SWOT – Strategic Analysis Tool for Managers

SWOT analysis entails the analysis of Strengths, Weaknesses, Opportunities and Threats that affect the business (Porter, 2008). Strengths and weaknesses affect the internal environment while opportunities and threats affect the macro-environment of the company. SWOT is an important strategic tool for managers. It is used by the managers of an organization evaluate the internal and external strengths, weaknesses, threats and opportunities that could affect their business operations and management decisions.

They can also be categorized into negative (threats and weaknesses) and positive factors (opportunities and strengths). These SWOT factors can be summarized in the matrix below.

Strengths: These are positive characteristics of the internal environment of an organization. It may include aspects such as operational efficiency, large market share, low prices (product affordability), sufficient assets, financial strength, and high quality of product, skilled employees, and brand image. Companies should leverage these strengths in their operations and management decisions to achieve better results.

Weaknesses: Weaknesses are negative aspects within the internal environment of an organization. They include poor management, weak marketing approaches, limited financial resources, obsolete technologies, negative image, low market share, unskilled employees, and increased expenses.

Opportunities: Opportunities are the favorable external conditions that can enable a business to thrive. They include large population, growth in product demand, increased purchasing power of consumers, economic growth, favorable shift in consumer attitudes and lifestyle, industry growth, new technology, emerging markets, and government subsidies and programs. A business can use this element of the SWOT analysis to identify opportunities for growth in the industry.

Threats: Threats are the unfavorable external factors that affect business. They include extreme weather conditions, climate change, trade restrictions, cultural differences, trade barriers, high taxations, decline in consumer income, rising unemployment, inflation, competition, and political instabilities.

SWOT analysis guides managers on what to do, what not to do, and where to invest. It provides a roadmap on where to identify new openings, where to invest the company’s resources, and areas in which the firm needs improvement. Thus, SWOT analysis tool is important in strategic planning so that the firm can determine which areas they should redirect their resources to achieve their goals and objectives.

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