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SWOT analysis is a decision-making tool used in business, personal and professional development, and financial planning. It assesses internal and external factors that can lead to changes and is used for strategic planning and development. It is also used by financial analysts, career planners, and life coaches.
Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis is often applied in a variety of business contexts. It can also be used to analyze unrelated situations where strategic decision making is important. In the business context, SWOT analysis is used for strategic planning and development. Non-business applications include personal and professional development, life management and financial planning.
SWOT analysis is a way of taking an assessment of a current position and identifying the internal and external factors that establish that position and can lead to changes. It is an exercise in decision making that relies on specific data to generate a strategic plan. Formal applications of SWOT can be seen most often in business management, but informal applications of the analysis are conducted by individuals on a daily basis. People who employ this type of thinking in their daily lives may not be aware of its academic genesis.
Companies use SWOT analysis to plan for the future. They apply the analysis to the entire company, a department, a product or a competitor. Strategic planning, marketing, and product development are typical business areas where management teams use SWOT. Assessment of strengths and weaknesses, opportunities and threats can also be used by an audit team to design corrective actions. Large companies use SWOT in the context of R&D, patent mapping, and planning large-scale projects.
In a business setting, SWOT analysis is often part of creating the initial business plan. Indeed, lenders and investors usually require this type of valuation to demonstrate that the prospective entrepreneur has correctly assessed the risk and probable market position of the business. These business applications of SWOT are just examples, however. There are many other types of business situations that use SWOT, including as a theory exercise to solicit employee input at retreats and seminars.
Ordinary people also use SWOT to make decisions, even though they may not know the official name of the process. For example, when a person decides whether or not to make a major life decision, such as relocating or ending a relationship, she can make a list detailing the pros and cons, considering those factors against future opportunities or potential pitfalls. These are just different labels applied to traditional SWOT categories. Financial analysts use SWOT to evaluate investments and career planners use it to help people decide a direction for their career.
Most interesting, perhaps, is the application of SWOT to the personal development arena used by life coaches and motivational speakers. It’s not uncommon to find these types of professionals using a modified SWOT approach in workshops and seminars to get people to identify their personal assets and develop a plan for the future. These types of uses simply underscore the flexibility of SWOT analysis as a decision-making paradigm.
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