A Guide to SWOT Analysis
The systematic review of a company’s internal strengths and weaknesses, and of the external opportunities and threats that it faces within its industry is known as SWOT analysis. A properly conducted SWOT analysis “provides a good overview of whether [a firm’s] overall situation is fundamentally healthy or unhealthy”. (Thompson et. al., 2004, p. 81)
These authors go on to stress a second reason for using this form of analysis:
Just as important, a first-rate SWOT analysis provides the basis for crafting a strategy that capitalizes on the company’s resources, aims squarely at capturing the company’s best opportunities, and defends against the threats to its well-being. (Thompson et. al., 2004, p. 81)
On
his excellent web page
about SWOT analysis, Humphrey suggests that “The
SWOT analysis headings provide a good framework for reviewing strategy,
position
and direction of a company or business proposition, or any idea.
Completing
a SWOT analysis is very simple…” (2004) He also makes a distinction between SWOT analysis
and
The web sites listed at the end of this page will give good overviews of what is involved in SWOT analysis. The depth of analysis can vary, from a simple analysis which has just a couple of factors in each of the four categories of Strengths, Weaknesses, Opportunities, and Threats, through to a very complex analysis where many factors are listed under each of these headings.
It is possible to have a SWOT analysis that is much too complex though: for example, the lists of questions on each of the Strengths, Weaknesses, Opportunities, and Threats web pages that are linked to Khurana’s (2004) main SWOT web page [no longer available online, I am afraid] are much too long. I am of the opinion that one should keep things simple, and that each of the four categories of analysis should have no more than, say, the top three most important items in each. This will still mean that you have to juggle 12 items of information in your head to come up with a recommendation for the company from doing the SWOT analysis.
One frustrating aspect of SWOT analysis, and indeed of strategic management in general, is the difficulty in getting all of the information that you might usually wish to have in order to make a decision. Often you are forced to go ahead with an analysis even though you may think you are not fully informed:
Do realize that any analysis requires data and information. If you do not have adequate information, the results of your analysis are likely to be less reliable. However, a real manager knows that complete information is never available. In the real world, you end up making business decisions with incomplete information. That is where things like common sense, gut feel and experience kick in. Nonetheless, the SWOT framework offers a good starting point for analysis. (Khurana, 2004)
You should try and gather as much information as you can before starting your analysis, but at some stage you must decide that you have collected enough data to be able to start your analysis. Do not forget though that any analysis is not just a listing of factors – you must come up with some conclusions and a recommendation for action after having weighed in your mind all of the issues that your SWOT analysis raises.
References
Humphrey, A. S. (2004) SWOT Analysis,
retrieved September 22nd, 2004 from
http://www.businessballs.com/swotanalysisfreetemplate.htm
Khurana, A.(2004) Understanding and Using SWOT Analysis, retrieved September 22nd, 2004 from http://businessmajors.about.com/cs/casestudyhelp/a/SWOT.htm
Thompson,
A. A. Jr., Gamble,
J. E., & Strickland A. J. III, (2004). Strategy:
Winning
in the Marketplace.
Useful Web Sites
http://www.mindtools.com/pages/article/newTMC_05.htm
http://www.businessballs.com/swotanalysisfreetemplate.htm