SWOT Analysis

Discover new opportunities. Manage and eliminate threats.

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SWOT Analysis is a powerful technique for understanding your Strengths and Weaknesses, and for looking at the Opportunities and Threats you face.

Used in a business context, it helps you carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities. 

Business SWOT Analysis

What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well placed to take advantage of. And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.
More than this, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.

How to Use the Tool

To carry out a SWOT Analysis:

Strengths:

• What advantages does your company have?
• What do you do better than anyone else?
• What unique or lowest-cost resources do you have access to?
• What do people in your market see as your strengths?
• What factors mean that you "get the sale"?

Consider this from an internal perspective, and from the point of view of your customers and people in your market.
In looking at your strengths, think about them in relation to your competitors – for example, if all of your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.

Weaknesses:

• What could you improve?
• What should you avoid?
• What are people in your market likely to see as weaknesses?
• What factors lose you sales?

Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities:

• Where are the good opportunities facing you?
• What are the interesting trends you are aware of?

Useful opportunities can come from such things as:

• Changes in technology and markets on both a broad and narrow scale
• Changes in government policy related to your field
• Changes in social patterns, population profiles, lifestyle changes, etc.
• Local Events

A useful approach to looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could open up opportunities by eliminating them.

Threats:

• What obstacles do you face?
• What is your competition doing?
• Are the required specifications for your job, products or services changing?
• Is changing technology threatening your position?
• Do you have bad debt or cash-flow problems?
• Could any of your weaknesses seriously threaten your business?

Carrying out this analysis will often be illuminating – both in terms of pointing out what needs to be done, and in putting problems into perspective.

Strengths and weaknesses are generally internal to your organization. 
Opportunities and threats often relate to external factors. 

For this reason the SWOT Analysis is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix.
You can also apply SWOT Analysis to your competitors. As you do this, you'll start to see how and where you should compete against them.

Tip:

SWOT can be used in two ways – as a simple icebreaker helping people get together and "kick off" strategy formulation, or in a more sophisticated way as a serious strategy tool. If you're using it as a serious tool, make sure you are rigorous in the way you apply it.

Example

A start-up small consultancy business might draw up the following SWOT Analysis:

Strengths:

• We are able to respond very quickly as we have no red tape, no need for higher management approval.
• We are able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers.
• Our lead consultant has strong reputation within the market.
• We can change direction quickly if we find that our marketing is not working.
• We have little overhead, so can offer good value to customers.

Weaknesses:

• Our company has little market presence or reputation.
• We have a small staff with a shallow skills base in many areas.
• We are vulnerable to vital staff being sick, leaving.
• Our cash flow will be unreliable in the early stages.

Opportunities:

• Our business sector is expanding, with many future opportunities for success.
• Local government wants to encourage local businesses with work where possible.
• Our competitors may be slow to adopt new technologies.

Threats:

• Will developments in technology change this market beyond our ability to adapt?
• A small change in focus of a large competitor might wipe out any market position we achieve.

The consultancy may therefore decide to specialize in rapid response, good value services to local businesses. Marketing would be in selected local publications, to get the greatest possible market presence for a set advertising budget. The consultancy should keep up-to-date with changes in technology where possible.

Key Points

SWOT Analysis is a simple but useful framework for analyzing your company's Strengths and Weaknesses, and the Opportunities and Threats you face. This helps you to focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities available to you.