What is the purpose of swot analysis in strategic planning

what is the purpose of swot analysis in strategic planning

Strategic planning

SWOT Analysis Oppurtunity Threats Strengths Weakness Technique is credited to Albert Humphrey who led a research project at Stanford University in the s and s. Planning tool used to understand Strengths, Weaknesses, Opportunities, & Threats involved in a project / business. Used as framework for organizing and using data and information. A decision taken in the light of a sound and thorough SWOT analysis can be informative to the extent that the organization becomes proactive, the basic aim of any strategic planning, and seeks to manage environment rather being reactive i.e. responding to changes that managers have failed to foresee.

Strategic planning is a process that helps an organization allocate its resources to capitalize on opportunities in the marketplace. Typically, it is a long-term process. Figure 2. Conducting a Situation Analysis As part of the strategic planning process, a situation analysis must be conducted before a company can decide on specific actions.

A situation analysis involves analyzing both the external macro and micro factors outside the organization and the internal company environments. It is also critical to examine the external macro and micro environments the firm faces, such as the economy and its competitors.

The external environment significantly affects the decisions a firm makes, and thus must be continuously evaluated. For example, during iss economic downturn in , businesses found that many competitors cut the prices of their products drastically.

Other companies reduced package sizes or the amount of product in packages. Firms also offered customers incentives free shipping, free gift cards with purchase, plannlng, etc. While a business cannot control things such as the economy, changes in demographic trends, or what competitors do, it must decide what actions to take to remain competitiveactions that depend in part on their internal environment.

Strengths and weaknesses are internal snalysis and are somewhat controllable. Opportunities and threats are factors that are external to the firm and largely uncontrollable. Opportunities might entail the international demand for the type of products the firm makes, few competitors, and favorable social trends such as people living longer.

You can conduct a SWOT analysis of yourself to help determine your competitive advantage. Perhaps your strengths include strong leadership abilities and communication skills, whereas your weaknesses include a lack of organization. Opportunities for you might exist in specific careers and industries; however, the economy and other people competing for the same position might be threats.

Moreover, a factor that is a strength for one person say, strong accounting skills might be a weakness for another person poor accounting skills. The same is true for businesses. See Figure 2. The easiest way to determine if naalysis factor is external or internal is to take away the company, organization, or individual and see if the factor still exists.

Internal factors such as strengths and weaknesses are specific to a company or individual, whereas external factors such as opportunities and threats affect multiple individuals and organizations in the marketplace. For example, if you are doing a situation analysis on PepsiCo and are looking at the weak economy, take PepsiCo how to clean an oil bottle of the picture and see what factors remain.

If the factorthe weak economyis still there, it is an external factor. As we have indicated, when an organization evaluates which factors are its strengths and weaknesses, it is assessing its internal pllanning. Once companies determine their strengths, they can use those strengths to capitalize on opportunities and develop their competitive advantage. Loyal and knowledgeable employees are easier to train and tend to develop better relationships with customers.

This helps organizations pursue more opportunities. When organizations assess their internal environments, they must look at factors such as performance and costs as well as brand awareness and location. Managers need to examine both the past and current strategies of their firms and determine what strategies succeeded and which ones failed.

This plajning a company plan its future actions and improves the odds they will be successful. For example, a company might look at packaging that worked very well for a product and use the same type of packaging for new products. When PepsiCo changed the packaging of major brands incustomers had mixed responses.

Tropicana switched from the familiar orange with the straw in it to a new package and customers did not like it. Individuals are also wise to look at the strategies they have tried in the past to see which ones failed and which ones succeeded. Have you ever done poorly on an exam? See which strategies work best for you and perhaps try the same type of strategies for future exams.

If a strategy did not work, see what went wrong and change it. Doing so is similar to what organizations do when they analyze their internal environments. Analyzing the external environment involves tracking conditions in the macro and micro marketplace that, although largely uncontrollable, affect the way an organization does business.

The macro environment includes economic what are male to male usb cables used for, demographic trends, cultural and social trends, political and legal regulations, technological changes, and the price and availability of natural resources.

Each factor in anallysis macro environment is discussed separately in the next section. The micro environment includes competition, suppliers, marketing intermediaries retailers, wholesalersthe public, the company, and customers. We focus on what is the purpose of swot analysis in strategic planning in our discussion of the external environment in the chapter.

When firms globalize, analyzing the environment becomes more complex because they must examine the external environment in each country in which they do business. Regulations, competitors, technological development, and the economy may be different in each country and will affect how firms do business.

Originally created in and revised inthe video has been updated and translated into other languages. Srrategic the external environment affects all organizations, companies must focus on factors that are relevant for their operations. For example, government regulations on food packaging will affect PepsiCo but not Goodyear. Coke and Pepsi are direct competitors in the soft drink industry, Hilton and Sheraton are competitors in the hospitality industry, and organizations such as United Way and the American Cancer Society compete for resources in the nonprofit sector.

However, hotels must also consider other options that people have when selecting a place to stay, such as hostels, dorms, bed and breakfasts, or rental homes.

A group of competitors that provide similar products or services form an industry. Michael Porter, a professor at Harvard University and a leading authority on competitive strategy, developed an approach for analyzing industries.

Called the five forces model Porter, and shown in Figure 2. As such, firms can find the best way to defend their position in the industry.

Doing so helps the firm figure out how much money a competitor may be able to spend on things such as research, new product development, promotion, and new locations. Competitive analysis involves looking at any information annual reports, financial statements, news stories, observation details obtained on visits, etc.

Another means of collecting competitive information utilizes mystery shoppersor people who act like customers. Mystery shoppers might visit competitors to learn about their customer service and their products. According to Porter, in addition to their direct competitors competitive rivalsorganizations must consider the strength and impact the following could have Porter, :. When any of these factors change, companies may have to respond what is the new heaven and earth in revelation changing their strategies.

For example, because buyers are consuming fewer soft drinks these days, companies such as Coke and Pepsi have had to develop new, substitute offerings such as vitamin water and sports drinks.

When you select a hamburger fast-food chain, you also had the option of substitutes such as getting food at the grocery or going to a pizza place. When computers entered the market, they were a substitute for typewriters.

Most students may seot have ever used a typewriter, but some consumers still use typewriters for forms and letters. When personal computers were first invented, they were a serious threat to typewriter makers such as Smith Corona.

Suppliers, the companies that supply ingredients as well as packaging materials to other companies, must also be considered. Buyers, who are the focus what date is notting hill carnival this year marketing and strategic plans, must also be considered because they have bargaining power and what is the purpose of swot analysis in strategic planning be satisfied.

Walmart, for instance, is a buyer with a great deal of bargaining power. Employees are in the same position. The Internet has made it easier than ever for customers to find products and services and for workers to find the best jobs available, even if they are abroad. Companies are also acquiring foreign firms.

These factors all have an effect on the ih decisions companies make. How to eat raw eggs without getting sick organizations must comply with government regulations and understand the political and legal environments in which they do business.

Different government agencies enforce the numerous regulations that have been established to protect both consumers and businesses. For example, plannkng Sherman Act prohibits U. The regulations related to the act are enforced by the Federal Trade Commission FTCwhich also regulates deceptive advertising. The U.

Food and Drug Administration O regulates the labeling analsyis consumable products, such as food and medicine. One organization that has been extremely busy is the Consumer Product Safety Commission, the group that sets safety standards for puepose products.

Unsafe baby formula and toys with lead paint caused a big scare among consumers in and Food and Drug Administration prohibits companies from using unacceptable levels of lead in toys and other household objects, such as utensils and furniture.

Mattel voluntarily recalled Sarge cars made in mid Consumer Product Safety Commission public domain. As we have explained, when organizations conduct business in multiple markets, they must understand that regulations vary across countries and across states. Many states hhe countries have different laws that affect strategy. For example, suppose you are opening ov a new factory because you cannot keep up with the demand for your products.

If you are considering opening the factory in France perhaps because the demand in Europe for your product is strongyou need to know that it is illegal for employees in that country to work more than thirty-five hours per week. The economy has a major impact on spending by both consumers and businesses, which, in turn, affects the goals and strategies of organizations. Economic factors include variables such as inflation, unemployment, interest rates, and whether the economy is in a growth period or a recession.

Inflation occurs when the cost of living continues to rise, eroding the purchasing power of money. When this happens, you and other consumers and businesses need more money to purchase goods and services. Interest rates often rise when inflation rises. Recessions can also occur when inflation rises because higher prices sometimes cause low or negative growth in the economy. During a recessionary period, it is possible for both high-end and low-end products to sell well.

Consumers who can afford luxury goods may continue to buy them, while consumers with lower incomes tend to become more value og. Other goods and services, such as products sold in traditional department stores, may suffer. In the face of a severe economic downturn, even the sales of luxury goods can suffer. The economic downturn that began thd affected consumers and businesses at all levels worldwide.

Conducting a SWOT Analysis

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy.. It may also extend to control mechanisms for guiding the implementation of the strategy. Strategic planning became prominent in corporations during the s and remains an important aspect of strategic management. Figure The Strategic Planning Process and Figure Elements of a SWOT Analysis show examples of internal and external factors and in a SWOT analysis. The firms internal environmentsuch as its financial resources, technological resources, and the capabilities of its personnel and their performancehas to be examined. Create your SWOT Analysis online. Here is an example online SWOT Analysis of the network based music maker Sonos. Sample Objective: We want our new product to be wildly successful in 9 months S - what are my strengths that give me a competitive advantage W - what are my weaknesses that hold me back from excelling.

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker. SWOT analysis is essential for more than just business management it can be used on yourself.

In fact, it should be used on yourself. Because a business is only as successful as the team behind it. So how does a personal SWOT analysis work?

Instead of examining the strength, weaknesses, opportunities and threats in business, apply them to yourself. Starting with goal setting. You absolutely need to set a goal before you start doing a SWOT analysis.

In all aspects. So, pick one goal. One goal per personal SWOT analysis otherwise, it gets too complicated, clunky, and difficult to manage the information.

List every single thing that you do well and why you do it well. Then keep track of your strengths. There are other strengths to put on your list.

No one likes to discuss or think about their weaknesses. But this is crucial to completing your personal SWOT analysis. Because weaknesses are holding you back from completing your goals.

Since this can be difficult, ask others to help out. Okay, your goal may not be to change fields. Here are other things to consider in your threats list of your SWOT analysis template :. Opportunities are things you create or act upon to help achieve your goal. If you identify threats in the personal SWOT analysis, you can create opportunities to counteract threats. He himself shares the following 10 rules for your analysis! Not taking these into account could be disastrous.

It could mean more of your time is wasted than is productive. No one wants to waste their own time. The first thing you need is a goal or a target. The target could be a new job or a new project, or even just a year out travelling.

By having a goal, you will be able to focus your efforts and answer the right questions when it comes to reviewing your strengths, weaknesses, opportunities and threats. Your goal provides a purpose for doing the personal SWOT analysis and a person with a purpose is almost certainly a person with conviction. Many questions will need answering.

There are lots of question lists available , but this article gives you a number of questions to ask. Yes I did say that the questions need to be answered by YOU. Think carefully about what they say but it could help you answer many of the questions in different ways.

Having full knowledge of your weaknesses is arguably the first step to improving your situation. The bottom line is this:. This happened to me and I had to put it right. It may not happen to you, but I still think you should be aware. While indulged in your work. You may get carried away filling in your strengths, weaknesses etc. In doing so, you could list similar things as a weakness AND a strength. So filtering out your duplicate statements across the different sections is hugely important.

A weakness cannot also be a strength and a threat cannot also be an opportunity. Most guides will tell you to focus on your opportunities followed by your Threats. This is where I put a spanner in the works and be a bit controversial. I was once told to focus on my Threats before my Opportunities. And I have to say, this was some great advice. For example:. This is the whole point of doing the personal SWOT analysis.

So you can take real action in real life. To improve your skills and update your ways of thinking. Make sure you are always improving and always engaging in your strengths, weaknesses, opportunities, and threats.

I firmly believe that if anyone is going to get anything out of the personal SWOT analysis, they must practice this principle. Place them in a spreadsheet. Give yourself a target for each one you want to change. By update, I mean find new things out about yourself.

New opportunities could arise all the time. New weaknesses could be more detrimental. And add your new findings to the spreadsheet you created while implementing the 8 th principle. What if tomorrow never comes? Do it now, today, this hour, this minute. You highlighted the strengths necessary to complete your goal in your personal SWOT analysis. These are your competitive advantages. Every business and person should know what their advantage is in any situation. You should highlight these strengths in cover letters or elevator speeches basically, wherever necessary to complete your goal.

With weaknesses written in your SWOT analysis , rate them. Which one is absolutely holding you back? And which ones are annoying, but minor inconveniences? You must root out the most impactful weaknesses and make a plan to counteract them. Now, look at your threats. Hopefully, you were able to create opportunity from each threat listed. SWOT Analysis. SWOT Examples.

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