTOR 2486485
    .
  33. OCLC 259247279
    . What Andrews and his colleagues in the Business Policy course resolutely refused to do—and the main reason his ideas largely disappear from the subsequent history of strategy—was to agree that there were standard frameworks or constructs that could be applied to analyzing a business and its competitive situation. Oh, they might allow one, perhaps because they had helped develop it: so-called SWOT analysis, which called for looking at the strengths, weaknesses, opportunities, and threats besetting an enterprise.
  34. ^ Hill & Westbrook 1997, p. 47: "The work of Kenneth Andrews has been especially influential in popularizing the idea that good strategy means ensuring a fit between the external situation a firm faces (threats and opportunities) and its own internal qualities or characteristics (strengths and weaknesses)."
  35. OCLC 10865820
    . Presented at the AMA General Management Conference held in New York, May 3, 1932.
  36. ^
    ISSN 0024-6301
    .
  37. ^ Examples of publications in the late 1960s that mention the four components of SWOT without using the acronym include:
  38. doi:10.1108/eb003232
    .
  39. doi:10.1243/PIME_PROC_1973_187_155_02
    .
  40. doi:10.1108/JMH-05-2023-0047
    .
  41. hdl:11572/433690
    .
  42. ^ Kemper, Carrie (May 17, 2015). "Homicide". Silicon Valley. Season 2. Episode 6. HBO.

Further reading

SWOT analysis is described in very many publications. A few examples of books that describe SWOT analysis and are widely held by WorldCat member libraries and available in the Internet Archive are:

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