By the Mind Tools Content Team. (n.d.). Retrieved from https://www.mindtools.com/amtbj63/swot-analysis
A “SWOT analysis” involves carefully assessing these four factors in order to make clear and effective plans.
A SWOT analysis can help you to challenge risky assumptions, uncover dangerous blindspots, and reveal important new insights.
The SWOT analysis process is most effective when done collaboratively.
SWOT analysis assesses a business’s Strengths, Weaknesses, Opportunities, and Threats, offering insights into current capabilities and future strategies. It helps identify competitive advantages, areas needing improvement, and external factors impacting the organization. This strategic tool guides businesses in making informed decisions by evaluating both internal and external dynamics. The process involves thorough analysis and documentation to uncover actionable insights for effective planning and protection against competitive risks.
In this article, video and infographic, we explore how to carry out a SWOT analysis, and how to put your findings into action. We also include a worked example and a template to help you get started on a SWOT analysis in your own workplace.
SWOT analysis is invaluable for challenging assumptions and uncovering blind spots in your organization’s performance. When used thoughtfully and collaboratively, it provides fresh insights into your current business position and facilitates the development of tailored strategies for any scenario.
For instance, while you might be aware of certain strengths within your organization, juxtaposing them with weaknesses and threats can reveal their true reliability. Similarly, while weaknesses may raise concerns, a systematic SWOT analysis could unveil overlooked opportunities that could outweigh these concerns.
SWOT analysis involves making lists – but so much more, too! When you begin to write one list (say, Strengths), the thought process and research that you’ll go through will prompt ideas for the other lists (Weaknesses, Opportunities or Threats). And if you compare these lists side by side, you will likely notice connections and contradictions, which you’ll want to highlight and explore.
You’ll find yourself moving back and forth between your lists frequently. So, make the task easier and more effective by arranging your four lists together in one view.
A SWOT matrix is a 2×2 grid, with one square for each of the four aspects of SWOT. (Figure 1 shows what it should look like.) Each section is headed by some questions to get your thinking started.
When conducting your SWOT analysis, you can either draw your own matrix, or use this downloadable template.
Avoid relying on your own, partial understanding of your organization. Your assumptions could be wrong. Instead, gather a team of people from a range of functions and levels to build a broad and insightful list of observations.
Then, every time you identify a Strength, Weakness, Opportunity, or Threat, write it down in the relevant part of the SWOT analysis grid for all to see.
Let’s look at each area in more detail and consider what fits where, and what questions you could ask as part of your data gathering.
Strengths are the capabilities and advantages that set your organization apart from competitors. They encompass what your organization excels at and what drives its success, such as motivated staff, access to unique resources, or efficient processes. These strengths form the core of your organization’s operations and reflect its Unique Selling Proposition (USP). It’s crucial to consider how these strengths are perceived by competitors and how they contribute to gaining a competitive edge in the market. Importantly, a true strength is one that provides a distinct advantage in your industry, rather than merely meeting basic market expectations.
Weaknesses, like strengths, are inherent features of your organization, so focus on your people, resources, systems, and procedures. Think about what you could improve, and the sorts of practices you should avoid.
Once again, imagine (or find out) how other people in your market see you. Do they notice weaknesses that you tend to be blind to? Take time to examine how and why your competitors are doing better than you. What are you lacking?
Be honest! A SWOT analysis will only be valuable if you gather all the information you need. So, it’s best to be realistic now, and face any unpleasant truths as soon as possible.
Opportunities are favorable circumstances external to your organization that can lead to positive outcomes, provided you seize them proactively. These arise from developments in the market, advancements in technology, or changes in societal and regulatory landscapes. Recognizing and capitalizing on opportunities is crucial for enhancing your organization’s competitive edge and market leadership. Even small advantages can contribute significantly to your competitiveness. Monitoring market trends, shifts in government policies, and changes in societal behaviors can unveil promising opportunities for growth and innovation.
Threats are external factors that pose potential risks to your business, such as supply chain disruptions, shifts in market demands, or difficulties in recruiting skilled personnel. It’s essential to foresee these threats and take preemptive measures to mitigate their impact before they hinder your growth.
Consider the challenges in bringing your products to market and meeting evolving quality standards or specifications. Technological advancements can present both threats and opportunities. Monitoring competitors’ actions is crucial, but adapting your strategy should be based on what aligns best with your organization’s goals rather than simply following trends.
Assess whether your business is particularly vulnerable to certain external challenges, like cash flow issues or market fluctuations, which could significantly affect your operations. Being vigilant about potential threats ensures proactive management and protects your business from unforeseen setbacks.
Imagine this scenario: a small start-up consultancy wants a clear picture of its current situation, to decide on a future strategy for growth. The team gathers, and draws up the SWOT Analysis shown in Figure 2.
The team’s analysis clearly shows that the consultancy’s main strengths lie in its agility, technical expertise, and low overheads. These allow it to offer excellent customer service to a relatively small client base.
The company’s weaknesses also involve its size. It will need to invest in training to improve the skills base of the small staff and focus on retention so it doesn’t lose key team members.
There are opportunities to offer rapid-response, good-value services to local businesses and to local government organizations. The company can likely be first to market with new products and services, given that its competitors are slow adopters.
The threats require the consultancy to keep up with changes in technology. Given its vulnerability to large-scale changes in its market, it also needs to keep a close eye on its largest competitors. To counteract this, the business needs to focus its marketing on selected industry websites to get the greatest possible market presence on a small advertising budget.
Many people attribute SWOT Analysis to Albert S. Humphrey. However, there has been some debate on the originator of the tool, as discussed in the International Journal of Business Research.
SWOT Analysis stands for Strengths, Weaknesses, Opportunities and Threats.
SWOT analysis is a useful tool to help you determine your organization’s position in the market. You can then use this information to create an informed strategy suited to your needs and capabilities.
To conduct a SWOT analysis, you first need to create a 2×2 matrix grid. Each square is then assigned to one of the four aspects of SWOT. You can either draw this grid yourself or use our downloadable template to get started.
While SWOT analysis puts the emphasis on the internal environment (your strengths and weaknesses), TOWS forces you to look at your external environment first (your threats and opportunities). In most cases, you’ll do a SWOT Analysis first, and follow up with a TOWS Matrix to offer a broader context.
Use a SWOT Analysis to assess your organization’s current position before you decide on any new strategy. Find out what’s working well, and what’s not so good. Ask yourself where you want to go, how you might get there – and what might get in your way.
Once you’ve examined all four aspects of SWOT, you’ll want to build on your strengths, boost your weaker areas, head off any threats, and exploit every opportunity. In fact, you’ll likely be faced with a long list of potential actions.
But before you go ahead, be sure to develop your ideas further. Look for potential connections between the quadrants of your matrix. For example, could you use some of your strengths to open up further opportunities? And, would even more opportunities become available by eliminating some of your weaknesses?
Finally, it’s time to ruthlessly prune and prioritize your ideas, so that you can focus time and money on the most significant and impactful ones. Refine each point to make your comparisons clearer. For example, only accept precise, verifiable statements such as, “Cost advantage of $30/ton in sourcing raw material x,” rather than, “Better value for money.”
Remember to apply your learnings at the right level in your organization. For example, at a product or product-line level, rather than at the much vaguer whole-company level. And use your SWOT analysis alongside other strategy tools (for example, Core Competencies Analysis), so that you get a comprehensive picture of the situation you’re dealing with.
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Here are four tips for getting more out of a SWOT analysis:
It’s also possible to carry out a Personal SWOT Analysis. This can be useful for developing your career in ways that take best advantage of your talents, abilities and opportunities.
See SWOT Analysis represented in our infographic:
SWOT Analysis helps you to identify your organization’s Strengths, Weaknesses, Opportunities, and Threats.
It guides you to build on what you do well, address what you’re lacking, seize new openings, and minimize risks.
Apply a SWOT Analysis to assess your organization’s position before you decide on any new strategy.
Use a SWOT matrix to prompt your research and to record your ideas. Avoid making huge lists of suggestions. Be as specific as you can, and be honest about your weaknesses.
Be realistic and rigorous. Prune and prioritize your ideas, to focus time and money on the most significant and impactful actions and solutions. Complement your use of SWOT with other tools.
Collaborate with a team of people from across the business. This will help to uncover a more accurate and honest picture.
Find out what’s working well, and what’s not so good. Ask yourself where you want to go, how you might get there – and what might get in your way.