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QuickMBA / Strategy / SWOT AnalysisSW OT 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 environmen t in which it operates. As such, it is instrumental in strategy formulation and sele ction. The following diagram shows how a SWOT analysis fits into an environmental scan:

SWOT Analysis FrameworkEnvironmental Scan / \ Internal Analysis External Analysis / \ / \ Strengths Weaknesses Opportunities Threats | SWOT Matrix Strengths A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage . Examples of such strengths include:

patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks Weaknesses The absence of certain strengths may be viewed as a weakne ss. For example, each of the following may be considered weaknesses: SWOT Analysis http://www.quickmba.com/strategy/swot/ 1 of 3 7/31/2017 1:09 AM lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacit y. While this capacity may be considered a strength that competitors do not share , it also may be a considered a weakness if the large investment in manufact uring capacity prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities The external environmental analysis may reveal certain n ew opportunities for profit and growth. Some examples of such opportunities includ e:

an unfulfilled customer need arrival of new technologies loosening of regulations removal of international trade barriers Threats Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

shifts in consumer tastes away from the firm's products emergence of substitute products new regulations increased trade barriers The SWOT Matrix A firm should not necessarily pursue the more lucrative op portunities. Rather, it may have a better chance at developing a competitive ad vantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pur sue a compelling opportunity.

To develop strategies that take into account the SWOT pr ofile, a matrix of these factors can be constructed. The SWOT matrix (also known a s a TOWS Matrix ) is shown below:

SWOT / TOWS Matrix Strengths Weaknesses Opportunities S-O strategies W-O strategies SWOT Analysis http://www.quickmba.com/strategy/swot/ 2 of 3 7/31/2017 1:09 AM ThreatsS-T strategies W-T strategies S-O strategies pursue opportunities that are a good fit to the compa ny's strengths. W-O strategies overcome weaknesses to pursue opportunities.

S-T strategies identify ways that the firm can use its strengths to red uce its vulnerability to external threats.

W-T strategies establish a defensive plan to prevent the firm's wea knesses from making it highly susceptible to external threats. Recommended Reading Bradford, Robert W., Duncan, Peter J., Tarcy, Brian , Simplified Strategic Planning: A No-Nonsense Guide for Busy People Who Want Results Fast! QuickMBA / Strategy / SWOT Analysis Home | Site Map | About | Contact | P rivacy | Reprints | User Agreement The articles on this website are copyrighted materi al and may not be reproduced, stored on a computer disk, republished on another w ebsite, or distributed in any form without the prior express written permission o f QuickMBA.com. SWOT Analysis http://www.quickmba.com/strategy/swot/ 3 of 3 7/31/2017 1:09 AM