SWOT analysis is the identification of the Strengths and Weaknesses of the organization, as well as the external Opportunities and Threats that affect its activities. This analysis should be an integral part of the strategy development of each company. Information about external opportunities and threats can be obtained from various sources: from buyers, suppliers, bankers, acquaintances working in other organizations, consultants, from government reports, specialized magazines, at meetings of members of associations. Many companies use the services of specialized firms that compile collections of newspaper articles and analyze trends in the development of domestic and international markets.
Managers can gain insight into the strengths and weaknesses of an organization from a variety of reports, including budgets, financials, income statements, employee surveys about company attitudes, and job satisfaction. More than 80% of managers’ working time is used to receive and transmit information. Through face-to-face meetings and conversations with employees at all levels, managers receive the necessary information about the merits and vulnerabilities of their company.
Internal strengths and weaknesses
Strengths are positive internal characteristics of the organization that can be used to achieve strategic goals. Weaknesses of an organization are usually understood as internal characteristics of the company that negatively affect or limit its activities.
External opportunities and threats
Threats are environmental factors that can hinder the achievement of the strategic goals of the organization. Opportunities are features of the external environment that could help a company achieve its strategic goals. The general assessment of the external environment is made according to nine components, which are shown in Fig. 4. The strategic behavior of an organization is influenced by elements of the task environment (actions of competitors, buyers, suppliers, sources of labor), and elements of the general environment have an indirect effect on the organization. The shared environment includes technological discoveries, economic, legislative/political and international developments, and sociocultural changes. Also, additional opportunities and threats may be associated with influence groups and interest groups, lenders, access to natural resources, and the level of industry competition.
Growth strategies are based on internal (investment in development) or external (acquisition of new business units) sources.
The stabilization strategy (or pause strategy) assumes slow, tightly controlled development, a simple continuation of the business. Usually, this strategy is resorted to after explosive growth. Management focuses on the establishment of business processes and interaction of business units, ensuring the effective operation of the organization as a whole.
A downsizing strategy means that an organization is going through a downturn and is either downsizing its divisions or selling or liquidating entire lines of business.