Using SWOT Analysis to Formulate Strategy
SWOT Analysis is a powerful technique for understanding your Strengths and
Weaknesses, and for looking at the Opportunities and Threats you face. SWOT analysis is
one of the most important steps in formulating strategy. In SWOT analysis, the best
strategies accomplish an organizations mission by exploiting an organizations
opportunities and strengths while neutralizing its threats and avoiding its weakness.
(Griffin, 2003) By looking at yourself and your competitors using the SWOT structure,
you can start to craft a strategy that helps you differentiate yourself from your competitors,
so that you can compete successfully in your market. This helps you to focus on your
strengths, minimize threats, and take the greatest possible advantage of opportunities
available to you. SWOT is a frequently used management tool, useful for reflection,
decision making and appraising options. It is particularly useful because of its simplicity,
the way in which it takes seconds to set up, and can be easily explained to others. The
simplicity of the idea contradicts how straightforwardly it can be extended and built on. A
firm should be able to identify the strengths, weaknesses, opportunities, and threats to run
properly and create strategic plans that will help the company more than it will hurt it.
What makes SWOT particularly powerful is that with a little thought, it can help you
uncover opportunities that you are well placed to take advantage of. And by understanding
your weaknesses, you can manage and eliminate threats that would otherwise catch you
unawares. SWOT analysis is a huge part of management; mangers sometimes use it as a
foundation when starting new programs. Strengths and weaknesses are internal factors.
Firms strengths are its resources and capabilities that can be used as a basis for developing
a competitive advantage. Strength could be your specialist marketing expertise, a new,
innovative product or service, location of your business or quality processes and
procedures. The absence of certain strengths may be viewed as weakness. A weakness
could be lack of marketing expertise, undifferentiated products or services, location of
your business, poor quality goods or services or a damaged reputation.
Opportunities and threats are external factors. The external environmental analysis may
reveal certain new opportunities for profit and growth. An opportunity could be a
developing market such as the Internet, mergers, joint ventures or strategic alliances,
moving into new market segments that offer improved profits or a new international
market. Changes in the external environment also may present threats to the firm. A threat
