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 Threats. Strength 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, the information can easily be distributed and interpreted.

  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.

    This method can be done 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 other methods may need 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. An updated SWOT analysis is recommended at the end of every financial year to project future losses, or when your goals are not met.

  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.

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