SWOT is a widely used thinking framework for identifying Strengths, Weaknesses, Opportunities and Threats. It enables key factors to be visibly recorded as a high-
level summary of a business. SWOT analysis is a summary that is simple but powerful.
- Strength: Capability of organization to compete and meeting the needs of customer it serves.
- Weakness: Limitation of resources which creates disadvantages in meeting the customer need and be competent.
- Opportunities: Favorable condition for a firm.
- Threats: Unfavorable condition for a firm.
The SWOT Matrix: The SWOT analysis is also called TWOS matrix. It is an important matching tool that helps manager develops 4 types of strategies. SO (strength-Opportunities) Strategies, WO (Weaknesses-Opportunities) strategies, ST (Strength-Threats) Strategies, and WT (Weakness-Threats) Strategies. Matching key external and internal factors is the most difficult part of developing a SWOT matrix and there is no one best of matches.
- SO Strategies uses a firm’s internal strengths to take advantage of external opportunities. All managers would like their organizational to begin a position in which internal strengths can be used to take advantages of external trends and events.
- WO Strategies aim at improving internal weakness by taking advantage of external opportunities. Sometimes key external opportunities exist, but a firm has internal weakness that prevents it from exploiting those For opportunities. e.g. there may be high demand for electronic devices to control the amount and timing of fuel injection in automatic engines (opportunities), but a certain auto parts manufacturer may be lack the technology required for producing these devices (weakness). One possible WO strategy would be to acquire this technology by forming a joint venture with a firm having competency in this area. An alternative WO strategy would be to hire and train people with the required technical capabilities.
- ST Strategies use a firm’s strength to avoid reducing the impact of external threats. This doesn’t mean that a strong organization should always meet threats in the external environment. However, when an excellent firm (strength) couldn’t complete with the alliance firm. Rival firms that copy ideas innovations and patented products are a major threat in many industries. This is still a major problem for U.S. firms selling products in china.
- WT strategies are defensive tactics directed at reducing internal weakness and avoiding external threats. An organization faced with numerous external threats and internal weakness may indeed be in precarious (insecure) position. In fact, such a firm has to fight for its survival, merge, retrench, declare bankruptcy or choose liquidation. There are eight steps involved in constructing a SWOT matrix.