Strategic Management: SWOT analysis’ advantages and disadvantages
Decision-making and problem-solving techniques
Strategic Management is defined as a set of managerial decisions and actions that determines the long-run performance of a corporation. It includes a variety of tools and analysis which help implement, evaluate and control the general strategy of a company. Strategy formulation begins with a situational analysis and it emphasises the monitoring and evaluating of external opportunities and threats in light of a corporation´s strengths and weaknesses (Wheelen and Hunger, 2006; Saloner et al., 2001).
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The basic model of strategic management consists of four elements: environmental scanning, strategy formulation, strategy implementation and evaluation and control (Wheelen and Hunger, 2006). (See Exhibit 1.0) For purposes of this literature review we will focus on the examination of the environmental scanning element; this because it is arguable whether it helps monitor, evaluate and disseminate internal and external information of a specific company within a certain environment in an accurate way.
This “basic model” uses a SWOT analysis, which serves as a first general approach for a company to therefore move forward into a deeper analysis so it has the basis to implement a long-term strategy.
It is generally used as a technique which can be applied across diverse functions and activities, but it is particularly appropriate to the early stages of planning (British Council, 2009). (See Exhibit 2.0) SWOT´s purpose is to identify strategic factors such as internal and external components that will determine the future of a corporation. The external environment consists of variables of opportunities and threats (O, T) that are on the external context of the organisation often with non-short-run-control over them and an internal environment which consists of strengths and weaknesses (S, W) within a corporation.(Wheelen and Hunger, 2006). This approach helps illustrate how the external opportunities and threats facing a particular corporation can be matched with a company´s internal strengths and weaknesses.
Factors should be evaluated across the organization in areas such as (Westbrook and Hill, 1997):
People and skills
Access to natural resources
Position on the experience curve
Patents and trade secrets
The SWOT analysis summarizes the internal factors of the firm as a list of strengths and weaknesses.
Opportunities and threats can arise when changes occur in the external environment such as:
Political and regulatory environment
(Note: The Social, Technological, Economical and political variables, are addressed in a PEST analysis).
The SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Threats. The questions or discussion points can vary and obviously can be altered depending on the subject of the analysis. A SWOT analysis is a perspective of one thing, be it a company, a product, a proposition, and idea, a method, or an option so the subject must be clear to all contributors (Chapman,2008). (See Exhibit...