What is SWOT Analysis?

SWOT Analysis is a strategic planning framework used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a business venture.

The aim of any SWOT analysis is to identify the key internal and external factors that impact the business.

SWOT analysis is a assessment technique for analyzing a business, its resources, and its environment.

SWOT stands for Strengths, Weaknesses, Opportunities, Threats and is used for business and strategic planning, marketing planning, organizational change, business and product development and research reports.

By understanding these external environments, organizations can maximize the opportunities and minimize the threats to the organization.

The technique is credited to Albert Humphrey, who led a convention at the Stanford Research Institute in the 1960s and 1970s using data from Fortune 500 companies.

The strategic framework aims to align the organization’s capabilities and resources to the business targets and goals.

The absence of certain strengths may be viewed as a weakness. Opportunities may reveal new avenues for profit and growth.

Strengths include:

- Good customer service

- Product features or benefits

- Specialist knowledge or skills

- committed employees

- Strong brand name

- Patents

- Good reputation among customers

- Lack of an established reputation

- Wastage of time and effort

- Lack of patent protection

- Poor reputation among customers

- Removal of international trade barriers

Threats include:

- Increasing competition

- Price wars

- New legislation and regulations

- A downturn in the economy

- Shifts in consumer tastes

- Increased trade barriers

Why use it?

SWOT Analysis enables you to explore possibilities for new efforts or solutions to problems in the organization, reveal priorities, adjust and refine plans mid-course, determine where a business initiative is possible.

Questions to Ask

- What is likely to produce the greatest ROI (Return On Investment)?

- What is likely to be quickest and easiest to implement?

- What the business does better than the competition?

- What competitors do better than the business?

- What do people in your market see as your strengths?

- What is your organization’s Unique Selling Proposition (USP)?

- What are people in your market likely to see as weaknesses?

- Why do you lose sales?

- What are new consumer trends?

- What are your competitors doing?

Criticism of the methodology

The main criticism of the SWOT Analysis methodology is that it may tend to oversimplify issues.

By presenting the resulting lists uncritically, weak opportunities may appear to balance strong threats.

There are also certain limitations of SWOT Analysis which are not in the organization’s control, like:

- Government policies

- Trading policies

- Lobbying and pressure groups