In strategic planning and strategic management, SWOT analysis (also known as the SWOT matrix, TOWS, WOTS, WOTS-UP, and situational analysis) 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 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, Examples of the "tried-and-true" trope: 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.

Overview

The name is an acronym for four components: Results of the assessment are often presented in the form of a matrix.

Internal and external factors

Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external. The degree to which an organization's internal strengths matches with its external opportunities is known as its strategic fit. Internal factors may include: External factors may include: A number of authors advocate assessing external factors before internal factors.

Use

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

Strategic planning

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. For instance, strong relations between strengths and opportunities can suggest good conditions in the company and allow using an strategy. On the other hand, strong interactions between weaknesses and threats could be analyzed as a warning to use a strategy. One form of SWOT analysis combines each of the four components with another to examine four distinct strategies:

Matching and converting

A SWOT analysis can be used to generate matching and converting strategies. Matching refers to seeking competitive advantage by matching strengths to opportunities. 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.

Marketing

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: 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.

In community organizations

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. Understanding particular communities can come from public forums, listening campaigns, and informational interviews and other data collection. SWOT analysis provides direction to the next stages of the change process. It has been used by community organizers and community members to further social justice in the context of social work practice, and can be applied directly to communities served by a specific nonprofit or community organization.

Limitations and alternatives

SWOT analysis is intended as a starting point for discussion and not to, in itself, show managers how to achieve a competitive advantage. 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". Hill and Westbrook, among others, also criticized hastily designed SWOT lists. 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; and domination by one or two team members doing the SWOT analysis and devaluing possibly important contributions of other team members. Many other limitations have been identified. 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:

Porter's five forces

Michael Porter developed the five forces framework as a reaction to SWOT, which he found lacking in rigor and too.

SOAR

SOAR (strengths, opportunities, aspirations, and results) is an alternative technique inspired by appreciative inquiry. SOAR has been criticized as having similar limitations as SWOT, such as "the inability to identify the necessary data".

SVOR

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. 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: 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).

History

In 1965, three colleagues at the Long Range Planning Service 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. 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. Stewart et al. focused on internal operational assessment and divided the four components into (satisfactory and fault) and (opportunity and threat), and not, as would later become common in SWOT analysis, into (strengths and weaknesses) and (opportunities and threats). Also in 1965, four colleagues at the Harvard Graduate School of Business Administration—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. ( was a term then current for what has come to be called strategic management. ) The first chapter of the textbook stated, without using the acronym, the four components of SWOT and their division into internal and external appraisal: "Deciding what strategy should be is, at least ideally, a rational undertaking. Its principal subactivities include identifying opportunities and threats in the company's environment and attaching some estimate of risk to the discernible alternatives. Before a choice can be made, the company's strengths and weaknesses must be appraised." 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. However, the textbook contains neither a 2 × 2 SWOT matrix nor any detailed procedure for doing a SWOT assessment. 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. 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), with other possible influences going back to the McKinsey consulting firm in the 1930s. 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, 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. 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". An early example of a 2 × 2 SWOT matrix is found in a 1980 article by management professor Igor Ansoff (but Ansoff used the acronym T/O/S/W instead of SWOT).

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