What is SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, & Threats.

Your company’s strengths and weaknesses are internal. You have some control over these things and can make changes. You can think of your team members, your intellectual property and your location as examples.

External threats and opportunities are things that happen outside of your company in the larger market. While you can make the most of opportunities and mitigate threats, they cannot be changed. These include prices for raw materials and customer shopping patterns.

SWOT analysis is a framework that can be used to assess a company’s competitive position and to plan. A SWOT analysis evaluates both internal and external factors as well as future and current potential.

A SWOT analysis helps to provide a real-world, fact-based, and data-driven assessment of the strengths and weaknesses within an organization, its initiatives, or industry. An organization must avoid preconceived notions or gray areas to make the SWOT analysis accurate. Instead, it should focus on real-life situations. It should be used by companies as a guide, not as a prescription.

How to perform a SWOT analysis

SWOT analysis can be used to assess the performance, potential, competition, risk, reward, and potential of any business. It also includes a part of the business such as a product or division, industry, or another entity.

The technique uses internal data to guide businesses towards strategies that are more likely to succeed and away from those that have failed or are less likely to succeed. Investors, competitors, and independent SWOT analysts can help them determine whether a company, product, or industry is strong or weak, and why.

SWOT Analysis – An Overview

An analyst presents a SWOT analysis in a square, divided into four quadrants that each focus on a specific element of SWOT. This visual arrangement gives a quick overview of the company’s situation. While not all points in each heading are equally important, they should all provide key insight into the balance between opportunities and threats, benefits and disadvantages, etc.

SWOT Analysis was originally used to analyze companies. It’s now used by many people, including entrepreneurs and investors, as well as non-profits and governments.

Strengths

The strengths of an organization are what it excels at, and what sets it apart from the rest. These include a strong brand and loyal customer base, strong balance sheets, and unique technology. A hedge fund might have a unique trading strategy that beats the market. The fund must decide how to use these results to attract investors.

Weaknesses

Organizations can’t perform at their best when they have weaknesses. These are areas that the business must improve in order to be competitive.

Opportunities

Opportunities are favorable external factors that can give an organization a competitive edge. A country may reduce tariffs so that a car manufacturer can export to a new market. This will increase sales and market share.

Threats

Threats are factors that could cause harm to an organization. A drought could result in the loss or reduction of crop yields for a wheat-producing firm. Other threats include rising material costs, increased competition, and tight labor supply. These are just a few examples.

Example SWOT Table:

SWOT Analysis – External Environment

External factors are just as important as the internal factors to a company’s success. External factors, such as market changes and monetary policy, can have a significant impact on the company’s success.

There are several possible questions that could be asked about external factors:

  • (Threat) How many competitions are there and what is their market share
  • (Threat) Are new regulations being considered that could potentially harm our products or operations?
  • (Opportunity). What are the market trends?
  • (Opportunity). What demographics should we be targeting?

To identify the challenges and opportunities for your business, use a SWOT analysis. 

SWOT Analysis – Internal Environment

The company’s internal environment is a valuable source of information that can be used to determine the strengths and weaknesses of the SWOT analysis. Internal factors can include human and financial resources, tangible (brand name), assets, and operational efficiency.

There are several questions you could ask to include internal factors:

  • (Strength) What’s the best thing we are doing?
  • (Strength). What is our greatest asset?
  • (Weakness). Who are our detractors?
  • (Weakness). What are our weakest-performing product lines

How do you write a good SWOT analysis?

A SWOT analysis is a way to identify and analyze the strengths, weaknesses, and opportunities of a company. You should first make a list with questions for each element. These questions will serve as a guide to complete the SWOT analysis and create a balanced list. You can either create the SWOT framework in a list format or as text. Most commonly, it is a 4-cell table with quadrants for each element. First, strengths and weaknesses are listed. Next, opportunities and threats are included.

In conclusion

The SWOT analysis can be used to guide business-strategy meeting planning. It is powerful to have everyone discuss the company’s strengths and weaknesses, identify the opportunities and risks and brainstorm new ideas. Sometimes, the SWOT analysis that you had in mind before the session changes to reflect the input of the group.

A SWOT analysis can be used by a company for both its overall business strategy sessions and for specific segments such as sales, marketing, production, or customer service. You can then see how the overall strategy from the SWOT analysis filters down to the specific segments before you commit to it. It is also possible to reverse the process by using a segment-specific SWOT analysis that feeds into a larger SWOT analysis.

While SWOT is a valuable planning tool, it has its limitations. This is only one of many businesses planning tools that you should consider. Each point in the categories is not ranked the same. The weight differences are not considered by SWOT. A deeper analysis using another planning method is required.