SWOT Analysis: Strengths, Weaknesses, Opportunities & Threats
by Tom Wright, on May 26, 2020 9:44:47 AM
A SWOT Analysis helps you to discover the internal strengths and weaknesses of your organization. It also helps you to discover the external opportunities and threats that confront you. As such, it's an invaluable tool for performing both internal and external Strategic Analysis.
What are the benefits of a SWOT Analysis?
A SWOT Analysis gives you a balanced view of yourself and the world in which you operate. It's also one of the easiest bits of Strategic Analysis that you can perform and is a great way to get people thinking strategically without getting into the full detail of Strategy Formulation.
Completing a SWOT Analysis should help you with things like:
- Understanding your competitive advantages & disadvantages
- Finding things to improve about your organization
- Understanding why some aspects of your organization are struggling
- Gaining insight on competitor activity
- Prioritizing actions
A SWOT Analysis is also a very useful framework for getting your team on the same page when it comes to the current state of the business, and where you want to go next (and can also be a useful addition to your Strategy Evaluation process if you're looking at refining your direction). It's a simple, jargon-free way of thinking about strategic planning.
Let's start with strengths. Understanding your strengths is crucial to deciding which opportunities you want to exploit in the future. Strengths could be tangible external elements such as well-regarded product lines, or less tangible elements such as a highly-skilled workforce in certain areas. Use the following list to help you understand your strengths as part of your SWOT Analysis:
- What is your organization famous for?
- What qualities do you or your products have that set you apart from competitors?
- What physical assets do you have which might put you ahead of the competition?
- What intellectual property do you own?
- What internal resources (such as staff) do you have that you're particularly proud of?
On the inverse, let's now look at your weaknesses. Weaknesses are a critical part of SWOT for the same reasons that strengths are. Understanding your weaknesses helps you to prioritize what to work on next, and what opportunities you are most likely to succeed with.
To help you understand your weaknesses, consider the following:
- What major failures have you had in the past 12 months, and why?
- What physical resources do you lack?
- What internal / skill-based resources do you lack?
- What do your competitors do better than you?
- How would people rate your products? What issues would they raise?
- How is your cash-flow position?
The opportunities element of a SWOT Analysis is where you start to shift your gaze away from your own company and to the market as a whole. Understanding the opportunities that exist for you is now useful as you have a sense of your strengths and weaknesses, making those opportunities easier to assess. Whilst the majority of the opportunities that you identify will be external, there may also be internal opportunities that are even easier to take advantage of. Consider things like:
- Are you missing opportunities to make additional revenue from existsing leads or customers?
- Are there any countries or markets that you could enter with your existing products with little effort?
- Are there any markets with a poor competitor showing that you could take advantage of?
- Are there any emerging trends that you could take advantage of?
- What new product ideas do you have?
- Are there any merger or acquisition opportunities that make sense to exploit?
Threats are the final part of a SWOT Analysis, and require you to consider what elements pose risk to either your organization or any of your revenue streams. This could be a mix of both internal and external threats.
There are several differences between a threat and a weakness, but if you're struggling to classify things, think of weaknesses as 'things that have already happened' and threats as 'things that have not yet happened, but could'.
When thinking about threats, consider elements such as:
- The emergence of new competitors
- Shifts in trends that could affect demand for your product or service
- Changes to the regulatory environment
- Poor public relations or market perception
- Staff morale or the possible loss of key people in your team
- Reduced investor appetite
- Macro-economic issues
How to conduct a SWOT Analysis
Now that you have an understanding of the key elements of a SWOT Analysis, conducting one is relatively simple. Grab a pen and paper (or whiteboard market) and gather your team, then work through each of the four quadrants above and list out everything you can think of.
Remember to include both internal and external factors for each quadrant - though you'll likely find that strengths and weaknesses tend to be more internal, whilst opportunities and threats tend to be more external.
Ensure that you take this opportunity to involve as many people from your leadership team as possible in the process of conducting your SWOT Analysis. This is a great way to drive engagement, and given that a SWOT Analysis is often a precursor to a new strategic plan, it's a great way to get buy-in to the process!
We've copiled 8 of the best tool you can use in your strategic analysis in this guide, and there is a handy infographic below which you can also pick up and save for later!