SWOT Analysis Guide

Developed by Lydia Tsintzou

Abstract

SWOT consists a strategic management tool (Helms & Nixon, 2010), mainly used to identify risks during the data analysis process (Project Management Institute, 2017). The acronym of the 4-box strategy development framework stands for Strengths, Weaknesses, Opportunities and Threats and is possible to be applied to different industries, such as commerce, production, planning and voluntary organizations (Sarsby, 2016). The first emergence of the term in the literature is traced back to 1960 to investigate what went wrong with corporate planning, funded by the Fortune 500 companies while creating a new system to support management change. Over the past decade, SWOT research has focused on analyzing organizations for recommended strategic actions.

As with every tool or technique, SWOT has also its advantages and limitations. On the one hand, it is an interactional analysis technique that makes macro evaluations possible, in a road from the general perspective and solutions to the more detailed, uncovering opportunities. On the other hand, it has been criticized as prone to bias with questioned validity due to the quantity of different identified factors or failure to easily include dynamic and structural changes in a world based on competition.

The following article aims to investigate the process of conducting a SWOT analysis through a literature review, in order to present a short guide for its implementation. By analyzing the potentials of this tool’s usage, some practical implications are presented, mainly relevant to the combination of SWOT with other strategic planning tools. In addition, the author’s reflections are presented in an attempt to discuss the value and potential improvements in the use of the tool.

Introduction

Strategic planning is a set of concepts, procedures and tools to be used in order for a company/organization to achieve its goals (Bryson, 2003) and is a function of all managers at all levels of an organization (Steiner, 1979). While being a process that deals with the futurity of current decisions, it is also a bulwark to support strategic management (Steiner, 1979).

Strategic management is a continuous process of an organization to formulate and evaluate decisions and plans to achieve a competitive advantage by being proactive (David, 2003; Dyer et al., 2017). The strategic management process is a sequential set of analyses and choices which includes the development of a vision and a mission, translated into a set of long-term objectives and followed by a strategy crafting to achieve the targeted performance. The next steps are the strategy’s implementation and execution as well as the necessary performance evaluation to review the situation and initiate corrective adjustments (Preble, 2003).

Shedding light to the step of formulating a strategy, the implementation of a thorough external and internal analysis is involved. By conducting an external analysis, the organization is under a process of identifying potential threats and opportunities, focusing especially on the competition and customer analysis, respectively (Dyer et al., 2017). On the other hand, the internal analysis supports the organization to identify its strengths and weaknesses as well as its competitive (dis)advantages. The combined results are often summarized in a SWOT analysis, which consists a strategic management tool, mainly used to identify risks during the data analysis process (Dyer et al., 2017; Helms & Nixon, 2010; Project Management Institute, 2017).

Based on the direct connection of SWOT with strategic management processes, an important notation is that the implementation of the tool does not lead itself to the development of a strategy (Sarsby, 2016). An analysis interpretation as well as decision making, consist of independent steps to be followed by the stakeholders.

The SWOT framework

SWOT Analysis components

The acronym of the 4-box strategy development framework stands for Strengths, Weaknesses, Opportunities and Threats. It consists ‘a data gathering framework which records input factors’ (Sarsby, 2016). The most common template of a SWOT analysis is a 2x2 matrix where the rows distinguish between internal or external factors while the columns distinguish between helpful and harmful factors (depending on the context or objective of the analysis). As internal factors, strengths and weaknesses could be characterized as organizational, while the external factors (opportunities and threats) could be characterized as environmental.

Strengths

Strengths are internal and helpful factors identified in the analysis objective. In this category, organizations might include financial strengths, technological advantages, customer services and human resources (Sarsby, 2016). In general, the characteristics that render an organization more efficient and effective than competitors are included in its strengths (Araştırmalar Dergici, 2017). In relation to the other matrix components, strengths could potentially support an opportunity or contribute to overcoming a threat (Sarsby, 2016).

Weaknesses

Weaknesses are internal and harmful factors identified in the analysis objective. This category might include financial struggles, dated technology, poor customer services and skill shortages related to human resources (Sarsby, 2016). Characteristics included in this category result in a lack of competencies and effective performance. Consequently, the identification of weaknesses is highly important as crafting a strategy based on a weakness could lead the company to ‘die quickly’. In relation to the other matrix components, weaknesses complicate the process of taking advantage of an opportunity and are factors more vulnerable to threats (Sarsby, 2016).

Opportunities

Opportunities are external and helpful factors, lacking the possibility of control, but if handled right may result in desired results. Opportunities may arise from different resources such as trends, innovations, etc. (Sarsby, 2016). Regarding the relation with the other matrix components ‘opportunities are conditions in the external environment that allow an organization to take advantage of organizational strengths, overcome organizational weaknesses or neutralize environmental threats’ (Harrison & St. John, 2004: 164).

Threats

Threats are external and harmful factors, over which there is no control (Sarsby, 2016). In relation to the other matrix components, they constitute a risk for opportunities or even organizational strengths.

Context of use

SWOT analysis is the commonest practical analytical tool for strategic planning, which is used by executives and consultants in different organizations as it is a simple and structured approach to evaluate a company’s strategic position and competitive advantage (Piercy & Giels, 1989).