SWOT analysis

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The four components of SWOT in a 2 × 2 matrix

In strategic planning and strategic management, SWOT analysis (also known as the SWOT matrix, TOWS, WOTS, Template:Abbr, and situational analysis)<ref>Template:Cite journal See also: Template:Harvnb: "For convenience, the matrix that will be introduced is called TOWS, or situational analysis"; Template:Harvnb.</ref> 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<ref>Template:Cite book</ref> 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,<ref>Examples of the "tried-and-true" trope:

Template:Cite book See also Template:Harvnb.
Template:Cite book
Template:Cite book

</ref> 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.

OverviewEdit

The name is an acronym for four components:

Template:Em: characteristics of the business or project that give it an advantage over others
Template:Em: characteristics that place the business or project at a disadvantage relative to others
Template:Em: elements in the environment that the business or project could exploit to its advantage
Template:Em: 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.<ref name=Ansoff1980/>

Internal and external factorsEdit

Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external.<ref name=Minsky2021>{{#invoke:citation/CS1|citation |CitationClass=web }} See also Template:Harvnb.</ref> The degree to which an organization's internal strengths matches with its external opportunities is known as its strategic fit.<ref name=Learned1965/><ref>Template:Cite book</ref><ref name=Mintzberg1998/>

Internal factors may include:<ref name="CTB">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

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:<ref name="CTB" />

Future trends in the organization's field or society at large (e.g. macroeconomics, technological change)
The economy—local, national, or international
Funding sources—investors, foundations, donors, legislatures
Demographics—changes in the age, race, gender, culture of those in the organization serviceable area
Physical environment—growth of location in which organisation is situated, access to location
Legislation
Local, national, or international events

A number of authors advocate assessing external factors before internal factors.<ref name=Minsky2021/><ref name="Weihrich1982">Template:Cite journal</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

UseEdit

SWOT analysis has been used at different levels of analysis, including businesses, non-profit organizations, governmental units, and individuals.<ref name=SWOTlimits/> It is often used alongside other frameworks, such as PEST, as a basis for the analysis of internal and environmental factors.<ref>Template:Cite book</ref> SWOT analysis may also be used in pre-crisis planning, preventive crisis management, and viability study recommendation construction.<ref>Template:Cite journal</ref>

Strategic planningEdit

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.<ref name=Pickton1998>Template:Cite journal</ref> For instance, strong relations between strengths and opportunities can suggest good conditions in the company and allow using an Template:Em strategy. On the other hand, strong interactions between weaknesses and threats could be analyzed as a warning to use a Template:Em strategy.<ref>Template:Cite journal</ref>

One form of SWOT analysis combines each of the four components with another to examine four distinct strategies:<ref name="Weihrich1982" />

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 convertingEdit

A SWOT analysis can be used to generate matching and converting strategies.<ref name=Piercy1989>Template:Cite journal</ref> 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.<ref name=Piercy1989 />

MarketingEdit

{{#invoke:Labelled list hatnote|labelledList|Main article|Main articles|Main page|Main pages}} Template:See also 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:

Qualitative marketing research such as focus groups
Quantitative marketing research such as statistical surveys
Experimental techniques such as test markets
Observational techniques such as ethnographic (on-site) observation

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<ref name="Armstrong1990">Template:Cite book</ref>
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 organizationsEdit

File:SWOT Analysis ssw 1.png

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

File:SWOT Analysis ssw 2.png

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.<ref name="CTB" /> Understanding particular communities can come from public forums, listening campaigns, and informational interviews and other data collection.<ref name="CTB" /> SWOT analysis provides direction to the next stages of the change process.<ref name="Birkenmaier2001">Template:Cite book</ref> It has been used by community organizers and community members to further social justice in the context of social work practice,<ref name="Birkenmaier2001" /> and can be applied directly to communities served by a specific nonprofit or community organization.<ref name="social work">Template:Cite journal</ref>

Limitations and alternativesEdit

SWOT analysis is intended as a starting point for discussion and not to, in itself, show managers how to achieve a competitive advantage.<ref name=Dess2012>Template:Cite book</ref>

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".<ref name=HillWestbrook1997>Template:Cite journal</ref> Hill and Westbrook, among others, also criticized hastily designed SWOT lists.<ref name=HillWestbrook1997/><ref>Template:Cite journal</ref> 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;<ref name=Dess2012/> and domination by one or two team members doing the SWOT analysis and devaluing possibly important contributions of other team members.<ref>Template:Cite journal</ref> Many other limitations have been identified.<ref name=Pickton1998/>

Business professors have suggested various ways to remedy the common problems and limitations of SWOT analysis while retaining the SWOT framework.<ref name=SWOTlimits>Some examples of publications that suggest remedies for common problems and limitations of SWOT analysis:

</ref>

Porter's five forcesEdit

{{#invoke:Labelled list hatnote|labelledList|Main article|Main articles|Main page|Main pages}} Template:See also 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.<ref>Template:Cite journal</ref>

SOAREdit

SOAR (strengths, opportunities, aspirations, and results) is an alternative technique inspired by appreciative inquiry.<ref>Template:Cite book</ref><ref>Template:Cite book</ref> SOAR has been criticized as having similar limitations as SWOT, such as "the inability to identify the necessary data".<ref>Template:Cite journal</ref>

SVOREdit

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.<ref name=Mesly/> 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:<ref name=Mesly>Template:Cite book</ref>Template:Rp

Forces	Internal	Mathematical link	External
Template:Em	Total Forces	Total Forces given constraints = Infrastructures / Opportunities	Opportunities
Template:Em	Vulnerabilities given constraints = 1 / Total Forces	constant k	Opportunities given constraints = 1 / Risks
Template:Em	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).<ref name=Mesly/>Template:Rp

HistoryEdit

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.<ref name=Puyt2020>Template:Cite journal</ref> 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.<ref name=Puyt2020/> Stewart et al. focused on internal operational assessment and divided the four components into Template:Em (satisfactory and fault) and Template:Em (opportunity and threat),<ref name=Puyt2020/> and not, as would later become common in SWOT analysis, into Template:Em (strengths and weaknesses) and Template:Em (opportunities and threats).<ref name=Learned1965/>

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.<ref name=Learned1965>Template:Cite book (See also Template:Harvnb.) Many publications cite this textbook as an early statement of the ideas behind SWOT, although it contains neither a 2 × 2 matrix nor any detailed procedure for doing a SWOT assessment; for example, Robert S. Kaplan and David P. Norton called this textbook "one of the early SWOT references", in: Template:Cite book</ref> (Template:Em was a term then current for what has come to be called strategic management.<ref name=Browne1999>Template:Cite book</ref>) The first chapter of the textbook stated, without using the acronym, the four components of SWOT and their division into internal and external appraisal:

Template:Quote

Looking back from three decades later, in the book Strategy Safari (1998), management scholar Henry Mintzberg and colleagues said that Business Policy: Text and Cases "quickly became the most popular classroom book in the field", widely diffusing its authors' ideas, which Mintzberg et al. called the "design school" model (in contrast to nine other schools that they identified) of strategic management, "with its famous notion of SWOT" emphasizing assessment of a company's internal and external situations.<ref name=Mintzberg1998>Template:Cite book</ref><ref name=Mintzberg1990>An analysis of the "design school" model was also in Mintzberg's earlier publications such as: Template:Cite journal</ref><ref name=Browne1999/> However, the textbook contains neither a 2 × 2 SWOT matrix nor any detailed procedure for doing a SWOT assessment.<ref name=Learned1965/> Strategy Safari and other books identified Kenneth R. Andrews as the co-author of Business Policy: Text and Cases who was responsible for writing the theoretical part of the book containing the SWOT components.<ref name=Mintzberg1998/><ref>Template:Cite book</ref><ref>Template:Harvnb: "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)."</ref> More generally, Mintzberg et al. attributed some conceptual influences on what they called the "design school" (of which they were strongly critical) to earlier books by Philip Selznick (Leadership in Administration, 1957) and Alfred D. Chandler Jr. (Strategy and Structure, 1962),<ref name=Mintzberg1998/> with other possible influences going back to the McKinsey consulting firm in the 1930s.<ref name=Mintzberg1990/><ref>Template:Cite book Presented at the AMA General Management Conference held in New York, May 3, 1932.</ref>

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.<ref name=Puyt2023>Template:Cite journal</ref> 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".<ref name=Puyt2023 />

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,<ref>Examples of publications in the late 1960s that mention the four components of SWOT without using the acronym include:

</ref> 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.<ref>Template:Cite journal</ref> 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".<ref>Template:Cite journal</ref> Early examples of a 2 × 2 SWOT matrix are found in John Argenti's book Systematic Corporate Planning (1974)<ref>Template:Cite journal</ref> and in a 1980 article by management professor Igor Ansoff (but Ansoff used the acronym T/O/S/W instead of SWOT).<ref name=Ansoff1980>Template:Cite journal</ref> In the 1960s Ansoff had worked with the LRPS, where the SOFT approach originated.<ref>Template:Cite journal</ref>

In popular cultureEdit

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.<ref>Template:Cite episode</ref>

ReferencesEdit

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External linksEdit

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