SWOT Analysis
SWOT Analysis
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T).
Such an analysis of the strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:
SWOT Analysis Framework
Environmental Scan
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Internal Analysis
External Analysis
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Strengths Weaknesses Opportunities Threats
Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a
Competitive advantage. Examples of such strengths include:
patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic
environment.
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T).
Such an analysis of the strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:
SWOT Analysis Framework
Environmental Scan
/
\
Internal Analysis
External Analysis
/\
/\
Strengths Weaknesses Opportunities Threats
Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a
Competitive advantage. Examples of such strengths include:
patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic
environment.