SWOT Analysis is a useful technique for understanding company's strengths and weaknesses, and for identifying both the opportunities open to the company and the threats the company has to face. Strengths depict the resource capability and supportive internal environment to the organizational strategy and objective. These are inheriting attributes of the company helpful to accomplish the objectives. Weaknesses depict resource deficiency and unfavorable internal environment to the organizational strategy and objective. These are inheriting limitations or obstacles on the company harmful to accomplish the organizational objectives. Similarly, opportunities reflect the external favorableness, and threats reflect the external unfavorableness to the organizational strategy and objective.
As a simple and sophisticated tool of strategy formulation, SWOT was originated by Albert S Humphrey in the 1960s. Strengths and weaknesses are often internality of organization, while opportunities and threats generally relate to external factors. For this reason the SWOT Analysis is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix. The SWOT matrix enables the managers to scan the organizational factors comparatively in terms of internal positive external positive; internal negative external negative. Such type positive and negative of internality and externality have to be pointed out in reference of;
- Organizational resource
- Organizational plan
- Environmental dynamism.
Example of SWOT
- We are able to respond very quickly as we have no red tape, and no need for higher management approval.
- We are able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers.
- We have strong reputation in the market.
- We can change direction quickly if we find that our marketing is not working.
- We have low overheads, so we can offer good value to customers. Weaknesses:
- Our company has little market presence or reputation.
- We have a small staff, with a shallow skills base in many areas.
- We are vulnerable to vital staff being sick, and leaving.
- Our cash flow will be unreliable in the early stages. Opportunities:
- Our business sector is expanding, with many future opportunities for success.
- Local government wants to encourage local businesses.
- Our competitors may be slow to adopt new technologies. Threats:
- Developments in technology may change this market beyond our ability to adapt.
- A small change in the focus of a large competitor might wipe out any market position we achieve.