Role of SWOT analysis in Strategic Management

 

The SWOT analysis helps you see how you stand out in the marketplace, how you can grow as a business and where you are vulnerable. This easy-to-use tool also helps you identify your company’s opportunities and any threats it faces. The process takes account of both the internal and external factors your company must navigate. A SWOT analysis brings out what steps need to be taken for further strategic planning, helping decision makers draw a future roadmap for the company. This information helps them plan for and mitigate future roadblocks, ensuring long term growth of business.

A two-by-two matrix is used to build a SWOT analysis, with horizontal pairings of internal (strengths and weakness) and external (opportunities and threats) factors and vertical pairings of helpful (strengths and opportunities) and harmful (weaknesses and threats) factors in achieving an objective. Final results of the analysis will help the organization determine whether objectives, products, services, projects or goals are a strategic fit. The best strategic fits are when the internal environment (strengths and weaknesses) aligns with the external environment (opportunities and threats).

SWOT Analysis helps in strategic planning in following manner-

1. It is a source of information for strategic planning.
2. Get visibility on their current status, letting them understand and measure overall business performance.
3. Builds organization’s strengths, which in turn can help them better penetrate the market to meet business targets.
4. It lets organizations get visibility on their weaknesses and potential areas of improvement. This information helps them plan for and mitigate future roadblocks, ensuring long term growth of business.
5. Maximize its response to opportunities.
6. Overcome organization’s threats.
7. It helps in identifying core competencies of the firm.
8. It helps in setting of objectives for strategic planning.
9. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.

SWOT Analysis provide information that helps in synchronizing thefirm’s resources and capabilities with the competitive environment in which the firm operates.

This information can help businesses be more proactive by helping them take appropriate actions in a dynamic market to maintain momentum.

 In conclusion, SWOT is an important tool to understand the health of an organization. It allows decision makers to identify not only where an organization stands, but also where they need to improve. This gives them the ability to be a proactive player in the market while helping them remain competitive.