We explain what the SWOT analysis is, its usefulness, and its internal and external analysis. Also, what are its characteristics and examples?
The SWOT analysis or also called SWOT (Strengths, Weaknesses, Opportunities and Threats), is a conceptual tool to approach a company or a specific project , from the review of its internal characteristics (weaknesses and strengths) and its external situation ( opportunities and threats), to outline a diagnosis of possible improvement.
This method comes from English (SWOT) and is usually represented through a square matrix that allows the correlation between the elements analyzed to be seen and thus have a more complete picture of the company or the project. For this, competitive advantages are taken into account as well as the generic strategy, that is, individual considerations and common models.
The SWOT analysis is used to create an accurate and complete diagnosis of a project , relating the pertinent information to allow the informed choice of the model to follow or of the possible routes of the same.
It is a strategy of analysis and understanding , therefore it is useful to diagnose problems, understand the level of effectiveness of an organization , determine the course of growth or simply provide the managers of the organization with a better understanding of the way in which it it works.
For this , the matrix of four aspects is used : Strengths, Weaknesses, Opportunities and Threats.
SWOT analysis appeared in the United States during the 1970s , as part of a revolution in the field of business and project analysis.
The business consultant Albert S. Humphrey is assumed to be its creator , although there are texts that attribute it to other business thinkers of the time.
The internal analysis proposed by the SWOT is based on two of its four fundamental elements , which are the strengths and weaknesses.
This involves all the structural, operational, managerial, economic, etc. considerations . that directly or indirectly influence the functioning of the organization and that respond only to elements that make life inside it.
The external analysis, similarly, has to do with the environmental conditions in which the organization lives , since no company is an island nor can it be independent of what happens in its environment.
In this sense, attention must be paid to present or future political, legal, social and technological conditions, to determine the threats and opportunities that exist or may arise.
Each of the elements that the SWOT pursues can be determined through a series of questions, in which it is outlined which elements we should pay attention to and in what sense. Some are:
Once the SWOT data has been collected through the questions, the next step in the analysis is its representation in a grid matrix . This matrix lays out the exploratory content in two columns and two rows, so that we can read strengths and opportunities, and weaknesses and threats, one on top of the other.
Strengths – WeaknessesOpportunities – Threats
From the conjunction of the strengths and the opportunities will arise the powers of the company, that is, the possible routes of growth and investment . From the weaknesses and threats, instead, the limitations will emerge, which are a warning regarding the present and future functioning of the company.
It is, thus, an evaluation of its real situation and the approach of possible future routes, which must be taken into account when considering its strategic objectives for the future, such as remodeling, investments , diversification, reductions etc
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