An analysis evaluating the strengths, weaknesses, opportunities, and threats, known as a SWOT analysis, is an important task when analyzing an organization’s situation, especially when the information is intended for use in strategy development and related decision making.
For the purposes of this report, however, your interest is in internal organizational factors, and you will therefore focus on strengths and weaknesses.
Review the elements of a SWOT analysis
Porter’s five forces analysis examines the situation faced by the competitors in an industry. Strategic groups analysis narrows the focus by centering on subsets of these competitors whose strategies are similar. SWOT analysis takes an even narrower focus by centering on an individual firm. Specifically, SWOT analysis is a tool that considers a firm’s strengths and weaknesses along with the opportunities and threats that exist in the firm’s environment, as represented in the table below.
Executives using SWOT analysis compare these internal and external factors to generate ideas about how their firm might become more successful. In general, it is wise to focus on ideas that allow a firm to leverage its strengths, steer clear of or resolve its weaknesses, capitalize on opportunities, and protect itself against threats. For example, untapped overseas markets have presented potentially lucrative opportunities to Subway and other restaurant chains such as McDonald’s and KFC. Meanwhile, Subway’s strengths include a well-established brand name and a simple business format that can easily be adapted to other cultures. In considering the opportunities offered by overseas markets and Subway’s strengths, it is not surprising that entering and expanding in different countries has been a key element of Subway’s strategy in recent years. Indeed, Subway currently has operations in nearly 100 nations.
|SWOT point||Organizational examples||Individual examples|
|Strengths||Having high-levels of cash flow gives firms discretion to purchase new equipment if they wish to.||Strong technical and language skills, as well as previous work experience, can help individuals rise above the competition.|
|Weaknesses||Dubious leadership and CEO scandals have plagued some corporations in recent years.||Poor communication skills keep many job seekers from being hired into sales and supervisory positions.|
|Opportunities||The high cost of gasoline creates opportunities for substitute products based on alternative energy sources.||The US economy is increasingly services based, suggesting that individuals can enjoy more opportunities in service firms.|
|Threats||Concerns about worldwide pollution are a threat to petroleum-based products.||A tight job market poses challenges to new graduates.|
SWOT analysis is helpful to executives and is used within most organizations. Important cautions need to be offered about SWOT analysis, however. First, in laying out each of the four elements of SWOT, internal and external factors should not be confused with each other. It is important not to list strengths as opportunities, for example, if executives are to succeed at matching internal and external concerns during the idea generation process.
Second, opportunities should not be confused with strategic moves designed to capitalize on these opportunities. In the case of Subway, it would be a mistake to list “entering new countries” as an opportunity. Instead, untapped markets are the opportunity presented to Subway, and entering those markets is a way for Subway to exploit the opportunity. Finally, and perhaps most important, the results of a SWOT analysis should not be overemphasized. SWOT analysis is a relatively simple tool for understanding a firm’s situation. As a result, SWOT is best viewed as a brainstorming technique for generating creative ideas, not as a rigorous method for selecting strategies. Thus the ideas produced by SWOT analysis offer a starting point for executives’ efforts to craft strategies for their organization, not an ending point.
In addition to organizations, individuals can benefit from applying SWOT analysis to their personal situation. A college student who is approaching graduation, for example, could lay out her main strengths and weaknesses and the opportunities and threats presented by the environment. Suppose, for instance, that this person enjoys and is good at helping others (a strength) but also has a rather short attention span (a weakness). Meanwhile, opportunities to work at a rehabilitation center or to pursue an advanced degree are available. Our hypothetical student might be wise to pursue a job at the rehabilitation center (where her strength at helping others would be a powerful asset) rather than entering graduate school (where a lot of reading is required and her short attention span could undermine her studies).
Now that you have an understanding of how SWOT analysis can play a role in strategic planning, review the quick walkthrough of how to apply SWOT analysis in the resources section below.
Executives using SWOT analysis compare internal strengths and weaknesses with external opportunities and threats to generate ideas about how their firm might become more successful. Ideas that allow a firm to leverage its strengths, steer clear of or resolve its weaknesses, capitalize on opportunities, and protect itself against threats are particularly helpful.
Then use the results of your analyses in Steps 2 through 8 to help identify the strengths and weaknesses of your organization. (Which I have attached)
The last step before working on all your conclusions and recommendations for this report is to examine your organization’s capacity to learn and change. Learning organizations are organizations that systematically measure their performance against sound criteria and metrics and then take concrete actions to change and make improvements.
However, organizations—and people—vary considerably in their ability to decide upon, implement, and manage change. Therefore, managing change is extremely important and often goes hand-in-hand with the desire to improve organizational performance.
Think about your organization’s attempts to improve its performance in key areas. If the organization has tried to make changes in key areas, were the attempts a success or a failure? Explain the reasons you associate with the organization’s success in making changes or the organization’s failure to succeed. (If you cannot identify any attempts by your organization to make changes, think of a key area in your organization that could be improved and briefly explain the reasons you think your organization would succeed or fail if an attempt to make changes in that area was launched.)
It’stime to wrap everything up. You will now finalize your situation audit report by making recommendations based on the conclusions and research that you’ve done.
In priority order, with one (1) being the highest rank, list and explain, in no more than a few sentences for each conclusion, your report’s 3 to 5 most important conclusions. Follow each conclusion with a specific recommendation that is expressed in no more than a few sentences.
Once discussed with senior management, these recommendations and conclusions may form the basis of future strategic plans and objectives for your organization.