What is a SWOT Analysis?

What is a SWOT analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organization’s structured look at those four categories. Organized into a matrix, it is used to gain a fuller understanding of a project’s viability or to better assess a business environment.

A SWOT analysis can be used at any time during any maturity level of operations; there is never a time when your strengths and weaknesses won’t matter, and in much the same way, identifying opportunities and threats is always helpful.

Despite their wide utility, SWOT analyses are often associated with the early stages of a commitment, project, or undertaking.

Planners and decision-makers know that in order to anticipate challenges down the road and to properly leverage their competitive edge, they must understand the environment in which their organization is conducting business.

A SWOT analysis is a structured tool used to organize key factors within that environment.

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These quadrants are further organized into two categories: internal and external. Strengths and weaknesses are internal characteristics, while opportunities and threats are external. The goal of a SWOT analysis is to brainstorm and uncover potential opportunities while being mindful of challenges and barriers.

Check out this blog post that explores the best ways to get the most out of your SWOT analysis.

SWOT: Strengths and Weaknesses

Strengths and weaknesses are internal characteristics. They are aspects over which the organization will have the most control and influence. Honesty when identifying strengths and weaknesses is crucial. Inflating strengths can be detrimental to success. Similarly, understating weakness can also have a negative effect on operations and business success.

Strengths are the aspects of a business that give it competitive edge. These activities are carried out more efficiently and effectively than others. Strengths can also be access to resources that competitors can’t effectively leverage, as well as aspects of your company’s USP that set it apart.

Ask these questions to get started uncovering strengths:

  • What are our sources of competitive advantage?
  • How do we differentiate ourselves from our competitors?
  • What is it about our USP that makes it a winning proposition?

Weaknesses are aspects of a business that put it at a disadvantage relative to competitors. These are areas that need improvement. Sources of weakness are just as diverse as sources of strength, but some common examples include fuzzy channels of communication, lack of resources, and unclear goals.

Ask these questions to get started uncovering weaknesses (and be honest with the answers):

  • What areas could we improve?
  • What causes us to lose sales?
  • Which areas of our business have experienced a decline that could have been avoided?

SWOT: Opportunities and Threats

Opportunities and threats are external characteristics. They emerge from changes within a marketplace, from changes in technology and people’s habits, and from changes in competitor behavior and politics.

Opportunities come from outside the organization, but there are ways to capitalize on them and create them from within. When identifying strengths and weaknesses (both internal characteristics) ask the following key questions:

Does leveraging or focusing on any of our organizational strengths potentially open new opportunities for us?

Does reducing or eliminating any of our organizational weaknesses potentially open new opportunities for us?

These are the best opportunities to leverage, because they are tied to activities the organization has the highest degree of control over (they are internal characteristics).

When the shift focuses to external characteristics, many of the same events can be opportunities for one organization and threats for another. Key changes in political policy, for example, often threaten some firms while creating new opportunities for others.

When examining the effect of external characteristics, it is better to identify the event and then classify it, rather than attempt to come up with events based on classification. For example, instead of stating outright that a new law capping the number of hours truck drivers can work in a week is a threat to your supply chain, look at the law and its implications first.

Explore the effect it will have on your supply chain, then classify it as either a threat or an opportunity. You may find that this approach allows team members to have more constructive input and to take a more holistic view of developments as they occur.

External Characteristics

To get started uncovering external characteristics of a marketplace and classifying them as opportunities or threats, ask the following questions:

  • Have there been any demographic shifts within our market?
  • Has the amount of market share we are capturing changed?
  • Have there been any key changes in policy that may benefit us?
  • What new products or programs have been launched by competitors?
  • Have there been any new entrants to the market? What do they bring to the table?

The answers to these questions can then be explored and classified.

You may even find that some of these answers have aspects that provide opportunities while also posing threats to different aspects of your business.

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