The SWOT Analysis

February 2, 2012

The Basics

A SWOT analysis is one of many processes that can be utilized to conduct strategic planning. The origin of its name is simple, in that it is merely a study of one’s Strengths, Weaknesses, Opportunities and Threats. In a general sense, a SWOT analysis can be used for just about any scenario where forward-looking decision making is crucial, from personal career development all the way up to leading the direction of an international corporation. Most often though, a SWOT analysis is used to carve and sustain a niche in a market for products or services.1 When a business is challenged by a competitor, declining market, or other dynamic, a SWOT analysis can be key to plotting the best course for the business. In a nutshell, it is a useful tool in situations where a business must detect, react to, and manage change.2

Phase 1

The general idea of a SWOT analysis is for a group of stakeholders (typically the business’s leadership) to assemble and record the existing, internal qualities of the business and compare them with external factors in an attempt to generate specific, attainable goals. Typically, the four sections are laid out in a 2×2 grid and completed in a group brain-storming-like manner as shown below.

To generate the 4 quadrants, the group might consider the following as they pertain to the business:

Strengths

These are resources and capabilities that can be used to generate a competitive advantage.3 This can be material items such as patents or infrastructure, or it can be less concrete like a solid corporate reputation or brand recognition.

Weaknesses

Quite obviously, these are areas in which the business needs to improve. Again, they can be things like manpower or capacity, lack of sales leads, or geographic limitations.

Opportunities

These are factors in the external environment that, if acted upon, can have a positive impact on the business in the near or distant future. Examples include an unfulfilled customer need, removal of regulation or the arrival of new technologies.3

Threats

This is the antithesis of the opportunities quadrant where the business should identify factors that may negatively influence the business in the future. Technology shifts, regulation, litigation, and substitute products all fit here.

Phase 2

Once the SWOT grid is complete, the most valuable part of the process begins. While the first phase was meant to ascertain a snapshot of the business and its environment, the second phase is intended to create one or more specific goals on which the business can focus. To realize these goals, the group might consider these questions:

· How can we leverage our Strengths?

· How can we improve each Weakness?

· How can we benefit from each Opportunity?

· How can we mitigate each Threat? 4

In addition to answering the above questions, a process known as Matching and Converting can also be used to discover a path forward. The purpose of Matching is to pair strengths with opportunities to create a competitive advantage not available to other players in the market.4 Converting is just the opposite – to analyze a weakness or a threat and consider how it might be converted in a positive way (often by leveraging a strength or opportunity).

Conclusion

A SWOT analysis can help a company to see itself for better and for worse. Utilizing this method can provide not only a solid strategic plan, but also a better understanding of what a company does well and where its shortcomings may lie.5 Initially, the idea of SWOT may seem so trivial it would appear useless. You might say, "Of course we know what our strengths are!" However, thoroughly completing the matrix and considering the phase 2 questions can actually produce valuable results. It can help a business re-focus on the things it does well, avoid future pitfalls, or find a new direction altogether. In the end, the SWOT analysis is one of the simplest ways to handle the one thing many businesses fail to control – change.

Submitted by Jason Cromes

1. http://www.mindtools.com/pages/article/newTMC_05.htm
2. http://www.britishcouncil.org/tipd-undertaking-a-swot-analysis.doc
3. http://www.quickmba.com/strategy/swot/
4. http://ithinktowin.blogspot.com/2009/04/swot-analysis.html
5. http://www.coursework4you.co.uk/essays-and-dissertations/swot-analysis.php

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2 Responses to “The SWOT Analysis”

  1. chrisacree said

    Well done! Our organization is in need of a SWOT analysis now that so many changes are going on. I plan to use your post as a guide in making this happen.

  2. Tamara Cunningham Johnson said

    This is a great posting of using a SWOT analysis. As technology is changing and companies are advancing, it is great to have an understanding of the strengths, weaknesses, opportunites, and threats within that corporation. When your company is aware of all of these things, it allows your company to move forward as developments become new and more up-to-date. I believe we all can take something from this and use it within our organizations.

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