You will find that a SWOT analysis is one of the most commonly used strategic planning techniques, however, it is also one of the most misunderstood practices.The primary use of a SWOT analysis is to provide structure to, or summarize, your strategic analysis. This technique can also be used in complex decision making, to help you to determine which of several options is better.
The Acronym SWOT represents:
A SWOT analysis will help you to summarize your understanding of the major issues identified in your strategic analysis. Your strategic analysis will focus on identifying the strengths, weaknesses, opportunities and threats in your three key strategic environments. Your three key strategic environments are:
The SWOT methodology is also used in decision-making, as it brings a structured analysis that can be applied to various decisions,effectively removing subjectivity and emotion from the decision-making process.
Now, let's explore Strengths, Weaknesses, Opportunities and Threats in more detail.
Strengths and weaknesses are internal to the organization and will be identified during your internal analysis.
Strength refers to a core competency of your business where your business has a competitive advantage when it comes to customer value propositions. For instance, your business scored higher than your competitor's. When completing your internal analysis, you will find that your strengths generally fall under two categories.
Some tangible strengths you may find in your business:
Some intangible strengths you may find in your business:
A weakness refers to a core competency of your business where your competitor has a competitive advantage when it comes to customer value propositions.For instance, your business scored lower than your competitor's.When completing your internal analysis, you will find that your weaknesses generally fall under two categories
A voice of experience, consider the following:
It is possible that every business in an industry could identify their customer service as a strength. It might be true that all businesses in an industry have effective customer service. However, if your customers don't notice a competitive difference or advantage within your business, it is not a strength. The strategic analysis is often completed by the leaders in the organization who put "Leadership" down as a strength. No matter how good your business is at something; if you are not better than your competitors, you should not list it as a strength.
Opportunities and Threats are external to your organization and will be identified in your macro and industry environment analysis.
Given that your opportunities and threats come from your macro and industry environment, it is possible that all businesses in your industry could identify similar opportunities and threats. You should refer to your macro environment analysis and industry environment analysis, (Porter's Five Forces) to help you to identify your opportunities and threats. Alternatively, you can use one of our SWOT templates.
Some possible Industry Opportunities are:
Some possible Macro Opportunities are:
A threat is a forecasted environmental condition that is out of your control and has the potential to harm your business' profitability. You will find your threats when completing your industry environment analysis and your macro environment analysis. You will find that your threats will fit into two categories.
A common example: If you import goods for resale, then a negative shift in exchange rates will driveup your costs. If you are unable to pass these costs on to your customers, your profitability margins will shrink. So, exchange rate volatility could be a threat.
Some possible Industry Threats include:
Some possible Macro Threats include:
The opportunity section of the SWOT Analysis is the most commonly misunderstood, Many people use the opportunity section to list solutions to their weaknesses and threats.
The SWOT analysis is purely an analysis tool. It should contain independently verifiable statements of fact. In the macro and industry analysis, you may identify opportunities that look like solutions, however, you should only include the statement of facts.
The reason for this is that, during your strategic analysis, you have not yet made any decisions. Decision-making comes after you have completed your SWOT and developed options for actions. Then you will make your solution decisions.
As a purist I would advise you that a SWOT is an analysis tool, and to avoid jumping to solutions. If you are more comfortable with jumping to solutions, it is your SWOT and you may do what you desire.
Note: Your SWOT analysis will be completed prior to developing your strategy or your action plans.
There are two commonly used methods of completing a SWOT analysis.
If you are going to use the SWOT technique during a brainstorming exercise, you should have a series of prepared questions or prompters ready to ensure that you consider the most common areas of analysis. These questions can be found in our SWOT analysis template. To access, click here
If you are keen to use the SWOT technique to summarize a more extensive strategic analysis, then you may want to review the following sections of this website to gain an understanding of this analysis.
Discover more about completing a SWOT analysis through these helpful links: