SWOT analysis is a tool for planning business strategies by evaluating a company’s strengths, weaknesses, opportunities, and threats. It can be combined with strategic planning to develop plans based on research information and identify threats and opportunities.
Strengths, Weaknesses, Opportunities, Threats (SWOT) is a trade term for one of the methods used for making informed business plans. The relationship between SWOT analysis and strategic planning is the fact that SWOT is a tool for planning business strategies. This means that it allows a company to evaluate itself and its environment with the aim of using the information gathered to make strategic decisions.
An example of the relationship between SWOT analysis and strategic planning can be seen in the case of a company that produces infant formula. The company has a major distribution outlet located in the state of Virginia and is planning to open another outlet in New Jersey to extend its reach. As part of this plan, the company conducts an analysis of its current business structure to uncover the company’s related strengths, weaknesses, opportunities and threats. This knowledge will help the company gain a clearer understanding of its business structure and enable it to develop a strategic plan based on research information.
The two can be combined by discovering the company’s strengths and weaknesses. For the company used in the figure above, strengths could be the reach of the distribution network, financial resources and the ability to use new technologies to its advantage. Weaknesses can include inability to access certain segments of the market, poor corporate culture, ineffective leadership, and low demand for certain products.
Another way to combine them is to make a list of all the opportunities identified. The opportunities could be in the form of new or existing favorable government policies, which the company can convert to its own advantage. Knowing the opportunities can help the company develop strategic business plans. If a company knows it will receive tax cuts for manufacturing certain types of products, for example, this is an opportunity that will allow it to develop a strategic plan for manufacturing that particular product so it can take advantage of the tax cut. An automaker may decide to make a certain brand of car a hybrid if it realizes it can get tax breaks or other types of tax incentives for making hybrids.
The combination of SWOT analysis and strategic planning also allows a company to identify threats. Some examples of threats to a business include a bad location, tough competition, and a weak corporate culture. Knowledge of threats will also be included in the strategic plan in order to find ways to avoid or overcome them.
Protect your devices with Threat Protection by NordVPN
