The main goal of strategic planning is to create a balance between the organization and the external environment and to sustain this balance over time. (Sackett, Jones and Erdley, 2005). Organizations are able to achieve this balance by evaluating new programs and services with the goal of maximizing the performance of the organization. SWOT analysis is a preliminary decision-making tool that sets the stage for this work. This planning process identifies the organization’s strengths, weaknesses, opportunities, and threats.
Before conducting a SWOT analysis, company leaders need to collect data that will help them to understand their business, market, and industry. The information gathered may vary based on these factors. This data might include population demographics, information on the competition, statistics on success and failure of similar ventures, barriers to breaking into the market, and organizational capabilities. Ways to gather this kind of information is through organizational surveys (data on the organization’s finances, operations, and processes), questionnaires, interviews, direct observation, and reporting (Harrison, 2010).
After collecting the data, managers sort it into the four categories summarized as SWOT. Strengths and weaknesses arise from factors within the organization (the internal business environment) whereas opportunities and threats are a result of external factors.
The next step involves the creation of a SWOT matrix for each business strategy being considered based on the data collected. Say a business wants to create a fruit juice production facility in a small business environment and its management wants to decide between using a joint venture approach and founding a new company; in this stage, the business would evaluate the strengths, weaknesses, opportunities, and threats involved in starting a new company as well as those involved in starting a joint venture with the local government authority in the locality (Harrison, 2010).
The last step in this process is deciding on the best course of action based on the results of the SWOT analysis.