One kind of context analysis, which is any method to analyze the environment in which businesses operate, is called a SWOT analysis. Performing a SWOT analysis allows a business to gain insights into its internal strengths and weaknesses, and also the external opportunities and threats posed by the marketplace within which they operate. The main goal of a context analysis, SWOT or otherwise, is to analyze the business environment in order to develop a strategic plan.
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats related to a project or business venture. A SWOT involves specifying the objective of the business and then identifying the internal and external factors that are favorable and unfavorable toward the business being able to achieve its objective. Setting the objective, in terms of moving from strategy planning to strategy implementation, should be done after the SWOT analysis has been performed. This allows the organization to set achievable goals and objectives.
- Strengths: internal characteristics of the business that give it an advantage over competitors
- Weaknesses: internal characteristics that place the business at a disadvantage against competitors
- Opportunities: external chances to improve performance in the overall business environment
- Threats: external elements in the environment that could cause trouble for the business Figure 1
Identification of SWOTs is essential because subsequent stages of planning can be derived from the SWOTs. First, decision makers have to determine whether an objective is attainable, given the SWOTs. If the objective is not attainable, a different objective must be selected and then the process can be repeated. Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category in order to maximize the benefits of the evaluation and identify their competitive advantages.