SWOT analysis (alternatively SWOT matrix) is an acronym for strengths, weaknesses, opportunities, and threats,is a structured planning method that evaluates those four elements of an organization, project or business venture.
A SWOT analysis can be carried out for a company, product, place, industry, or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective.
Some authors credit SWOT to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies. However, Humphrey himself did not claim the creation of SWOT, and the origins remain obscure. The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit.
a. Components of SWOT Analysis
i. Strengths: characteristics of the business or project that give it an advantage over others;
ii. Weaknesses: characteristics of the business that place the business or project at a disadvantage relative to others;
iii. Opportunities: elements in the environment that the business or project could exploit to its advantage;
iv. Threats: elements in the environment that could cause trouble for the business or project.
b. Main factors of SWOT Analysis
SWOT analysis aims to identify the key internal and external factors seen as important to achieving an objective. SWOT analysis groups key pieces of information into two main categories:
i. Internal factors – the strengths and weaknesses internal to the organization;
ii. External factors – the opportunities and threats presented by the environment external to the organization.
Analysis may view the internal factors as strengths or as weaknesses depending upon their effect on the organization's objectives. What may represent strengths with respect to one objective may be weaknesses (distractions, competition) for another objective. The factors may include all of the 4Ps as well as personnel, finance, manufacturing capabilities, and so on.
The external factors may include macroeconomic matters, technological change, legislation, and sociocultural changes, as well as changes in the marketplace or in competitive position. The results are often presented in the form of a matrix.
SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade its users to compile lists rather than to think about actual important factors in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats.It is prudent not to eliminate any candidate SWOT entry too quickly. The importance of individual SWOTs will be revealed by the value of the strategies they generate. A SWOT item that produces valuable strategies is important. A SWOT item that generates no strategies is not important.
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