Introduction to SWOT-EFE - Organization is Johns Hopkins Medical

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Strategic Analysis for Healthcare

Chapter 9

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SWOT: External Opportunities and Threats

Analysis of an organization’s strengths, weaknesses, opportunities, and threats is commonly called SWOT analysis.

SWOT brings together analyses from the previous chapters and starts to form a cohesive assessment of the organization.

SWOT does not identify particular strategies but rather identifies issues that may later need to be strategically addressed.

Specific consideration is given to critical success factors in the firm’s industry. The SWOT categories are examined in two dimensions, covering internal and external issues.

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SWOT: Internal and External

Health Administration Press

SWOT: Internal and External

Internally, every organization has both strengths and weaknesses.

As a prelude to developing strategy, the analyst must understand what these strengths and weaknesses are, particularly in relation to the industry’s critical success factors.

Opportunities and threats, described in greater detail later in this chapter, are regarded as the external SWOT factors.

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SWOT: Internal and External

The SWOT analysis will serve as the basis for two lines of analysis that we will explore in the chapters ahead.

The first line will involve developing an internal factor evaluation (IFE) and an external factor evaluation (EFE), leading to an internal–external (I/E) matrix that suggests broad strategic directions.

In the second line of analysis, SWOT will form the basis of a TOWS (SWOT written backwards) matrix that will be used to develop specific strategies.

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SWOT: Lines of Analysis

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SWOT: The External Analysis

Most strategy texts instruct the analyst to complete all four SWOT boxes at one time.

This text, however, separates the internal and external components and addresses them separately.

Doing so allows the strategist to focus on the external issues first and to draw upon the previous analyses that were primarily external in focus.

We will examine the internal SWOT factors in Chapter 17, after having had an opportunity to perform additional analyses of the inner workings of the company.

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SWOT: The External Analysis

The external factors account for SWOT’s O and T—the opportunities and the threats.

An opportunity can be thought of as any market possibility for which your organization can take action and make a positive impact.

Such impacts could include

organizational growth,

market share increase,

potential entry into new markets,

increased profits,

chances to exploit competitors’ weaknesses,

or any other positive outcome.

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SWOT: The External Analysis

A threat can be defined as any possibility for your organization to be negatively affected by an external action of the market or of a competitor.

Threats represent negative impacts on your firm’s profitability and competitive well-being.

Negative impacts could involve such things as

competitor plans to introduce new technology or services to attract your current customer base,

economic forces,

the potential of a hostile takeover,

the chance of a new entrant entering into your market,

or looming price wars.

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SWOT: The External Analysis

When you begin your SWOT analysis, first focus on the external factors that could, either now or in the future, impact your organization.

Consider the critical success factors that pertain to the external environment.

Where does this information come from?

It should draw upon your research about the organization in particular, the industry, and the external environment in general.

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SWOT: The External Analysis

You have previously assessed these issues to develop your industry map, five forces analysis, PEST analysis, and competitive benchmark analysis.

Review those analyses and identify the issues that could become competitive threats against your organization or could create competitive opportunities for your organization.

Typically, you should identify about ten opportunities and ten threats.

Note that you are not proposing strategies or solutions at this time. You are identifying critical issues that will need to be addressed in subsequent strategy development sections.

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Exercise

Divide the class into groups.

Complete the external portion of the SWOT analysis for your project organization in the space provided.

Be sure to review your previous analyses and consider the critical success factors in the industry.

What are the implications for strategy?

The issues you identify in this exercise will be used to complete the EFE in the next chapter and later will be transferred into the TOWS strategy development chart in Chapter 24.

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Internal: Strengths Weaknesses

External: Opportunities Threats