Steps of SWOT Analysis in Strategic Management

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In the previous article, we read the SWOT Analysis which was one kind of model of strategic management models. Today, we try to understand the different steps of SWOT analysis of strategic management. Beside this, we also can understand the using of SWOT results for the choice of strategy and next steps of SWOT analysis.

Steps of SWOT Analysis:

While undertaking a SWOT analysis of your organization you can follow the following major steps of SWOT analysis. Such as:-

  1. Analyze the external environment
  2. Analyze the industry and competition
  3. Identify the external opportunities and threats
  4. Analyze the internal environment and identify the internal strengths and weaknesses
  5. Assess the attractiveness of the organization’s situations and draw conclusions regarding the need for strategic action.

We now discuss the details of the steps of SWOT analysis involved in the SWOT analysis.

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Steps of SWOT Analysis

1st External Environmental Analysis:

External environment analysis is the first step of the steps of SWOT analysis. From this, we have to obey the following things. Such as:-

  • Identify the key political, economic, social-cultural, demographic, natural/ecological and technological forces that are most likely to affect the organization.
  • Monitor information on the environmental forces.
  • Select the methods to be used in forecasting these forces.
  • Isolate the marketplace chances on the origin of the forecasts of these forces.
  • Estimate the inclinations in these navies.
  • Identifying the threats to the organization’s future profitability.

2nd Industry and Competitive Analysis:

The second is the industry and competitive analysis of the steps of SWOT analysis. There are included the following indicators. Such as:-

  • Examine the landscape of struggle.
  • Study the business construction.
  • Identify and analyze individual competitors.
  • Identify the key industry-related opportunities and threats.

3rd Identification of Opportunities and Threats:

The external analysis (one of the steps of SWOT analysis) will provide you with information for the identification of threats and opportunities in the external environment. It is the responsibility of the management to ensure that information derived from environmental scanning is summarized and analyzed to determine what characterize these threats and threats. One method of performing an opportunity and threat analysis is simply to categorize the environmental factors in terms of opportunity potential and threat potential. Then management should summarize the emerging implications for future organizational direction. A sample opportunity and threat analysis for Comilla Foundry (producer of tube-wells) are presented in the following table.

sample format for identification of opportunities and threats in the steps of SWOT analysis
Environmental Factor Opportunities Threats
General Environment
Decreasing disposable income of customers
Society is getting more comfortable with using cheaper tub-wells
Operating Environment
TARA Pump (one competitor) has introduced new good quality product
Services provided by TARA Pump is superior

4th Internal Environmental Analysis and Identification Internal Strengths & Weaknesses:

The fourth phase of the steps of SWOT analysis is it. That name is  internal environmental analysis and identification of internal strengths & weaknesses. But it is divided into two categories. Such as:-

  1. Internal Environmental Analysis
  2. Identification Internal Strengths and Weaknesses

1. Internal Environmental Analysis

The internal environmental analysis is the sup-step of the steps of SWOT analysis. We have to read these important indicators. Such as:-

  • Recognize the areas for scrutiny (for instance product position, financial position, etc.)
  • Evaluate the strengths and weaknesses for their strategy-making implications.
  • Detecting association’s inner resource and strengths abilities.
  • Examine each of the nominated zones.
  • Identifying the organization’s internal weaknesses and resources deficiencies.

2. Identification Internal Strengths and Weaknesses

It is the second sub-step of the steps of SWOT analysis. The information derived from the internal analysis would provide you the basis for identification of strengths and weaknesses of your organization. While identifying the strengths and weaknesses, you need to bear in mind that the skills and capabilities which are likely to serve as enablers for strategy formulation and implementation are to be listed as strengths. Those which are not enablers should be listed as the weakness. You use the example-based format, as shown in the following table. For identification and listing of strengths and weaknesses.

The firm has not yet introduced MIS, which hampers timely use of information for decision making. There is included a table. Such as:-

A sample format for identification of internal stregnths and weaknesses in the steps of SWOT analysis
Environmental Factor Opportunities Threats
Comilla Foundry is hiring more professional sales executives and managers
Comilla Foundry has high employee turnover
The firm often suffers from working capital deficiency
The firm is purchasing raw materials at a relatively cheaper prices

More read: Porter’s Five Forces Model of Competition Analysis

5th Concluding SWOT Analysis and Drawing Conclusion:

Concluding SWOT Analysis and Drawing Conclusion is the final one of the steps of SWOT analysis. Under it has following things. Such as:-

  • Assess the attractiveness of an organization’s situation on the basis of identified strengths, weaknesses, opportunities and threats.
  • Draw conclusion regarding the need for strategic action.

A format for comprehensive SWOT analysis (in the steps of SWOT analysis) with examples from the bank is given the following table for your better understanding of how to write down statements for strengths, weaknesses, opportunities, and threats.

Example of the Steps of SWOT Analysis Format
Internal Strengths Internal Weaknesses
1. Our bank has a trained workforce
2. Top managers are visionary
3. It has adequate physical facilities
4. It has sound organization structure showing clear reporting relationships
1. Two non-professional directors create obstacles in effective decision-making
2. Ten out of 54 brances are not making profits
3. Overhead expenditures are high
External Opportunities External Threats
1. Freedom is granted by Bangladesh Bank to impose discriminatory rates of interest on different accounts
2. People’s shift in attitudes loward hire purchase through bank loans and in using credit cards for regular shopping
1. Dpression in the economy
2. Slow growth in idustrilization
3. Many firms are increasingly becoming sick
4. Undue political pressures for granting loans to financially unviable projects

More read: Thompson and Strickland Strategic Management Model

Use of SWOT Results for the Choice of Strategy of the Steps of SWOT Analysis:

Strategy-makers can be used the outcomes of SWOT analysis (in the steps of SWOT analysis) for the choice of strategy. Inefficacious corporations, the strategists methodically compare the key internal strengths and weaknesses with the key external opportunities and threats. They identify, based on their understanding of opportunities and threats, realistic options from which to choose an appropriate strategy. Again, based on the examination of the organization’s strengths and weaknesses, the narrow down the choice of strategic alternatives and selection of strategy depending on their understanding of strengths and weaknesses. They identify the distinctive competencies and critical weaknesses and then compare them with the markets determinates of success. The whole exercise serves as a useful framework for making the best strategic choice.

When systematically done, Steps of SWOT analysis covers all aspects of an organization. Thus, it provides a dynamic framework for choosing a strategy. Strengths, weaknesses, opportunities, and threats point to the need for strategic action. The results of the analysis provide clues to the strategist/managers in a business-firm need to take the following things. i.e.:-

  • Undertake actions to protect/improve the firm’s strengths;
  • Initiate efforts to overcome the weaknesses;
  • Pursue market opportunities matched with resources capabilities; and
  • Take actions to define against external threats to the firm’s business.

As a strategist, you need to keep in mind that when your firm has many opportunities, it may also face some key threats in its external environment. Similarly, side by side with several weaknesses, your firm might have some unique strengths relative to the competitors. That means steps of SWOT analysis would simply help you visualize the overall position of your firm in terms of market conditions. And this would enable you to identify an appropriate strategy for the market.

More read: Value Chain Analysis in Strategic Management

What Next to the Steps of SWOT Analysis?

From the results of the SWOT analysis and completing the steps of SWOT analysis, managers/strategy-makers by now have understood the situations of the organization. And also understand the context of industry and the general external environment as well as the internal conditions of the firm. They have also adequate information for setting organizational objectives. Based on the information and their understanding of the environment, they should now be in a position to decide about the firm’s objectives, both long-term and short-term. As stated earlier, long-range objectives specify the results desired in the organization’s mission. They normally extend beyond current fiscal years. Short-range objectives (one years or less) should follow logically from long-range objectives. Once the long-range objectives have been determined, the stage has now been set for formulating appropriate competitive strategies.

The strategies must be framed keeping in view the certainties of the total situation so as to the programmed purposes can be attained efficiently and capable. If there is possible, in the next post deals with the setting of objective. And that would form the basis for strategy formation or more explanation about the Steps of SWOT Analysis.

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