Reference no: EM133353924

Four letters make up an acronym that often sends chills down the spine of students in business education: SWOT. The acronym stands for strengths, weaknesses, opportunities, and threats, and the SWOT analysis forms the basis of most case analyses in business education.

The SWOT is credited (blamed?) to a management consultant named Albert Humphrey, who created the SWOT analysis during his studies of Fortune 500 companies during the 1960s. It was designed to help companies assess their current situation, based both on internal and external factors.

Strengths and weaknesses are internal factors that are within the control of an organization. They can relate to any business processes that a company faces at a given time. This could include financial, accounting, marketing, human resources, and operations, to name a few. Any actions taken by a company can be scrutinized as either a strength or a weakness.

Opportunities and threats are external to a business, and involve the external environment surrounding the organization. These can be in the areas of demographic, social, political, legal, economic, or myriad other factors that exist in the external environment. In almost every SWOT analysis competition is an external factor to be assessed, and it is important to look at the competitive factors that play a role in the industry of focus.

And while this analysis seems straightforward, there is a constant struggle for students to apply the model properly. Students are often tasked with completing a SWOT and creating their 2×2 matrix, which would look something as shown in the figure below.

It is not that students struggle with populating each of the four quadrants; rather, there often are misconceptions on how to properly apply the SWOT. The biggest issue in a SWOT involves opportunities. Often students will place into this quadrant the actions or activities a company could undertake in the external environment. However, this does not represent a proper opportunity. Opportunities are external to a company's control, external trends and forces that any business in an industry will have to manage and potentially take advantage of.

This applies to threats, where students will sometimes write in negative factors specifically relating to a company. Threats and opportunities must be written in a way that are entirely external, and not relating to any one company.

The main reason for this relates to how the SWOT is correctly applied. A SWOT analysis is a strategic and powerful business tool if properly completed and used. Connections are sought between the internal and external factors in a SWOT. For example, a company might be highly skilled at social media and received numerous awards. This internal factor could match with an external trend toward consumers seeking out reviews of products in an industry through websites and social media. Matching these two factors, it is clear that the company could take advantage of an opportunity with its own strength.

And, of course, other matches can be had in a SWOT analysis. A company's weakness could be matched with a threat in the industry, thus giving the company pause to carry forward in a particular area. The company could also decide after such a result from a SWOT analysis to work toward mitigating or minimizing that particular weakness given the external threat that is present.

Matching can also be done with strengths and threats, and weaknesses and opportunities. It will often depend on whether the internal or external factor is stronger as to how a company should proceed. This process is often referred to as a feasibility analysis and can be used in developing a strategic direction for the business.

Given that you have already completed a SWOT analysis in class about Apple (see your course notes), you can now apply the knowledge you have from this case by going back to that SWOT and making any necessary changes. Take the next step and perform a feasibility analysis on one internal and one external factor that seem to match up. What does this process tell you? Likely, that a SWOT is nothing to fear and something worth knowing how to do well.

Question

Given that you have already completed a SWOT analysis in class about Apple (see your course notes), you can now apply the knowledge you have from this case by going back to that SWOT and making any necessary changes. Take the next step and perform a feasibility analysis on one internal and one external factor that seem to match up. What does this process tell you? Likely, that a SWOT is nothing to fear and something worth knowing how to do well.