SWOT Analysis

See Also:
Porter’s 5 Forces of Competition
Core Competencies
How to Write an Action Plan
How to Turnaround a Company

SWOT Analysis

The SWOT Analysis – an acronym standing for Strengths, Weaknesses, Opportunities, and Threats – assesses a company’s competition in the desired field or market. This analysis serves as an excellent tool for decision-making, either for personal use or from a business standpoint.

Business SWOT Analysis: Planning, Performance, and Evaluation

The purpose of a SWOT analysis, from a business point-of-view, is to organize a proper business strategy around the internal and external factors that affect one’s business. Existing or older businesses may use a SWOT analysis to predict or proactively adapt to the environmental changes pertaining to their business. New or starting businesses may use this analysis to plan ahead before their actual business plans to assess potential road bumps or advantages they can use.

How to Complete a SWOT Analysis

When mapping out a business strategy with a SWOT analysis, you first look at the four elements in your company: Strengths, Weaknesses, Opportunities, and ThreatsStrength and Weaknesses are considered internal factors that might affect a company. These are characteristics, rather than physical elements surrounding the business, such as profitability or shortages. The Opportunities and Threats are considered external factors. These are the physical elements such as network or competition.
SWOT Analysis

Benefits of a SWOT Analysis

With the SWOT Analysis you can:

  1. Analyze the current situation of a company.

    SWOT shows the leaders of a company how realistic their situation is. With the simple grid system, people can visualize and organize their thoughts. This list may be pages long, but with the SWOT Analysis, you can easily distribute and interpret the information easily.

  2. Provide different perspectives when executing a decision.

    When completing a SWOT analysis, a leader of a company is forced to consider all different types of potential aspects that affect the company, not only what they see on a regular basis.

  3. Simplify; SWOT does not require extensive technology or payment during completion.

    You can do this method on a computer, piece of paper, or dry-erase board. And it’s free – straight from your mind.

Limitations of a SWOT Analysis

In comparison to many other types of business analysis, SWOT may not be as ideal because:

  1. The method is not as detailed.

    The SWOT analysis only has four factors, compared to other types of analysis which have seven or eight different factors. The method is useful with analyzing an idea or small maintenance in business planning. But you may need other methods to be paired with this analysis in order to get a full, detailed plan.

  2. You have to make a new SWOT every time you make a change.

    When updating a plan or making  a new decision, you have to consider all four factors in the SWOT analysis that might alter your previous factors. We recommend updating your SWOT analysis at the end of every financial year to project future losses, or when you don’t meet your goals.

  3. Subjectivity.

    In any decision-making process, the data collected must be reliable and un-biased. It is easy to misinterpret or over-represent your own strengths and opportunities versus weaknesses and threats when not done in a group setting.

Download your free External Analysis whitepaper that guides you through overcoming obstacles and preparing how your company is going to react to external factors.
swot analysis
[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
swot analysis

Related Blogs
Does your Accounting Department Produce Net Income?

Coaching the Entrepreneur: Learn how to know what you don’t know. How much should I spend on accounting for my company?     I have been in the accounting profession for 32 years, and for the last 6 years, I’ve owned my own consulting firm to assist companies with accounting challenges. There is one common theme that I

Read More »
Near Sourcing vs. Outsourcing: The Key to Cost-Effective Accounting Solutions

In this insightful interview, Dan sheds light on the critical role of accounting in business growth and success. Uncover the common pitfalls business owners face when overlooking accounting and how it can hinder access to loans and financial opportunities. Learn why good financial statements are vital for decision-making and attracting investors. With the NearSourcing model,

Read More »
Is Mexico the New China?

In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.

Read More »
WIKI CFO® - Browse hundreds of articles
Skip to content