SWOT analysis was originally conceived and developed in the 1960s and its basic organising principles have remained largely unchanged in the field of

strategic management since that time (Kotler et al., 2013). It is, as Ghazinoory, Abdi and Azadegan-Mehr (2011) comment, a systematic framework which helps

managers to develop their business strategies by appraising the internal and external determinants of their organisation’s performance. Internal

environmental factors include leadership talent, human resource capabilities, the company’s culture as well as the effectiveness of its policies and

procedures. In contrast, external factors include competition, government legislation, changing trends, and social expectations (Johnson, Scholes and

Whittington, 2008).

The SWOT analysis framework involves analysing the strengths (S) and weaknesses (W) of the business’s internal factors, and the opportunities (O) and

threats (T) of its external factors of performance (Ghazinoory, Abdi and Azadegan-Mehr, 2011). Through this analysis, the weaknesses and strengths within a

company can correspond to the opportunities and threats in the business environment so that effective strategies can be developed (Helms and Nixon, 2010).

It follows from this, therefore, that an organisation can derive an effective strategy by taking advantage of its opportunities by using its strengths and

neutralise its threats by minimising the impact of its weaknesses. Moreover, SWOT analysis can be applied to both a whole company as well as a specific

project within a company in order to identify new company strategies and appraise project feasibility.

Hollensen (2010) asserts that the strengths and weaknesses of a company relate to its internal elements such as resources, operational programmes and

departments such as sales, marketing and distribution. More specifically, a strength is an advantageous – or even unique – skill, competency,

product, or service that a business or project possesses that allows it to create competitive advantages. This may include abstract concepts, such as its

possession of strong research and development capabilities. A weakness on the other hand is a strategic disadvantage, such as a skill that the business or

project lacks which limits it and creates potential risks in negative economic conditions. Achieving a balance between such positives and negatives is

therefore a necessary pre-requisite for any company and it is also imperative that a company continues to review its strengths and weaknesses to take

account for changes in its internal environment (Kotler et al., 2013).

An opportunity is, as Henry (2011) comments, a desirable condition which can be exploited to consolidate and strengthen a strategic position. Examples of

this phenomenon would include growing demand for a trendy new product which it could consider selling, such as that announced by Burger King relating to

the introduction of a black cheeseburger (Molloy, 2014). A threat on the other hand, is a condition that creates uncertainties which could potentially

damage an organisation’s performance or market share (Henry, 2011). Threats include the introduction of new competing products or services, foreign

competition, technological advancements, and new regulations. Examples of the fear of such external factors can be noted in the comments of companies

planning to relocate their headquarters and registration bases from Scotland to England in the event of a ‘yes’ vote in the Scottish referendum

in September 2014 (Wright, Titcombe and Spence, 2014). Therefore, a company needs to develop strategies to overcome these threats in order to prevent the

loss of its market share, reputation, or profit. It must be noted, however, that opportunities and threats exist in the environment and therefore are often

beyond the control of the organisation – but they do offer suggestions for strategic direction. SWOT analysis, as a result, demands a great deal of

research into an organisation’s present and future position (Johnson, Scholes and Whittington, 2008). The results of SWOT analysis provide a useful

source of information from which an organisation can go on to develop policies and practices which allow it to build upon its strengths, diminish its

weaknesses, seize its opportunities, and make contingency plans or measures to eradicate or curtail threats, as Kotler et al. (2013) observe.

SWOT analysis is widely used by managers because of its simplicity (Hollensen, 2010). It is used as a planning tool that can be adapted to a range of

situations and projects. Whilst it is not the only technique available to managers, it can often be the most effective if used properly (Henry, 2011). The

basis for a SWOT analysis is usually drawn from an audit review as well as from independently carried out interviews with staff and customers. Data is then

analysed to arrive at a list of issues which can be categorised into strengths, weaknesses, opportunities, and threats. The key issues and company

activities are then reassessed through protracted discussions between managers and reduced further to identify the most important issues and the potential

impact that they could have on the organisation. If too many issues are included in the analysis, there will be a lack of focus in the development of a new

company strategy and thus it is important to ensure that such discussions focus on a limited number of factors (Ghazinoory, Abdi and Azadegan-Mehr, 2011).

Additionally, the issues considered should be made in view of customer opinions and perceptions, which would therefore require objectivity. Ideally, a

company should carry out a SWOT analysis on a regular basis in order to assess its situation against its competitors in a constantly evolving market

environment (Fernie and Moore, 2013). According to Stalk, Evans and Schulman (1992, p. 62), “the essence of strategy is not the structure of a

company’s products and markets but the dynamics of its behaviour”.

It is also recommended that an organisation should develop and undertake SWOT analysis on its competitors so that it is able to take into account consumer

perceptions and determinants of their buying behaviour. This is particularly the case with issues such as quality, in which perceptions may be more

powerful than reality (Kaplan and Norton, 2008). In today’s highly competitive and fast changing market environment, managers may make a grave error

when evaluating their company’s resources; that is, not to assess them relative to the competition (Kotler et al., 2013). A competitive analysis as

part of the SWOT framework is always necessary in order to determine an organisation’s position in the wider market. Thus, for example, if a project

or business strength is the amount of capital it has to invest in improved IT functionality, this may not be the case if its competitor is investing double

this amount to improve its own IT functionality. Thus, it is no longer a strength but rather a weakness for the company. The same competitive analysis

should also be taken into account when assessing opportunities and threats, as it depends on the relative situation of the competing businesses (Johnson,

Scholes and Whittington, 2008).

McDonald (1989, p. 16) states that the “SWOT device… whilst potentially a very powerful, analytical device, is rarely used effectively”,

and recommends using a summary from a marketing audit to arrive at a sound SWOT analysis; the analysis must be conducted rigorously so that it prioritises

the issues of paramount importance. Further, McDonald suggests keeping it focused on critical factors only and to maintain a list of differential strengths

and weaknesses in comparison to competitors, concentrating mainly on competitive advantages. Additionally, only critical external opportunities and threats

should be listed with a focus on the real issues. Finally, according to McDonald (1989), the reader of the SWOT analysis should be left with the main

issues encompassing the business to the extent that they are able to derive and develop marketing objectives from them. At the end of the analysis, the

organisation is left with reasons behind their choices as well as their potential impacts, which provides them with a stronger basis from which to form

future strategic decisions.