SWOT analysis is most commonly used by commercial entities, but it is also used by non-profit organizations and, to a lesser extent, individuals for personal assessment. Additionally, it can be used to evaluate initiatives, products or projects.
When and why should a SWOT analysis be done?
A SWOT analysis is often used as part of a strategic planning exercise. The framework is considered a powerful decision-making support because it enables an entity to discover previously unarticulated opportunities for success, or to highlight threats before they become too burdensome.
Elements of a SWOT analysis
As the name implies, a SWOT analysis examines four elements:
- Strengths : attributes and internal resources that support a successful outcome.
- Weaknesses : internal attributes and resources that work against a successful outcome.
- Opportunities : external factors that the entity can capitalize or use for its benefit.
- Threats : External factors that could jeopardize the success of the entity.
How to do a SWOT analysis
A SWOT analysis generally requires decision makers to first specify the objective they hope to achieve for the business, organization, initiative or individual.
From there, decision makers list strengths and weaknesses, as well as opportunities and threats.
There are several tools to guide decision makers through the process, often using a series of questions on each of the four elements.
For example, decision makers can be guided by questions such as “What do you do better than anyone else?” and “What advantages do you have?” to identify strengths; they may be asked “Where do you need to improve?” to identify weaknesses.
Similarly, you can ask questions such as “What market trends could increase sales?” and “Where do your competitors have advantages in the market?” (threats)
Using a SWOT analysis
A SWOT analysis should be used to help an entity, be it an organization or an individual, to obtain information about current and future market position or against a stated objective.
The idea is that because entities can see competitive advantages and positive prospects, as well as existing and potential problems, they can develop plans to capitalize on positive aspects, address deficits, or do both.
In other words, once SWOT factors are identified, decision makers should be better able to determine whether an initiative is worth pursuing, and what is required to make it successful. As such, the analysis aims to help an organization adapt its resources to the competitive environment in which it operates.
Pros and cons of SWOT analysis
SWOT analysis can aid the decision-making process by creating a visual representation of the various factors that are most likely to impact a company, project, initiative, or individual.
While such a snapshot is important to understanding the multiple dynamics that impact success, a SWOT analysis has its limits. The analysis may not include all relevant factors for all four items, thus giving a biased perspective.
Also, since it only captures factors at a point in time and does not allow for how those factors might change over time, the information it provides could have a limited shelf life.
SWOT analysis example
In this case we will do a SWOT analysis for a company
Strengths : You must put all the internal factors that can provide competitive advantages in relation to your skills.
- The training and experience of the company’s staff
- Very good managerial skills
- Synergies between different strategic departments
- Availability of sufficient financial resources
- Wide product portfolio
- Experience in the launch of a product
Weaknesses : They refer to the elements that could collapse a predominant competitive position in the market. These elements should be minimized in the strategy.
- Little financial muscle compared to other companies
- Bad reputation
- Little experience in the sector
- Low market share
- Little budget for marketing work
- High production costs
Threats : Factors in the sector that can harm the competitive position in the market.
- Market saturation
- Market entry of new skills
- Legislative changes
- Global economic crisis
- Ease of entry of new competitors
- High number of substitute products
- Trend towards lower margins in the sector
- Little implementation of the business model in the sector
- High administrative procedures to start a business
- Sudden changes in consumer lifestyle
Opportunities : The opportunities of a company will be made up of all the possible elements of the sector that the company could exploit.
- Market growth
- Increase in Internet management in the sector
- Healthier lifestyle
- Accessible foreign markets