SWOT Analysis – A Business Strategy Skill

1. What is SWOT analysis?
2. Characteristics of SWOT Analysis
3. How to conduct a SWOT analysis?
4. Advantages and disadvantages of SWOT Analysis

What is SWOT Analysis?

SWOT is the abbreviation for Strengths, Weaknesses, Opportunities, and Threats. These four factors are used in the planning process to develop a business strategy.  

This framework of management originated in the 1960s and is debatably credited to Albert Humphrey from the Stanford Research Institute. 

The main goal of SWOT analysis is to give a clear picture of where your organisation currently stands. By looking into the internal and external environments of the firm, you can identify what is affecting your strategy and what you can do to overcome challenges. 

Characteristics of SWOT Analysis

The four elements of the SWOT Analysis are categorised into internal and external factors. Here is how. 

Internal Factors

The internal factors of the SWOT analysis refer to the strengths (S) and weaknesses (W) of the company. The common ones are 

1. The resources for finance
2. Human resource management 
3. Current processes

Strengths

These are characteristics that determine how the company is able to differentiate itself in the market. It could be the diversity of products the company offers, better customer service, or the one or two departments of a firm, among others. 

The company’s strengths should ideally have a competitive advantage. 

Weaknesses

These characteristics determine the current challenges or obstacles in a company. Some examples are internal departments, resources, and operational processes, among others. 

Weakness let you explore the areas where the firm is currently lacking. It also helps ask the basic question, ‘If we turn our weaknesses into strengths, will they help us get ahead of the competition?’

External Factors

These factors are external because the company has no control over them. That’s why the company has to look for opportunities (O) and threats (T) once they define the strengths and weaknesses. 

Some external factors to consider are 

1. Trends in the market
2. Technology
3. Demographics
4. Political environment
5. Economic environment

Opportunities

These characteristics are there to positively impact the company in the near future. But the firm has to take advantage of opportunities itself. 

It could be new technologies or as small as areas of improvement as determined when you understand the weaknesses. 

Let’s say your marketing department has not been able to generate sales or make customers happy. You can then shift the focus to planning an inbound marketing strategy through proper customer segmentation, and using marketing automation platforms. 

Related – Free digital marketing courses

Threats

These characteristics determine the factors that are creating obstacles for your company. It could be a new competitor that sells a similar product less than you and gets your customers in the process. Or maybe your supply chain has become weak, and you are not able to gather resources on time. 

How to Conduct SWOT Analysis?

SWOT analysis is necessary for evaluating a variety of business purposes. Generally, you can use a template in MS Excel and point out the following from the examples below. 

Strengths	Weaknesses
What does the company do to satisfy customers? How is the company better than its competitors? What is the USP?	What factors make customers dislike the company? What are the negative characteristics?
Opportunities	Threats
How can the company help customers better? How can the company generate more sales? What technologies will help the company maintain better relationships with customers?	Who is the current competition? Why is the current competitor better than the company?

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Advantages and Disadvantages of SWOT Analysis

Now that you know how to conduct SWOT analysis, learn about the main pros and cons of it. 

Advantages of SWOT analysis

• It does not necessarily require an advanced set of business skills or costly tools. 
• Creating business goals becomes streamlined with SWOT analysis
• It is also time efficient instead of hiring an external consultant

Disadvantages of SWOT analysis

• Performing a SWOT analysis does not offer any alternatives
• If there are too many opportunities, you won’t be able to determine which one is the best

Parting Thoughts

So this is all about how you can get started with SWOT analysis. If you wish to apply practically, consider taking up short but valuable online courses such as Internal Analysis of a Company: From Value Chain to SWOT Analysis on FutureLearn.