Wednesday, July 1, 2009

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
Internal Analysis
External Analysis
/ \
/ \
Strengths Weaknesses
Opportunities Threats
SWOT Matrix

The above is a schema of how SWOT works. You start at the top level and go down to details. When this is filled with content, it gets the shape of a matrix, such as the example below:

SWOT analysis provides a framework for visioning by helping the planners to identify and prioritize the organization’s GOALS and to further identify the strategies of achieving them.

Assessing the Internal Environment

Internal scan or assessment of the internal environment of the organization involves identification of its strengths and weaknesses i.e., those aspects that help or hinder accomplishment of the organization’s mission and fulfillment of its mandate with respect to the following Four Ps

1.People (Human Resources)

2.Properties (Buildings, Equipments and other facilities)

Processes (Such as student placement services, M.I.S etc.)

Products (Students, Publications etc.)

Assessing the External Environment

External scan refers to exploring the environment outside the organisation in order to identify the opportunities and threats it faces. This involves considering the following:

  1. Events, trends and forces in the Social, Technological, Economical, Environmental and Political areas (STEEP).
  1. Identifying the shifts in the needs of customers and potential clients and
  1. Identification of competitors and collaborators.

While assessing the external environment the planners have to also consider the forces and trends in terms of the Institute’s Customers, Clients, Competitors and Collaborators (CCCC).

Customers - The employers who hire the graduates of the institute are in fact the customers of the institute. What do these employers need in terms of skills, knowledge and attitudes in potential employees and current employees?

Clients - The full-time students are clients of the institute, but there is a much larger potential market of clients for part-time, evening and weekend courses – adults seeking job-related and personal development skills and knowledge. What does this market have to offer in terms of opportunities?

Competitors - Public and private institutions which do or can potentially draw away the students (clients) and employers (customers) who hire graduates of the institute. Are there some opportunities for sharing and helping even more people, or do these institutions threaten to restrict or even close down the polytechnic?

Collaborators - All of the partners and supporters of the institute, such as The Chamber of Commerce and Industry, societies and associations of engineers and business owners, apex advisory councils and committees, other educational institutions and particular Government and funding agencies.

  • Conduct Focus group meeting
  • Invite employees to meet for about an hour and “focus” them on the Four Ps or STEEP to give their perceptions of the strengths and weaknesses or opportunities and threats.

Simple rules for successful SWOT analysis.

  • Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.

  • SWOT analysis should distinguish between where your organization is today, and where it could be in the future.

  • SWOT should always be specific. Avoid grey areas.

  • Always apply SWOT in relation to your competition i.e. better than or worse than your competition.

  • Keep your SWOT short and simple. Avoid complexity and over analysis.

  • SWOT is subjective.

Once key issues have been identified with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. So SWOT is a very popular tool with marketing students because it is quick and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple.

SWOT Analysis Limitations

While useful for reducing a large quantity of situational factors into a more manageable profile, the SWOT framework has a tendency to oversimplify the situation by classifying the firm's environmental factors into categories in which they may not always fit. The classification of some factors as strengths or weaknesses, or as opportunities or threats is somewhat arbitrary. For example, a particular company culture can be either a strength or a weakness. A technological change can be a either a threat or an opportunity. Perhaps what is more important than the superficial classification of these factors is the firm's awareness of them and its development of a strategic plan to use them to its advantage.

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