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USING THE SWOT FRAMEWORK IN THE HEALTHCARE SECTOR

Arthur Daemmrich wrote this technical note solely to provide material for class discussion. The author does not intend to provide
legal, tax, accounting or other professional advice. Such advice should be obtained from a qualified professional.

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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-05-24

Analyzing an organization using the strengths, weaknesses, opportunities, and threats (SWOT) framework
generates crucial insights for decisions on major new initiatives. For example, when considering an
acquisition or launching a new product or service, a SWOT analysis can raise warnings about customer
sensitivities or gaps in expertise; alternatively, it can reveal new lines of business and unmet needs that
may lead to new business opportunities. A SWOT analysis also serves as a typical first step in a broader
strategic planning process. This technical note focuses on the use of a SWOT framework in the healthcare
sector, with recommendations for key questions to ask when initiating a SWOT analysis and advice for
arranging information in a way that supports strategic decision-making.

The SWOT approach has gained importance in the healthcare sector in recent years, due to both market
and policy shifts. In the United States, SWOT analyses have been used to provide important perspectives
to healthcare providers — ranging from large general hospitals to small specialty clinics — once patients
could more freely choose providers, following the decline of health maintenance organizations in the
early 2000s. A new wave of SWOT studies has been carried out to understand the implications of broader
insurance coverage and increased outcomes and payment transparency under the 2010 Affordable Care
Act.1 In Canada, hospitals and other healthcare organizations carried out SWOT analyses associated with
the “10-Year Plan to Strengthen Health Care” initiative, which sought to reduce patients’ wait times
starting in 2004.2 In many other countries, health care is a site for major reform as policy-makers seek to
rein in costs and encourage innovation. Across the developed world and in many developing countries,
better use of strategic decision-making will be essential to healthcare providers and finance organizations
as they care for aging populations, seek to reduce the impacts of lifestyle-related diseases such as obesity,
and work to manage expenses associated with treating chronic diseases.

1
Jeffrey Harrison, Essentials of Strategic Planning in Healthcare (Chicago: Health Administration Press, 2010), 92–97.
2
“First Ministers’ Meeting on the Future of Health Care 2004,” Health Canada, September 16, 2004, accessed February 22,
2016, http://healthycanadians.gc.ca/health-system-systeme-sante/cards-cartes/collaboration/2004-meeting-racontre-eng.php;
“Progress Timeline 2003–2013: Highlights of Health Care Reform,” Health Council of Canada, March 2014, accessed
February 22, 2016, https://www.longwoods.com/articles/images/HCC_Progress_Report_Eng.pdf.

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SWOT’S ORIGINS AND ROLE IN STRATEGIC PLANNING

The SWOT approach traces its roots to the study of strategy by military leaders. Famous works by Sun
Tzu (The Art of War) and Carl von Clausewitz (On War) not only provided advice on the choice of terrain
and battle methods but also outlined the principles of organizational leadership and advocated for ways of
avoiding direct conflict.3 Work on strategy shifted to business planning and analysis in the 1950s and
1960s, as the field became an independent academic discipline and gained credibility at business schools.
Alfred D. Chandler, Jr., author of several books on American enterprise, defined strategy as “the
determination of the basic long-term goals and objectives of an enterprise and the adoption of courses
of action and the allocation of resources to carry out these goals.”4 His Harvard Business School
colleague Kenneth R. Andrews advocated that strategy should be deliberately and consciously decided
by company executives:

Corporate strategy is the pattern of decisions in a company that determines and reveals its
objectives, purposes, or goals, produces the principal policies and plans for achieving those goals,
and defines the range of business the company is to pursue, the kind of economic and human
organization it is or intends to be.5

Executives leading firms through a period of rapid economic expansion in the 1950s and 1960s sought
clear decision frameworks, and larger firms set up departments to focus on long-range planning. Planning
processes that linked internal strengths to market opportunities gained importance, as managers sought to
forecast market trends and anticipate their competitors’ plans.

To help corporations identify and prioritize strategic issues in the 1960s, scientists and business analysts
at the Stanford Research Institute (SRI) developed the SWOT approach. Albert S. Humphrey, a chemical
engineer by training, recommended a question and answer method:

We started as the first step by asking, “What’s good and bad about the operation?” Then we asked,
“What is good and bad about the present and the future?” What is good in the present is
Satisfactory, good in the future is an Opportunity; bad in the present is a Fault, and bad in the future
is a Threat. Hence S-O-F-T. This was later changed to SWOT.6

In a variety of advisory and consulting projects, SRI team members carried out SWOT analyses on six
major areas of activity: products, processes, customers, distribution, finance, and administration.

Over the next five decades, SWOT gained further traction as strategic planning became more
standardized. Typically, strategic planning begins with a review of and revisions to an organization’s
mission and objectives. This first step involves considering how the world will be different because of the
work of the organization and stating in a concise way the organization’s core organizing principles. The
second step is an environmental scan, featuring a SWOT analysis and sometimes other approaches, which
can include a five forces study of entry barriers, suppliers, customers, substitute products, and industry
rivalry, or a review of the political, economic, social, and technological factors in the business

3
John Kay, Peter McKiernan, and David Faulkner, “The History of Strategy and Some Thoughts About the Future,” in The
Oxford Handbook of Strategy: A Strategy Overview and Competitive Strategy, ed. David Faulkner and Andrew Campbell
(Oxford: Oxford University Press, 2006), 27–52.
4
Alfred D. Chandler, Strategy and Structure: Chapters in the History of the American Industrial Enterprise (Cambridge, MA:
MIT Press, 1962), 13.
5
Kenneth Andrews, The Concept of Corporate Strategy (Homewood, IL: Dow-Jones Irwin, 1980), 18–19.
6
Albert Humphrey, “SWOT Analysis for Management Consulting,” SRI Alumni Association Newsletter (December 2005): 7–8,
accessed March 21, 2016, https://www.sri.com/sites/default/files/brochures/dec-05.pdf.

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environment.7 In the third step, leaders or consultants write a strategic plan that matches the
organization’s strengths to its opportunities that were identified in the SWOT analysis, while also
identifying ways to address weaknesses and external threats.

CONDUCTING A SWOT ANALYSIS

A thorough SWOT analysis involves several steps, including a survey of the firm and its environment, an
investigation and evaluation of significant factors, a categorization of major elements, and a mapping of
findings onto a matrix. The research is best carried out by people at multiple levels in an organization and
should incorporate insights from clients and customers. Key components of a SWOT analysis include
factors that make projects and products successful; knowledge, skills, and abilities of employees;
inhibitors to innovation and greater sales; political, economic, social, and technological changes
underway in the operating environment; competition and positioning of other organizations in the sector;
and the needs and wants of customers. For example, when analyzing a healthcare delivery organization
such as a general hospital, an analyst would compile data on the community’s health status and
demographic trends, identify new medical technologies that are likely to impact care and the length of a
patient’s stay, examine existing and future payment trends, and evaluate the market share and competitive
strengths of other providers in the region.

In-house planners for an organization or hired consultants often begin with an internal survey before
considering external factors. It is nonetheless important to evaluate each area of the SWOT framework
both from an internal perspective and from the situation of customers or collaborators. An organization-
wide survey (or more targeted questions for specific leaders) can be used to gather information on
finances, operations, and processes.

Findings typically are presented in a 2 × 2 SWOT matrix, with strengths and weaknesses at the top and
opportunities and threats at the bottom. Strengths and weaknesses focus on resources internal to the
organization, while opportunities and threats are external market factors. Internal factors can be changed
through managerial action, while external forces exist in the market independent of the organization. A
SWOT analysis is sometimes also termed an internal–external analysis, because it results in an I–E matrix
(see Exhibit 1). If the SWOT analysis is being carried out to examine a specific business decision, the
matrix can include category headers such as “helpful to objectives” and “harmful to objectives” above
strengths and weaknesses, respectively.

Three fundamental principles should be followed to ensure that the SWOT analysis generates actionable
results. First, analysts must be realistic and honest; it is important to minimize efforts to game outcomes
during the process of data collection and evaluation. Second, participants should avoid complexity. The
SWOT framework requires brevity, and participants need to avoid over-analyzing, especially when
considering organizational weaknesses and external threats. Third, the analysis should proceed sequentially.
Start with data gathering, often through collective brainstorming, and then narrow the analysis by combining
similar items and discarding those items that are vague or unsupported by evidence. An effective plan for
discussions and preparation of the matrix proceeds from strengths to opportunities and from weaknesses to
threats; in each case, participants inevitably will identify weaknesses when discussing strengths and will
find threats when discussing opportunities. By separating these factors into distinct points of discussion,
participants will avoid either locking in on overly narrow issues or missing key points.

7
Peter Ginter, Strategic Management of Health Care Organizations (San Francisco: Jossey-Bass, 2013), 255–307; Michael
Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 57, no. 2 (March–April 1979): 137–145.

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Strengths

Strengths are factors that underpin current great organizational performance. Specifically, strengths are
found in the special expertise, reputation, cost advantages, technology advantages, and other factors that
make an organization a great employer and leading competitor in the marketplace. Analysts should
consider the main advantages of the organization and what it does better than others. What factors help it
to attract customers and make sales? What is its unique selling proposition? How does it keep employee
engagement high and satisfy customers, clients, and partners?

Examples of organizational strengths in health care include using state-of-the-art medical equipment,
focusing on continual improvement, successfully deploying informatics (e.g., electronic medical records),
employing highly trained medical personnel, achieving high rankings on national surveys, scoring high in
terms of patient satisfaction, and attaining high job satisfaction among doctors, nurses, and other
employees. Strengths should be considered in relation to competition in the business sector. For example,
if every general hospital has a computed tomography scanner, then purchasing one is a necessity, not a
new competitive strength.

Weaknesses

Weaknesses are forces within an organization that negatively affect the quality of products or services,
undermine sales, or increase costs. Weaknesses can also represent the absence of important strengths, or
in some instances, may result from narrowly focusing on a specific strength. Analysts should consider the
organization’s main areas of needed improvement and what it does worse than its competitors.
Weaknesses falling into broad categories should be broken down to draw out their underlying specific
causes. What products or service lines should the organization avoid offering? What factors drive
customers away and undermine sales? The analyst should both note issues affecting revenues, such as
limited services or marketing deficiencies, and should identify concerns about management or staff
expertise and satisfaction.

Examples of weaknesses in a healthcare organization include outdated facilities for providing care,
fluctuations in the continuity of care due to poor communication, insufficient training for nurses, tensions
among medical staff, inefficient use of healthcare informatics, a payer mix that includes large numbers of
uninsured or Medicaid patients, challenges in securing reimbursements, and poor rankings on national
surveys or from patients. As with strengths, weaknesses should be analyzed mostly internally, but also
relative to competitors.

Opportunities

For an organization, key opportunities are business initiatives that generate increased sales or attract a
new customer base. Opportunities also can arise through innovation, demographic and other population
shifts, changes to regulations, new international trade agreements, and other forces that affect
competition. Major points to consider include large-scale societal or economic trends, technology
breakthroughs, new government policies, and current events. What new business ventures will fit with the
organizational mission? What are major competitors doing, and what new low-cost offerings are
emerging that could eventually undermine the organization’s business?

In health care, opportunities may include joint ventures or collaborations with other clinics or hospital
networks, the development of new specialized services, grants to implement better healthcare informatics,

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and initiatives to reduce medical errors, improve provider satisfaction, and streamline the patient
experience. Since implementation of the Affordable Care Act in the United States, many healthcare
providers have recognized business opportunities in integrated health care and from avoiding penalties for
readmissions to hospitals. Other opportunities can arise from government payments, for example, under
the U.S. Centers for Medicare & Medicaid Services’ pay-for-performance incentives.

Threats

Threats are factors that will harm the performance of the organization. As with opportunities, threats can
arise from economic and social forces, government regulation, changes in technology, and other events.
In addition, threats to sustaining a business include actions by competitors, changing customer needs, and
organizational issues of debt, cash flow, and the declining quality of products or services. Key questions
to ask include the following: What forces threaten the organization’s current market position? What will
future customers want and how do their desires differ from the organization’s current offerings?

In health care, threats to care providers include the growth of specialized service sites, cost-cutting by
Medicare and Medicaid, new technologies that make existing infrastructure obsolete, and demands for the
use of expensive medical technology without requisite reimbursement. Disruptive technologies or
business models can pose threats that many organizations tend to ignore until it is too late. While fast-
service clinics currently offer limited services, one could easily envision scenarios where they expand and
outcompete general hospitals in some profitable areas of patient care. While threats are typically
considered to arise from external market forces, threats to the quality of products and services can also
arise internally, especially as a result of either the loss of key staff or poorly thought-out changes to the
strategic focus of the organization’s leadership.

FROM SWOT TO STRATEGY

Once the SWOT matrix is complete, analysts should consider the opportunities identified relative to the
organization’s strengths, while also looking critically at weaknesses and the benefits that would arise if
such weaknesses were overcome. A next step toward strategic planning involves aligning opportunities
and threats to strengths and weaknesses (see Exhibit 2). In addition, a gap analysis can be carried out to
identify deficiencies in the organization’s ability to meet the needs of customers. The analyst should
delineate the skills, knowledge, policies, and other resources needed to bridge gaps between current
strengths and the opportunities identified in the SWOT matrix.

While a SWOT analysis is often carried out at the enterprise or overall organization level, it also can be
used with success at the product or service line level. For example, a hospital evaluating the construction
of an offsite specialty surgery center would complete one SWOT matrix for a wholly owned center and
another for a joint venture with a local physicians’ group. A SWOT analysis of major competitors can
also yield helpful insights, especially when considering acquisitions or starting new service lines.

Organizations operate in environments in which they compete, co-exist, or co-operate with one another
while providing services or products to customers within boundaries set by regulations and markets.
Carrying out a SWOT analysis as part of strategy setting involves working with ambiguity and
complexity; it also requires decisions about the activities to be excluded from the strategy. Some firms
focus on a specific customer, while other organizations intentionally follow a strategy of market
segmentation in which products are offered at different price points with commensurate style, design, and

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quality that attract distinct segments. But these approaches to customer focus are inherently complex for
hospitals and other healthcare institutions that pledge to treat anyone with disease or illness.
Organizations seeking to reach the “general public” find it difficult to give pre-eminence to one subgroup
over another, but also get frustrated when trying to be all things to all people.

Few healthcare organizations have been willing to make exclusionary decisions about the service lines or
opportunities for growth they will avoid, attempting instead to be all things to all patients (or all potential
patients). Shifts in other service industries suggest, however, that hospitals and other healthcare
organizations need to focus their services and pioneer new programs in specialty lines in an effort to
become especially good at some activities while avoiding others entirely. In coming years, healthcare
organizations worldwide will face regulatory and consumer pressures to improve outcomes, quality of
care, price transparency, patient satisfaction, and employee engagement even while dealing with aging
populations in developed countries and a rising middle class elsewhere. A SWOT analysis can serve as a
necessary first step to develop a tighter organizational focus and prepare for a more competitive business
environment in health care. In this way, a variety of organizations can better understand both their internal
barriers to change and how to improve their services in ways that are valued by customers.

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EXHIBIT 1: THE SWOT MATRIX

Strengths Weaknesses
 What are the organization’s core  What can the organization improve?
competencies?  What does it do worse than competitors?
 What does it do better than anyone else?  In what areas does it have fewer resources
Internal

 What unique resources can it draw on? than competitors?

 In what areas does it have clear cost  What needs to change to succeed against the
advantages? market-leading competitor?
 In what areas does it innovate?  What are others likely to see as weaknesses?
 What do people in the market see as its
strengths?
Opportunities Threats
 What opportunities are open to the  What threats could undermine the
organization? organization’s main business?
External

 What market trends can it take advantage
of?
 What will customers demand in the future
and will their price sensitivity change?
 How can it turn strengths into new products
or services?
 Who are the newest competitors?
 What disruptive technologies are on the near
horizon?
 What are the major obstacles to growth?
 What is the competition doing differently?
 What threats arise from internal weaknesses?

Source: Created by the author.

EXHIBIT 2: USING THE SWOT ANALYSIS TO GAIN INSIGHTS INTO STRATEGIC PLANNING

Opportunities Threats
(external, positive) (external, negative)
Strength — Opportunity strategies Strength — Threat strategies
Strengths Which of the organization’s strengths How can the organization’s strengths minimize
(internal, can be applied to the opportunities that or eliminate the threats that were identified?
positive) were identified?
Weakness — Opportunity strategies Weakness — Threat strategies
Weaknesses What actions will overcome How can the organization minimize or
(internal, organizational weaknesses when overcome its weaknesses in light of the threats
negative) pursuing opportunities that were that were identified?
identified?

Source: Created by the author.

This document is authorized for use only in Professor Francisco L. Roman, Jr. and Professor Mervin L. Pobre's WSGSB - MBA 2021-Strategic Formulation and Implementation at Asian
Institute of Management from Oct 2020 to Apr 2021.