A SWOT analysis summarizes key external issues from the business environment and the internal strategic capabilities of an organization. The SWOT analysis can therefore be used for strategy development, and be used as a basis for generating strategic options. Likewise, a SWOT analysis can be used to asses future courses of strategic actions
It is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face. Used in a business context, a SWOT Analysis helps you carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities.
Originated by Albert S Humphrey in the 1960s, SWOT Analysis is as useful now as it was then. You can use it in two ways – as a simple icebreaker helping people get together to “kick off” strategy formulation, or in a more sophisticated way as a serious strategy tool.
A SWOT analysis groups key pieces of information into two main categories:
Internal factors are presented as the strengths and weaknesses internal to the organization. These factors may shed light upon which processes the company masters, and which processes are not being handled satisfactorily to be competitive. Here one must do a comprehensive analysis of the internal environment’s potential strengths and weakness. Factors that could be evaluated are:
- Company culture
- Company image
- Key staff
- Access to natural resources
- Brand Awareness
- Exclusive contracts
External factors are presented as the opportunities and threats presented by the external environment to the organization. These external factors may be evaluated using the PESTEL Framework that tries to evaluate macroeconomic factors affecting the company and its strategies. Likewise, companies should monitor its competitors, and their relative strength and importance. Opportunities arise when changes occur in the external environment, a company can come upon a chance to introduce a new product due to environmental changes. Changes can be related to:
- Market trends
- Social changes
- New technology
All the advantages the company holds over others and the key factors to keep it ahead of the competitive market. A firms strength are its resources and capabilities that can be used as a basis for developing a competitive advantage
- What advantages does your organization have?
- What do you do better than anyone else?
- What unique or lowest-cost resources can you draw upon that others can’t?
- What do people in your market see as your strengths?
- What factors mean that you “get the sale”?
- What is your organization’s Unique Selling Proposition (USP)?
Consider your strengths from both an internal perspective, and from the point of view of your customers and people in your market.
You should also be realistic – it’s far too easy to fall prey to “not invented here syndrome.” Also, if you’re having any difficulty with this, try writing down a list of your organization’s characteristics. Some of these will hopefully be strengths!
When looking at your strengths, think about them in relation to your competitors. For example, if all of your competitors provide high quality products, then a high quality production process is not strength in your organization’s market, it’s a necessity.
The disadvantages and the limitations of the company which keep it behind the competitors and can adversely affect in achieving the goal. The absence of certain strength can be viewed as a weakness.
- What could you improve?
- What should you avoid?
- What are people in your market likely to see as weaknesses?
- What factors lose you sales?
Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you don’t see? Are your competitors doing any better than you?
It’s best to be realistic now, and face any unpleasant truths as soon as possible.
External factors that can work in favor of the company to achieve its goal and improve performance towards achieving the same.
- What good opportunities can you spot?
- What interesting trends are you aware of?
- Falling trade barriers in attractive foreign markets
- Changes in technology and markets on both a broad and narrow scale.
- Changes in government policy related to your field.
- Changes in social patterns, population profiles, lifestyle changes, and so on.
- Local events.
External factors that can work against the favor of the company to achieve the goals and adversely affect the performance of the company
- What obstacles do you face?
- Rising sales of substitute products
- What are your competitors doing?
- Are quality standards or specifications for your job, products or services changing?
- Is changing technology threatening your position?
- Do you have bad debt or cash-flow problems?
- Bargaining powers of suppliers and customers
- Could any of your weaknesses seriously threaten your business?
- Entry of low cost foreign competitors
Business SWOT Analysis
What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well placed to exploit. And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.
More than this, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.
Philip Kotler – Principles of marketing