An Effective Tool for Strategic Planning - Essay Example

SWOT Analysis is a primary research method that aims at analyzing the environment of a company’s business by subdividing the factors into internal and external influence to the company’s business. SWOT Analysis forms as a core of the Strategic Planning process, which helps in understanding the current situation in which the company is operating, and provides the knowledge for maximization of positive factors and minimization of negative factors, leading to better results.

SWOT Analysis is a method of analyzing the environment of a company’s business with the focus both on internal and external factors that affect the company’s performance. It involves the evaluation of a company’s Strengths, Weaknesses, Opportunities, and Threats (SWOT). (Kotler & Keller, 2006)  The purpose of the SWOT Analysis is to identify the business prospects for a company and evaluate the internal resources that help in completing the task. This gives more meaningful results as compared to PEST (Political, Economic, Social and Technological) analysis, due to the categorization of the factors into internal (Strengths and Weaknesses) and external factors (Opportunities and Threats) that are matched together to gauge the future performance of the company.

The key is in the classification of factors into the right category. A strategic plan is defined as “The process of determining a company’s long-term goals and then identifying the best approach for achieving those goals” (Strategic Planning definition, 2009). This involves a standard procedure and requires the analysis of external market conditions and integrating the same with the company’s internal resources. Once the company sets its Mission and Goals, it needs to evaluate the current situation under which these goals are to be achieved (Strategic planning process, 2009).

This situation will always be influenced by both internal (that are related only to the firm) and external factors (related to the entire industry in which the firm is operating), which needs a thorough analysis.