The SWOT analysis is a strategic planning tool which summarises the key issues from the business environment and the strategic capability of an organisation. This can be used as strategy development and as a basis against which to generate strategic options and assess future courses of actions.
Many managers believe that a SWOT analysis is a brainstorming exercise in which the Strengths, Weaknesses, Opportunities and Threats are identified. That approach has the major weakness of relying on the received wisdom in the organisation.
- STRENGTHS: What we are good at.
- WEAKNESSES: What we are not so good at.
- OPPORTUNITIES: Favourable events trends.
- THREATS: Unfavourable events trends.
The primary aim is to identify the extent to which the current strengths and weaknesses are relevant to and capable of dealing with the changes taking place in the business environment. If the strategic capability of an organisation is to be understood the SWOT analysis is only considered useful if it is comparative, and not absolute to its “competitors” or other organisations, i.e. examining strengths, weaknesses, opportunities and threats relative to competitors.
The SWOT analysis focuses on future choice and the extent to which an organisation is capable of supporting these strategies. In order for the SWOT analysis to be effective, it has to be open and honest whilst prioritising the important areas to the business.
By using the current thinking, or received wisdom, in the organisation managers are likely to continue to accept inefficiencies. The systematic approach to Analysis, breaking it down into separate categories and using well researched and tested frameworks, will enable an objective view to be obtained on the current situation facing the organisation.
Reviewing all of the key issues brought forward from the detailed analyses should complete the SWOT Analysis. A view should have already been expressed as to the nature of the issues, Strengths, Weaknesses, Opportunities or Threats. That alone is insufficient to form the basis for further action. A clear view has to be taken on the relative significance of each of the issues. The more important issues should be highlighted and dealt with first. Issues of lesser importance can be relegated to a position that, if there are sufficient resources available, they can be addressed later. John Argenti, a British management guru, suggests that we should look for the Strategic Elephants, those issues that are critical to the success of the organisation.
The manager accepts the status quo, the leader challenges it.