Strategic planning is critical to business success. Unlike classic business planning, the strategic variety involves vision, mission, and outside-of-the-box thinking, which is applied when a company needs a revamping of its activities or thinks that things are not going well with the company requires a repositioning. In this situation, the company evolves a strategic planning approach. Strategic planning describes where you want your company to go, not necessarily how you are going to get there. However, like all other “travel plans,” without knowing where you want to go, creating details on how to arrive is meaningless. Strategic planning defines the “where” the company is heading. The primary aim of strategic planning is to bring an organization into balance with the external environment and to maintain that balance over time. Organizations accomplish this balance by evaluating new programs and services with the intent of maximizing organizational performance. Strength, Weaknesses, Opportunities, and Threat (SWOT) analysis is a preliminary decision-making tool that sets the stage for this work.
In SWOT analysis, data on the organization are collected and sorted into four categories: strengths, weaknesses, opportunities, and threats. Strengths and weaknesses generally stem from factors within the organization, whereas opportunities and threats usually arise from external factors. Organizational surveys are an effective means of gathering some of this information, such as data on an organization’s finances, operations, and processes. SWOT analysis involves the collection and evaluation of key data. Depending on the organization, these data might include population demographics, community health status, sources of funding, and the current status of the enabling technology. Once the data has been collected and analyzed, the organization’s capabilities in these areas are assessed.
Understanding SWOT analysis as a tool for Strategic Change
For most entrepreneurs, engaging in a SWOT analysis is usually far from what they consider an important tool in their business management tools. However, fully understanding a SWOT analysis will show why every business should carry out such a review once every while and much more so in challenging times. SWOT analysis is carried out by some companies as part of the overall corporate planning process in which financial and operational goals are set for the upcoming year and strategies are created to accomplish these goals.
SWOT refers to Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a process where the management of the company brainstorms to identify the internal and external factors that impact or are capable of impacting the company’s future performance both negatively and positively. The company’s strengths and weaknesses are internal factors. Opportunities and threats deal with environmental factors that are external to the company. A SWOT analysis can help identify and understand key issues affecting the business that may not be so clear to management in their routine daily business analysis and thinking. It is therefore an important strategic tool for the entrepreneur that wants to think logically about its business or wants to evaluate how best to be competitive or grow the business. It is a very practical and efficient way to start exploring the bigger picture and deciding what next level to take your business to. SWOT analysis is most useful in a rapidly changing economic environment in which most companies are struggling for survival and growth. On such an occasion, management must be prepared to spend time reviewing the company’s SWOT and use it to determine the best way to progress the business.